Mann_BLRB 9_TB_Ch30

Business Law and the Regulation of Business

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Chapter 30—Relationship with Third Parties TRUE/FALSE 1. Bob is the promoter of a new corporation that has not yet been incorporated. On behalf of the as yet unincorporated business, he enters into a three-year lease agreement for office space and personally signs the lease in his own name. The corporation is liable on the contract, because Bob is its agent. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 2. If an agent who has actual authority and receives reimbursement does not tell the third party that he is working in an agency capacity, the principal is still bound. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 3. An agent has the power to contractually bind his principal whenever he has actual or apparent author- ity and acts within his authority. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 4. Apparent authority is not actual authority. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 5. Apparent authority can arise where there is an undisclosed principal as well as where the principal is disclosed. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 6. Ordinarily, an agent may delegate his duties to an equally qualified subagent. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 7. A subagent owes a fiduciary duty to both the agent and to the principal. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 8. A principal may be liable where his agent sells liquor to an underage person even though the principal did not authorize the act. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 9. An agent is never personally liable for the torts he commits while in the scope of his employment. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 10. Apparent authority may arise by an agent's showing a third party a document from the principal au- thorizing the agent to enter into such a transaction. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic
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11. Sunset Properties, Inc. hires William to manage its 82-unit apartment complex. Nothing is said as to expenses. William purchases fuel to heat the apartments and arranges for a repairperson to do ordinary maintenance. William will be personally liable for these expenses, because he has no authority to incur them. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 12. A principal who authorizes his agent to commit a tortious act with respect to the property or person of another is not liable for the injury or loss sustained by that person. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 13. The liability of an employer under the doctrine of respondeat superior is limited to wrongdoing by the employee in the course of his employment. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 14. Rena employs James, a real estate broker, to find a buyer for her home for a price of at least $125,000. James has the actual implied authority to contract for the sale of Rena’s home.
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Mann_BLRB 9_TB_Ch30 - Chapter 30-Relationship with Third...

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