Test Bank For The Law of Corporations and Other Business Organizations 6th Edition by Angela Schneeman

 Introduction to Agency and Business Organizations…………………………………………………………. 112 Sole Proprietorships……………………………………………………………………………………………………… 114 Partnerships ………………………………………………………………………………………………………………… 116 Limited Partnerships …………………………………………………………………………………………………….. 119 Limited Liability Partnerships and Limited Liability Limited Partnerships ………………………….. 121 Limited Liability Companies …………………………………………………………………………………………. 123 Corporations ……………………………………………………………………………………………………………….. 125 Incorporations ……………………………………………………………………………………………………………… 127 The Corporate Organization ………………………………………………………………………………………….. 129 The Corporate Financial Structure………………………………………………………………………………….. 131 Public Corporations and Securities Regulations……………………………………………………………….. 133 Mergers, Acquisitions, and Other Changes to the Corporate Structure ………………………………… 136 Foreign Corporation Qualification………………………………………………………………………………….. 138 Corporate Dissolution …………………………………………………………………………………………………… 140 Employee Benefits and Employment Agreements ……………………………………………………………. 142

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CHAPTER 1Introduction to Agency and Business Organizations

MULTIPLE CHOICE1. Agency is a legal relationship in which

1. the principal acts on behalf of the agent.
2. the principal becomes personally liable forall actions of the agent.
3. awrittencontractmustspecifyallauthorityof the agent.
4. the agent acts for or represents the principalby the principal’s authority.

ANS: D2. When used in relation to the agency relation- ship, the master

1. retains some control over his or her servant (employee).
2. gives his or her servant (employee) full discretion to act on the master’s behalf.
3. hires the employee for a specific task for which the master is not responsible.
4. is not liable for any actions taken on his or her behalf by the servant (employee).

ANS: A3. A special type of power of attorney designed to continue for certain purposes even after the incapacity of the principal is referred to as aA. specialpowerofattorney.B. willpowerofattorney.C. durablepowerofattorney. D. generalpowerofattorney.ANS: C4. An agency relationship may not be createdA. byexpresscontract.B. byconductoftheprincipalandagent.C. without the principal’s knowledge or con-sent.D. byratification.ANS: C5. When the principal intentionally or negligently causes a third party to reasonably believe that an individual is acting as the principal’s agent, and the third party relies on that belief, thenA. no agency relationship exists.B. anexpressagencyagreementiscreated.112©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

C. thepurportedagentassumespersonalliabil- ity for his or her actions.D. an apparent agency may exist.ANS: D6. An agent’s duties to the principal includeA. thedutyofloyalty.B. thedutytoactwithoutcompensation.C. the duty to perform any tasks requested bythe principal.D. thedutytocompensatetheprincipal.ANS: A7. The principal’s duties to the agent do not include

1. the duty to compensate the agent as agreed on.
2. thedutytocooperatewiththeagent.
3. thedutytoexercisereasonablecaretoavoidplacing the agent in harm’s way.
4. the duty to always put the agent’s interestsfirst.

ANS: D8. A principal is not liable for the torts of his or her agent if the

1. tort is committed by the agent acting in the scope of his or her employment by the principal.
2. agent’s action is unrelated to the agency relationship.
3. principal is negligent or reckless in super- vising the agent.
4. agent is acting under the principal’s direc- tion when committing the tort.

ANS: B TRUE/FALSE

9. Disputes concerning agency law are typically resolved under the contract or common law of the state where the agency was created.ANS: T
10. A power of attorney need not be put in writing.

ANS: F