Multiple choice questions on Agency with Answers

Question 1

Which one of the following statements is incorrect?

a) An agency relationship may be created through necessity.
b) An agency relationship may be created through estoppel.
c) All agents are entitled to be paid for their services.

d) An agent creates a legal relationship between a third party and a principal.
Question 2

An agency relationship which is made retrospectively is know as an agency by:

a) Estoppel
b) Ratification
c) Necessity

d) Commerce
Question 3

X Ltd has two directors, Joe and Harry. Neither of the directors have authority to individually enter
contracts on behalf of the company. In practice, Joe (with Harry's acquiescence) enters into all the
contracts on behalf of the company. What type of agency has been created when a third party acting
in good faith enters into a contract with Joe who states he is acting on behalf of X Ltd?

a) An express agency.

b) An agency by estoppel.
c) An agency by ratification.

d) An agency of necessity.

Question 4

Con appoints George, to act as his agent for two weeks. George agrees to act without payment. Con
instructs George to collect rent each Friday morning from his tenants and pay the rent into the bank
next door. In the second week, George collects the rent but fails to bank it. On the way home he
leaves it on the bus and it is never recovered. Can Con take action against George for breach of his
agency duties?
a) No, Con has provided no consideration and therefore there is no agency agreement.
 b) No, George is a gratuitous agent and has no duty to follow instructions.
c) Yes, even though George is a gratuitous agent if he does act he must do so in accordance
with instructions set out by the principal.

d) Yes, provided he pays George for being an agent.

Question 5

Prab asked her agent, Hari to purchase her 500 shares in X Ltd. Hari owned 600 shares in X Ltd so
without informing Prab where the shares come from he sells his shares to Prab at market value. Is
Hari in breach of his agency duties?

a) Yes, because he has a duty to avoid a conflict of interest.

b) Yes, because he has a duty to account.
c) No, because he has sold Prab the shares at market value.

d) No, because he has acted according to Prab's instructions and she has the shares as she
requested.
Question 6

When does apparent (ostensible) authority of an agent arise?

a) When the agent acts with the usual authority of his job.
b) When the principal gives the agent implied authority to act.
c) When the agent has actual authority to act.

d) When the principal represents to a third party that an agent has authority to act when in
fact he does not.
Question 7

Which one of the following is not a duty of an agent?

a) Duty to exercise care and skill.
b) Duty to take a commission.
c) Duty to account.

d) Duty to avoid a conflict of interest.

Question 8
 Frank enters into a contract with Sally believing that Sally is acting on her own behalf when in fact
she is acting as an agent for Derek on his express instructions. In the event of a breach of contract
who can Frank take action against?
a) No-one, the contract is invalid.
b) Sally.
c) Derek.

d) Derek or Sally.
Question 9

What is an undisclosed agency?

a) Where a third party is not informed of the existence of the principal and believes the agent
is acting on his own behalf.
b) Where the agent indicates through conduct he is acting as an agent.
c) Where the principal is not in existence.

d) Where the third party knows there is a principal but does not know his name.
Question 10

Which of the following statements is incorrect?

a) An agency may be terminated by death of either party.
b) An agency may be terminated by express agreement.
c) An agency agreement can always be terminated by a principal.

d) Mental incapacity of an agent will terminate the agency relationship.

11. A sub-agent is the employee who is specially employed by the original agent to act
under his control in the business of the agency. The usual rule and regulation are that an
agent is not allowed to delegate his authority to another person especially when he/she
has not the permission of his principal. Under what conditions an agent may hire or
appoint a sub-agent and delegate the work?

(A). The principal has expressly allowed a delegation of such authority.

(B). The ordinary custom of trade a sub-agent may be employed.
(C). The nature of work is such that a sub-agent is essential
(D). All of these
(E). None of these

Question 12. Which of the following is the Effect of ratification?

(A). Ratification is started from the time of making a contract between the ratifier of the act and
the person who did of the act.
(B). A contractual relationship is started between the ratifier and the third party.
(C). Both A&B
(D). None of these

Question 13. Which is correct for substituted agent or Co-agent?

(A). A co-agent works under the rules, regulations, and instructions of the principal.
(B). There is an agreement or contract between the co-agent and the principal.
(C). Co-agent is not affected by the termination of the original agency.
(D). All of these
(E). None of these

Question 14. Which are the methods in which an agency relationship, familiar in law, can
be established?

(A). by agreement
(B). by ratification
(C). by estoppel
(D). by necessity.
(E). All of these
(F). None of these

Question 15. An agent is a special employee who is employed to do any act for another or
to represent another in dealing with any of the third person.

(A). True
(B). False
(C). Partially True
Question 16. Where a sub-agent is appropriately selected and appointed by an agent to
delegate the work?

(A). The principal is bound by the acts of the sub-agent as if the subagent was an agent
originally appointed by the principal.
(B). The agent is accountable and answerable to the principal for the acts of the subagent.
(C). The sub-agent is accountable and answerable for his acts to the agent, but not to the
principal, except in case of scam or fraud.
(D). All of these
(E). None of these

Question 17. Which of the following are the types of agents?

(A). Commercial agent or mercantile agent

(B). Auctioneer
(C). Company directors and managers
(D). Partners in a business partnership
(E). All of these
(E). None of these

Question 18. Where a sub-agent is not appropriately chosen and appointed by an agent to
delegate the work?

(A). The agent stands as a principal towards such a sub-agent

(B). The principal is not represented by such sub-agent and so he/she is not accountable and
responsible for the acts of the sub-agent.
(C). The agent is accountable and responsible for the acts of the sub-agent to the principal as
well as to the third parties.
(D). All of these
(E). None of these

Question 19. The contract between the agent and principal can be appropriately
said as

A. Contract of services
B. Contract for services
C. Service Contract
D. service by contract

Question 20. Any one can become an ____________

A. Agent
B. Principal
C. Contractor
D. Party to the contract

Question 21. A _____________ authorizes the agent to do all acts on behalf of

principal

A. Special power of attorney

B. Particular Power of attorney
C. General power of attorney
D. All of the above

Question 22. The power of attorney is an example of agency by

________________________

A. Express Agreement
B. Implied agreement
C. Ratification
D. special agreements

Question 23. Incase of ratification the principal must ratify __________

A. Part transaction based on necessity

B. the agreement of agency
C. whole transaction
D. the third party about agency

Question 24. _______ means to give full consent or approval to an act which was
originally done without authority
A. Estoppel
B. Ratification
C. Holding out
D. Express agency

Question 25. The consideration in case of Contract of Agency ______________

A. can be past, present, future

B. Need not be adequate
C. Need to be real
D. Not Mandatory

Question 26. An agent who is appointed to sell a house is ___________

A. General agent
B. Special agent
C. Mercantile agent
D. Non mercantile Agent

Question 27. Advocates are classified as ______________

A. General agent
B. Special agent
C. Mercantile agent
D. Non mercantile Agent

Question 28. In case of war between the principal’s and agent’s countries then
the Contract of agency will be

A. Holding out
B. Terminated by agreement between parties
C. Termination by operation of Law
D. continued as anybody can become an agent.

Question 29. Irrevocable agency will be terminated when

A. death of agent/principal
B. Principal becomes incapable
C. Time lapses
D. agent’s obligations are performed

Question 30. Which of the following is the agency terminated by Operation of

Law

A. Lapse of time
B. Death of Agent or principal
C. Occurrence of a specified event
D. Purpose achieved