Question

Multiple Choice

Choose the single choice among the 4 choices that best completes the statement or answers the question.

1.When the owner of goods delivers goods to a merchant and the goods are of a kind the merchant deals in, this is known as

a.a principal/agent relationship.

b.an independent contractor relationship.

c.an entrustment.

d.an employer/employee relationship.

2.An agent’s implied authority

a.is not always present in a principal/agent relationship.

b.can cause additional liability to be imposed on the agent.

c.exists by virtue of being reasonably necessary to carry out the agent’s express authority.

d.can only be disclaimed by the principal, not the agent.

3.Ratification

a.is an agent’s approval of actions taken by his/her principal.

b.must be in writing.

c.is a principal’s approval of his/her agent’s unauthorized act.

d.must be made within a reasonable time to be effective.

4.An undisclosed principal

a.has no liability.

b.is bound to any contract properly made by his/her agent with a third party.

c.is liable under the UCC if a reasonable person under similar circumstances would find him/her liable.

d.may be subject to punitive damages for fraud.

5.If a seller or lessor of goods has stolen the goods

a.his/her title to the goods is voidable.

b.the owner of the goods can reclaim the goods if the owner acts promptly after discovery of the theft or acts promptly after he/she should have discovered the theft.

c.can pass title to the goods to a good faith purchaser of the goods who has given consideration for the goods.

d.his/her title to the goods is void.

Answer 1

1) When the owner of goods delivers goods to a merchant and the goods are of a kind the merchant deals in, this is known as

Solution: an entrustment

Explanation: An entrustment states that when an owner entrusts the possession of the goods to a merchant who deals in goods of that kind, the merchant holds power to transfer all rights (inclusive of title) in the goods to a buyer in the ordinary course of business

2) An agent’s implied authority

Solution: exists by virtue of being reasonably necessary to carry out the agent’s express authority

Explanation: In agency law, implied authority (of the agent) can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority.

3) Ratification

Solution: is a principal’s approval of his/her agent’s unauthorized act.

Explanation: The ratification effect of is to make the principal liable for the agent's unauthorized action

4) An undisclosed principal

Solution: is bound to any contract properly made by his/her agent with a third party

Explanation: The undisclosed principal is bound by the acts done by the agent within the specified actual authority.

5) If a seller or lessor of goods has stolen the goods

Solution: his/her title to the goods is voidable

Explanation: A lessor or seller holds voidable title or voidable leasehold interest to goods if he or she obtained the goods through fraud