DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
Second Semester A.Y. 2012-2013
Accounting Review 2
Quiz IV Contract of Agency
Name:____________________________________________________________________Date:___________________________
_
Section:__________________________________________________________________Score:___________________________
Direction: Read and solve the following problems. Write the letter of your best answer on the space provided before
each number. Erasures are not allowed and considered wrong.
___1. An agent, authorized by a special power of attorney to sell a land belonging to the principal succeeded in selling the
same to a buyer according to the instructions given to the agent. The agent executed the deed of absolute sale on behalf
of his principal two days after the principal died, an event that neither the agent not the buyer knew at the time of the sale.
What is the standing of the sale?
a. Voidable
b. Valid
c. Void
d. Unenforceable
___2. X, who was abroad, phoned his brother, Y authorizing him to sell Xs parcel of land in Pasay. X sent the title to Y by
courier service. Acting for his brother, Y executed a notarized deed of absolute sale of the land to Z after receiving
payment. What is the status of the sale?
a. Valid since a notarized deed of absolute sale covered the transaction and full payment was made.
b. Void since should have authorized agent Y in writing to sell the land.
c. Valid since Y was truly his brother Xs agent and entrusted with the title needed to effect the sale.
d. Valid since the buyer could file an action to compel X to execute a deed of sale.
___3. As an agent, A, was given a guarantee commission, in addition to his regular commission, after he sold 20 units of
refrigerators to a customer. The customer, however, failed to pay. As principal, P demanded payment from A for the
customers accountability. Which is correct?
a. A can refuse to pay on the ground that his job aws only to sell and not to collect payment.
b. P should demand payment from the customer.
c. A is not liable if he was authorized to sell on credit.
d. A bears the risk of collection and should pay P the proceeds of the sale.
___4. The following are the obligations of an agent, except
a. In the execution of the agency, the agent shall act in accordance with the instructions of the principal.
b. Shall be bound to advance the necessary funds, except when the principal is insolvent.
c. Shall finish the business already begun on the death of the principal, should delay entail any danger.
d. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the
custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent.
___5. Which of the following statements is false?
a. P in writing appoints A as his agent to sell his specific parcel of land for P40,000. A sold it orally on X. The
contract of A and X is valid.
b. B wrote A, his sister, to sell his parcel of land. The land was purchased by X, but A did not forward the money to
B. B now wants to recover the parcel of land. B can recover because the authority of S is not in special power or
attorney.
c. P orally appoints A as his agent to sell his land for P40,000. A sold it to X in writing. The sale by A to X is not
valid.
d. P orally appointed A to sell a house on a parcel of land belonging to X. A sold it to B orally. The contracts by P
and A, and A and B are valid.
___6. P sends a letter to A in Cavite, authorizing A to sell his specific car for P90,000. If no reply is made by A, is there a
presumption of implied agency between the two of them.
a. None, because as between persons who are absent, the acceptance of the agency cannot be presumed from
the silence of the agent.
b. Yes because no reply was send, there is implied acceptance or implied consent.
c. Yes unless A is habitually engaged in the business of selling and buying cars.
d. None acceptance must always be expressed.
___7. M appointed R and Z as her agents to sell her specific property for P100,000 on cash basis. Solidarity has been
agreed upon. Can M hold Z liable if R sell the property for P80,000?
a. Yes because the obligation is solidary.
b. No because the appointment of 2 or more agents in one and the same obligation is joint and any stipulation to
the contrary is void.
c. Yes but only for Zs share that is P10,000.
d. No because R acted beyond the scope of his authority.

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___8. The following are the characteristics of a contract of agency, except

