CONTRACT OF AGENCY MCQS

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.

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

a) Estoppel b) Ratification

c) Necessity d) Commerce

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.

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.

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.

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.

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.

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.

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.

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. As per-section 201, of the Contract Act an agency can be terminated by

A. The principal revoking his authority B. The agent renouncing the business of the
agency

C. The completion of agency business D. All of above

12. An agent is bound to render proper account to ____ on demand

A. His principal B. Sub-agent C. Creditor

13. Article 214 of the Contract Act, bound an agent to communicate with______ in cases of
difficulty

A. Sub-agent B. Principal C. Legal Advisor

14. Section_____ to_____ of the Contract Act, deals with principal's duty to agent

A. Section 222, 225 B. Section 222, 230

C. Section 222, 235 D. All of above

15. Section 226, to last one of the Contract Act, deals with

A. Effects of the agency upon the agent B. Effect of the agency upon the principal

C. Effects of agency on contracts with third person D. None of above

16. The person for whom agents do any act or to represents whom is called

A. Employer B. Principal

C. Managing director D. None of above

17. Definition of agent is provided in section_____ of the Contract Act, 1872

A. 175 B. 180

C. 185 D. None of above

18. As provided in section 183, any person who is of the age of majority according to the law to
which he is subject and who is of sound mind may employ

A. Servant B. A Labour

C. An agent D. None of above

19. Section 184, of the Contract Act deals with qualification of

A. Principal B. Agent

C. Both (a) and (b) D. None of above

20. An unsound person cannot become

A. An agent B. Principal

C. Both (a) and (b) D. None of above

21. As per section 185 of the Contract Act, 1872 consideration is

A. Necessary to create agency B. Not necessary to create agency

C. Depends upon type of agency D. None of above

22. The person acting employed by under the control of the original gent in the business of the
agency is called

A. Assistant agent B. Associate agent

C. Sub-agent D. None of above

23. Section_____ of the Contract Act defined sub-agent

A. 191 B. 192

C. 193 D. None of above

24. In spirit of section 189, of the Contract Act agents authority in an emergency is

A. Limited depends upon principal permission B. Unlimited agent can do all necessary
act without principal permission

C. Both (a) and (b) D. None of above

25. A principal is responsible for all the acts of his agent which is called

A. Vicarious liability B. Original liability of The Principal

C. Both (a) and (b) D. None of above

26. _______ agency is the most common form of agency.

A. Implied B. Express

C. Apparent D. Incidental

27. A(n) ________ is a contract a principal and agent enter into that says the principal cannot
employ another agent other than the one stated.

A. ratified contract B. apparent agency contract

C. exclusive agency contract D. exclusive principal contract

28. Agency by ________ occurs when (1) a person misrepresents himself or herself as another's
agent when in fact he or she is not and (2) the purported principal accepts the unauthorized act.

A. ramification B. indoctrination

C. ratification D. indemnification

29. Apparent agency is also referred to as ________.

A. express agency B. agency by default

C. agency by estoppels D. authorized agency

30. A principal owes a duty to ________ the agent for any losses the agent suffers because of the
principal. This duty usually arises where an agent is held liable for the principal's misconduct.

A. rectify B. ratify

C. indemnify D. vilify

31. The legal rule of ________ knowledge means that the principal is assumed to know what the
agent knows, even if the agent does not tell the principal certain relevant information.

A. reputed B. imputed

C. disputed D. refuted

32. Under the doctrine of ________, an employer is liable for the tortious conduct of its employees
or agents while they are acting within the scope of their authority.

A. frolic and detour B. misappropriation

C. respondeat superior D. coming and going

33. The common law doctrine of ________ is based on the legal theory of ________ liability.

A. respondeat superior; nefarious B. respondeat superior; vicarious

C. respondeat inferior; nefarious D. respondeat inferior; vicarious

34. Sometimes, a principal requests that an agent run errands or conduct other acts on his or her
behalf while the agent or employee is on personal business. In this case, the agent is on a ________
mission.

A. bifurcated B. dual-purpose

C. conflict of interest D. multifaceted

35. A(n) ________ agency results if a third party entering into a contract knows (1) that the agent is
acting as an agent for a principal and (2) the actual identity of the principal.

A. inherently disclosed B. partially disclosed

C. fully disclosed D. undisclosed

36. A(n) ________ agency occurs if the agent discloses his or her agency status but does not reveal
the principal's identity and the third party does not know the principal's identity from another
source.

A. fully disclosed B. undisclosed

C. inherently disclosed D. partially disclosed

37. A principal accepts an agent's unauthorized contract through ________ of the contract.

A. Subrogation B. Ramification

C. subornation D. ratification

38. Principals often employ persons and businesses that are not their employees to perform
certain tasks on their behalf. These persons and businesses are called ________ contractors.

A. General B. sub-

C. independent D. dependent

39. Which of the following is not a method of terminating an agency relationship by acts of the
parties?

A. mutual agreement B. bankruptcy of the principal

C. achievement of agency purpose D. lapse of time

40. Which of the following is not a method of terminating an agency relationship by operation of
law?

A. bankruptcy of the principal B. death of either the principal or the agent

C. mutual agreement D. insanity of either the principal or the agent

1C 2B 3B 4C 5A
6D 7B 8D 9A 10C
11D 12A 13B 14A 15C
16B 17D 18C 19B 20C
21B 22C 23A 24B 25A
26B 27C 28C 29C 30C
31B 32C 33B 34B 35C
36D 37D 38C 39B 40C