VT Bar Business Organizations 3

Question 1

An agent has actual authority when:

Accepted Answer

The principal expressly or impliedly communicates authority to the agent, giving the agent reasonable grounds to believe they may act

Answer

Actual authority (express or implied) arises from the principal's communications to the agent that create a reasonable belief in the agent that they are authorized to act.

Question 2

Apparent authority arises when:

Accepted Answer

The principal's conduct or manifestations cause a third party to reasonably believe the agent has authority to act

Answer

Apparent authority is created by the principal's manifestations to third parties (not to the agent) that lead those third parties to reasonably believe the agent has authority.

Question 3

For ratification of an agent's unauthorized act to be effective, the principal must:

Accepted Answer

Ratify before the third party withdraws from the transaction

Answer

For ratification to bind the third party, the principal must affirm the unauthorized act before the third party withdraws from the transaction; retroactive consent cures the lack of authority.

Question 4

A shareholder derivative suit is brought:

Accepted Answer

By a shareholder on behalf of the corporation to enforce the corporation's own rights when the board wrongfully refuses to act

Answer

In a derivative suit, a shareholder sues on behalf of the corporation when the board wrongfully refuses to pursue the corporation's claims; any recovery goes to the corporation, not the suing shareholder.

Question 5

Under respondeat superior, an employer is vicariously liable when:

Accepted Answer

An employee commits a tort while acting within the scope of their employment

Answer

Under respondeat superior, an employer is vicariously liable for torts committed by an employee acting within the scope of their employment, even if the employer was not negligent.

(VT Bar) Vermont Bar Exam Practice Test

(VT Bar) Vermont Bar Exam Practice Test

VT Bar Business Organizations 3