a. Consensual
b. Principal
c. Innominate
d. Bilateral
___9. If an agent enters into a contract in the name of his principal, exceeding the scope of his authority, the contract
entered into is
a. Voidable
b. Unenforceable
c. Rescissible
d. Void
___10. P appointed A to be his agent to administer his mango orchard while P is in USA, but A died leaving his son, B, of
legal age to take care of the mango orchard until P arrived. This is an agency created by
a. Estoppel
b. Ratification
c. Assignment
d. Operation of Law
___11. This require a special power of attorney, except
a. To accept or repudiate inheritance
c. To enter into compromise
b. To effect novation
d. To lease real property for one year
___12. A, a manufacturer and B, a distributor agreed to a contract where A will deliver 2,000 units of As products to B
every month and B will sell the products at As suggested prices plus 15%. All unsold units at the end of the year shall be
bought back by A at the same price at the time the products were ordered. A shall hold B free from any claim for defects in
the units. The contract between A and B is
a. Contract of sale
b. Pacto de retro sale c. Contract of lease
d. Agency to sell
___13. He bears the risk of collecting from the buyer the price of the sale,
a. Commission agent b. Delegacion
c. Del credere agent
d. Expromission
___14. On day 1, A appointed B as his agent covered by a general power to lease his car to Z for eight months. On day 2,
A appointed C as his agent covered by a special power to lease the same car for two months. On day 3, A directly
transacted business with Z, leasing the car for two months. Which is correct?
a. The appointment of B is valid because it is covered by a general power.
b. The appointment of C is valid because it is covered by a special power.
c. The appointment of B and C are considered revoked because the principal directly transacted with Z.
d. The appointment of B is valid because it is the earliest appointment.
___15. Which of the following is correct?
a. A contract of agency must be in writing to be a valid agreement.
b. A sale of personal property made by an agent without authority from the owner is void.
c. A sale of a piece of land made by an agent with oral authority from the owner is void.
d. An unemancipated minor cannot be appointed as agent.
___16. In which of the following acts may a person not appoint an agent?
a. To represent the principal in a wedding ceremony where the principal is a principal sponsor.
b. To vote for the principal during the meetings of stockholders where the principal is a stockholder.
c. To represent the principal in a baptismal ceremony where the principal is the father of the child to be baptized.
d. To attend a meeting of the board of directors of a corporation where the principal is a director.
___17. Not a fundamental obligation of the agent
a. Sacrifice his interest and give it to the principal if there is conflict.
b. To render an accounting of the transaction.
c. Should not carry out the agency even if that is the transaction, if he knew it would result in a loss or damage to
the principal.
d. Can be the borrower if he is authorized to lend.
___18. A appointed B as his agent to sell his car for P250,000. B sold the car to C for P250,000 but B acted in his own
name. After delivery, C inspected the car and she found hidden defects in the car. Is A, as principal, liable to C even if B
acted in his own name?
a. No applying caveat emptor or let the buyer beware
b. Yes because this is a contract involving property belonging to the principal.
c. No because the contract of sale is between B and C.
d. Yes if C was aware of the hidden defects.
___19. To improve the financial condition of his principal, an agent with general powers of administration given to him by
the principal in writing sold two parcels of land, one for less than the price appearing in the inventory prepared by the
principal and the other for double the price that appeared in the aforesaid inventory. Which is correct?
a. Both contracts cannot be enforced against the principal.
b. Both contracts are binding upon the principal.
c. The sale for double the price appearing in the inventory is binding upon the principal.
d. The sale for less than the price appearing in the inventory is binding upon the principal.
___20. Not a mode of extinguishing an agency
a. Accomplishment of purpose of agency
b. Death of the principal, and the agency is for the interest of either the principal or agent
c. Insanity of the principal or agent
d. Dissolution of the firm or corporation which entrusted or accepted the agency

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___21. Agency can be revoked at will

a. When a bilateral contract depends upon it
b. If it is a means of fulfilling an obligation already contracted
c. If a partner is appointed managing partner in the articles of partnership and his removal is unjustifiable
d. When the principal directly manages the business entrusted to the agent
___22. In agency, the agent represents
a. A person who is capacitated
b. A person who is incapacitated
c. Heirs and creditors of the estate
d. The judicial court
___23. I. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter should be in
a public instrument, otherwise the sale shall be void.
II. Agency is presumed to be without compensation unless there is proof to the contrary.
a. True, True
b. False, False
c. False, True
d. True, False
___24. I. A special power to sell includes the power or mortgage and a special power to mortgage includes the power to
sell.
II. Should there be a stipulation that the agent shall advance the necessary funds, he shall be bound to do so
even when the principal is insolvent.
a. True, True
b. False, False
c. False, True
d. True, False
___25. I. If the agent has been empowered to borrow money he may himself be the lender at the current rate of interest
and if he has been authorized to lend money at interest, he can borrow it.
II. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may
have received by virtue of an agency even though it may not be owing to principal.
a. True, True
b. False, False
c. True, False
d. False, True
___26. I. The responsibility of two or more agents who have been appointed simultaneously is solidary.
II. When two or more principals have granted power of attorney for a common transaction, any one of them may
revoke the same provided it is with the consent of the others.
a. False, False
b. True, True
c. False, True
d. True, False
___27. I. The limits of the agents authority shall be considered exceeded even if it have been performed more
advantageous to the principal than that specified by him.
II. If the agent acts on his own name, he is directly bound as if the transaction were his own and that the contract
shall not be valid between the principal and the third party.
a. True, True
b. False, False
c. False, True
d. True, False
___28. I. In the execution of the agency, the agency shall observe the diligence of a father of a good family.
II. In case a person declines an agency, he is bound to observe ordinary diligence in the custody and preservation
of the goods forwarded to him by the owner until the latter should appoint an agent.
a. True, True
b. False, False
c. True, False
d. False, True
___29. I. If the agent contracts in the name of the principal exceeding the scope of his authority and the principal does not
ratify the contract, the contract shall be void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal.
II. A third person cannot set up the fact that the agent has exceeded his powers if the principal has ratified or has
signified his willingness by the principal.
a. True, True
b. True, False
c. False, True
d. False, False
___30. Which of the following statements refers to a contract of agency?
a. He represents an incapacitated person.
c. He is controlled by the principal.
b. There is no meeting of minds.
d. The legal relation is always created by law.

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