Q.1 Which of the following best defines an agent in commercial law?
A person who lends money to a business
A person authorized to act on behalf of another
A person who regulates trade practices
A person who owns a company
Explanation - An agent is someone who is authorized to act on behalf of another person (the principal) in business transactions.
Correct answer is: A person authorized to act on behalf of another
Q.2 The relationship between a principal and an agent is primarily based on:
Contract
Competition
Ownership
Partnership
Explanation - Agency relationship is generally created through a contract, which defines the authority and duties of the agent.
Correct answer is: Contract
Q.3 Which of the following duties is owed by an agent to the principal?
Duty to disclose
Duty to compete with principal
Duty to ignore instructions
Duty to delegate authority to others without consent
Explanation - An agent has a duty to disclose relevant information to the principal and act in their best interest.
Correct answer is: Duty to disclose
Q.4 A principal is liable for acts of an agent if the agent acts:
Without authority
Within the scope of authority
Against the instructions of the principal
As a competitor of the principal
Explanation - The principal is liable for acts of the agent that are performed within the agent's authority, whether express or implied.
Correct answer is: Within the scope of authority
Q.5 An agent's authority may be terminated by all of the following EXCEPT:
Completion of the task
Revocation by the principal
Death of the principal
Agent acting in good faith beyond authority
Explanation - Authority ends upon completion, revocation, or death of the principal. Acting in good faith beyond authority does not automatically terminate authority.
Correct answer is: Agent acting in good faith beyond authority
Q.6 A sub-agent is:
An agent appointed by the original agent with the principal’s consent
A competitor of the principal
An independent contractor with no connection to the principal
A principal's partner
Explanation - A sub-agent is someone appointed by the original agent to perform duties on behalf of the principal, usually with the principal's approval.
Correct answer is: An agent appointed by the original agent with the principal’s consent
Q.7 Which type of authority is explicitly given to an agent by the principal?
Implied authority
Apparent authority
Express authority
Unlimited authority
Explanation - Express authority is explicitly granted by the principal to the agent through written or verbal instructions.
Correct answer is: Express authority
Q.8 Apparent authority arises when:
An agent acts in their own interest
A third party reasonably believes the agent has authority based on principal’s conduct
Principal verbally revokes authority
Agent acts illegally
Explanation - Apparent authority exists when a third party reasonably assumes the agent has authority due to the principal's behavior or representations.
Correct answer is: A third party reasonably believes the agent has authority based on principal’s conduct
Q.9 Which of the following is NOT a duty of the principal to the agent?
Duty to compensate
Duty to indemnify for authorized acts
Duty to provide work
Duty to deceive
Explanation - Principals owe duties like compensation and indemnity for authorized acts. There is no duty to deceive an agent.
Correct answer is: Duty to deceive
Q.10 An agent acting beyond their authority is called a:
Sub-agent
Unauthorized agent
General agent
Special agent
Explanation - An agent acting outside the scope of authority granted by the principal is termed an unauthorized agent.
Correct answer is: Unauthorized agent
Q.11 Which of the following best describes a 'general agent'?
An agent with limited authority for a specific act
An agent authorized to conduct a series of transactions
An agent acting illegally
An agent hired without principal’s consent
Explanation - A general agent has authority to conduct a series of transactions related to a particular business or activity.
Correct answer is: An agent authorized to conduct a series of transactions
Q.12 Which of the following is a 'special agent'?
An agent authorized to perform one specific task
An agent who manages the principal's entire business
An agent who hires sub-agents without consent
An agent with unlimited powers
Explanation - A special agent is appointed to carry out a particular act or transaction only, not ongoing business.
Correct answer is: An agent authorized to perform one specific task
Q.13 The principal is liable for torts committed by the agent if:
The agent was acting within scope of employment
The agent acted outside authority
The agent committed an intentional tort
The agent was a sub-agent without consent
Explanation - Principals are liable for wrongful acts of their agents committed during the course of employment (respondeat superior).
Correct answer is: The agent was acting within scope of employment
Q.14 Ratification in agency law occurs when:
Principal approves an unauthorized act by the agent
Agent revokes their authority
Principal dies
Third party terminates the contract
Explanation - Ratification happens when a principal approves or confirms an act done by an agent without prior authority, making it legally binding.
Correct answer is: Principal approves an unauthorized act by the agent
Q.15 Which of the following can terminate an agency by operation of law?
Death of the principal
Mutual consent
Completion of task
Revocation by principal
Explanation - Certain events such as death, insanity, or bankruptcy of the principal automatically terminate the agency relationship.
Correct answer is: Death of the principal
Q.16 Authority that is not expressly given but necessary to carry out express authority is called:
Express authority
Implied authority
Apparent authority
General authority
Explanation - Implied authority allows an agent to perform acts reasonably necessary to accomplish the express authority granted.
Correct answer is: Implied authority
Q.17 Which of the following scenarios shows a breach of agent’s fiduciary duty?
Agent discloses confidential information to a competitor
Agent follows principal’s instructions
Agent acts in principal's best interest
Agent delegates tasks with principal’s consent
Explanation - Fiduciary duty requires loyalty and confidentiality. Disclosing confidential information to a competitor breaches this duty.
Correct answer is: Agent discloses confidential information to a competitor
Q.18 A disclosed principal means:
The third party knows the principal exists and identity
The third party does not know the principal
The principal is acting secretly
The agent acts without authority
Explanation - In a disclosed agency, the third party knows both the existence and identity of the principal.
Correct answer is: The third party knows the principal exists and identity
Q.19 Undisclosed principal means:
Third party is unaware that agent is acting for a principal
Principal acts openly
Agent has no authority
Principal revokes authority
Explanation - An undisclosed principal is one whose existence is not known to the third party at the time of the contract.
Correct answer is: Third party is unaware that agent is acting for a principal
Q.20 Which of the following contracts is the agent personally liable?
Contracts made on behalf of a disclosed principal
Contracts made on behalf of an undisclosed principal
Contracts made within authority of principal
Contracts ratified by the principal
Explanation - When an agent contracts on behalf of an undisclosed principal, the agent may be personally liable to the third party.
Correct answer is: Contracts made on behalf of an undisclosed principal
Q.21 An agent who is compensated based on the completion of a specific task is called a:
General agent
Special agent
Commission agent
Unauthorized agent
Explanation - A commission agent earns payment based on performance or completion of specific transactions.
Correct answer is: Commission agent
Q.22 Which of the following is a characteristic of agency by estoppel?
Principal is prevented from denying agency due to third party reliance
Agent acts without principal’s knowledge
Agency arises from verbal contract only
Agency exists only in writing
Explanation - Agency by estoppel arises when a principal’s conduct causes a third party to reasonably believe that someone is their agent, making the principal liable.
Correct answer is: Principal is prevented from denying agency due to third party reliance
Q.23 Which of the following statements is TRUE about an agent’s duty of care?
Agent must perform tasks with reasonable skill and diligence
Agent can act negligently without consequences
Agent owes no duty once authority is granted
Agent’s duty is limited to personal benefit
Explanation - Agents are expected to act with reasonable skill, competence, and diligence while performing their duties.
Correct answer is: Agent must perform tasks with reasonable skill and diligence
Q.24 Which type of agent has continuous authority to act on behalf of the principal in business matters?
General agent
Special agent
Sub-agent
Commission agent
Explanation - A general agent has ongoing authority to conduct all acts related to a particular business or employment.
Correct answer is: General agent