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You cannot be held liable for the actions of your agents if the agents are violating your instructions.

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HBR Accounting hired Denise,a CPA,to prepare tax returns.Which statement is correct?


A) Denise is a gratuitous agent and has a duty not to commit gross negligence.
B) Denise is an agent and has a duty not to commit ordinary negligence.
C) Denise,as a CPA,is an agent with special skills.She is held to a higher duty than ordinary negligence.
D) Denise,as a CPA,is an agent with special skills.She is held to a lower standard than ordinary negligence.

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Tom,the production manager at Esday,was told by his supervisor to hire Elton,a 15- year-old,to operate an industrial machine.Hiring the 15-year-old violates the child labor laws.Tom:


A) should hire Elton.Tom has a duty to obey Esday's instructions.
B) should hire Elton.Tom has a duty of care to ensure that the government does not discover that Elton is 15 years old.
C) should not hire Elton.Tom has a duty of care and he would not be caring for Elton.
D) should not hire Elton.Tom has a duty to obey Esday's instructions only if they are legal and ethical.

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Andrew has been hired to do some work for Rossi Enterprises.What factors would a court consider in determining if Andrew is an employee or an independent contractor? Why does the designation matter?

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In determining if agents are employees o...

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Mohammad was an employee in the new product development department of Estay Inc.Mohammad was directly involved in the development of a new product that Estay intended to launch in 6 months.Estay took great care to keep information concerning the new product a secret.Ceries,Inc. ,a competitor of Estay,persuaded Mohammad to leave Estay to direct Ceries' marketing department.Which statement is correct?


A) Mohammad can share with Ceries the confidential information he knows about Estay's new product because he was directly involved in its development.
B) Mohammad can share with Ceries the confidential information he knows about Estay's new product because his agency relationship with Estay is terminated.
C) Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because of the equal dignities rule.
D) Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because he has a duty not to disclose confidential information he acquired during the agency.

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Janet was employed as a sales representative for Esday,Inc.An appreciative customer gave her a diamond bracelet for all her hard work on a complicated contract.Can Janet keep the bracelet?


A) Yes.The bracelet was given to Janet personally and intended for her.
B) Yes,but only if she discloses the gift to Esday and Esday consents to her keeping the bracelet.
C) No.An agent is not allowed under any circumstances to personally profit as a result of the agency relationship.
D) No.The bracelet is regarded as an unfair trade practice and violates antitrust law.

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Jolene hired Lacy to find a buyer for her house.Adam was interested in buying the house.If both Jolene and Adam agree,Lacy,a real estate agent,may represent both parties.

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Jim agreed to show Donna's car to a potential buyer.Donna was not able to be home since she had to attend a meeting.After showing the car,Jim left the keys in it and the car was stolen.Which statement is correct?


A) Since Jim is a gratuitous agent,he will only be liable for the loss of the car if his conduct constitutes gross negligence.
B) Since Jim is a gratuitous agent,he will be liable for the loss of the car if his conduct constitutes ordinary negligence.
C) Since Jim is a gratuitous agent,he has no liability for the car.
D) Since Jim is a gratuitous agent,he is strictly liable for the loss of the car.

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An agent must obey all instructions of the principal.

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Circus Pizza contracted with Art to run its birthday parties.Art's responsibilities included supervising the children and organizing the games.Circus did not investigate Art's background,which included a history of assaulting children.Art assaulted a 7-year-old girl in the restaurant's kitchen during a birthday party.Circus Pizza:


A) cannot be liable for the damages because Art committed an unforeseeable intentional tort.
B) cannot be held liable for the damages because Art's conduct was not in the scope of employment.
C) may be held liable on the basis of negligent hiring.
D) may be held liable only if Circus actually knew of Art's background.

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Nikki was an tax accountant with HBR Accounting.Nikki decided to do some private tax consulting in the evenings and on weekends.HBR is unaware of Nikki's consulting work.Which statement is correct?


A) Nikki has not breached a fiduciary duty to HBR since her consulting is done after her work for HBR.
B) Nikki has not breached a fiduciary duty to HBR since her behavior does not reflect badly on the accounting firm.
C) Nikki has not breached a fiduciary duty to HBR since Nikki has a contractual relationship with her clients,not her employer.
D) Nikki has breached a fiduciary duty to HBR since she is competing with HBR.

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Which of the following is not required of an agency relationship?


A) Consideration.
B) Fiduciary relationship.
C) Consent of the parties to act as agent or principal.
D) Control of principal over agent's conduct.

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Mrs.O'Leary hired Jenna to sell her house in Michigan.She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated with the sale of real estate,acting as a prudent person." On May 30,Jenna finalized a deal with Brandon for the purchase of the house.Brandon and Jenna signed the real estate contract that day.Jenna learned the next day that Mrs.O'Leary had died May 29.


A) The contract is void since the agency terminated May 29.
B) The contract is valid since the agency's purpose was achieved before Jenna was notified of Mrs.O'Leary's death.
C) The contract is voidable at the option of Mrs.O'Leary's estate.
D) The contract is voidable at the option of Brandon.

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The bankruptcy of an agent automatically terminates an agency relationship.

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Rob agrees to act as an agent for Diane in selling her car.Diane has a duty of loyalty to Rob.

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Barnett was orally hired by Paula to locate desirable real estate that she could use for rental property.She stated she wanted to find a four-plex that could be purchased for under $200,000 that could be rented for at least $1,000 per month per unit (which equates to $4,000 rental per month for the property).Barnett located a four-plex that could be purchased for $160,000 and was renting for $1,200 per unit.It was such a good deal that he purchased it for himself.About two months later he found a second property that was listed for $199,000 and rented for $1,000 per unit.Paula purchased the property.Afterwards,she learned that Barnett had bought the $160,000 four-plex for himself without telling her about it.Paula believes that Barnett has acted improperly.Barnett claims that he did what she asked -- he found a property for under $200,000 that rented for $1,000 per unit.He also claims that since their agreement was oral,he has a legal defense if she pursues the matter in court.Does Paula have any legal recourse against Barnett? Explain.

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Yes.Barnett violated his fiduciary duty ...

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Cameron,editor of the local newspaper,assigned to Jim the writing of a story about pollution of a nearby stream.Although Jim used reasonable care in gathering and checking his information,unknown to Jim,the story contained a defamatory statement about Maureen.Maureen reads the story and sues Jim for libel.Cameron,who read and published the story:


A) must indemnify Jim for Maureen's claim.
B) need not indemnify Jim for Maureen's claim because Jim should have checked his facts more carefully.
C) need not indemnify Jim for Maureen's claim because Jim breached his duty to obey instructions.
D) can recover damages from Jim for any injury to the newspaper resulting from Jim's story.

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Express authority can be created by:


A) words spoken directly to the agent.
B) conduct.
C) written words given to one person to give to another person,the agent.
D) All the above.

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An agent is always liable for his or her own torts committed within the scope of the agency relationship.

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An agency will be terminated in all but which one of the following situations?


A) The principal and agent agree on an agency relationship to sell a boat,and the boat is sold.
B) A travel agent files for individual bankruptcy under Chapter 13.
C) The agent violates his duty of loyalty.
D) An electrician,an agent of a contractor,has her license revoked.

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