Agency – MCQs with Answers

1. What is the primary role of an agent?
a) To act on behalf of the principal
b) To make independent decisions
c) To act for themselves
d) To supervise the principal
Answer: a) To act on behalf of the principal

2. Which of the following is NOT a type of agency?
a) Agency by agreement
b) Agency by estoppel
c) Agency by invention
d) Agency by ratification
Answer: c) Agency by invention

3. The relationship between the principal and agent is called:
a) Contractual relationship
b) Agency relationship
c) Employer-employee relationship
d) Trustee relationship
Answer: b) Agency relationship

4. Who has the authority to appoint an agent?
a) The agent
b) The principal
c) The third party
d) The court
Answer: b) The principal

5. What is implied authority in agency?
a) Authority explicitly granted by the principal
b) Authority that the agent assumes without consent
c) Authority inferred from the agent’s position
d) Authority given by a third party
Answer: c) Authority inferred from the agent’s position

6. When does an agency relationship come to an end?
a) When the agent dies
b) When the principal revokes the authority
c) When the purpose is fulfilled
d) All of the above
Answer: d) All of the above

7. What is ‘ratification’ in agency?
a) When the agent rejects a contract
b) When the principal approves an unauthorized act by the agent
c) When the agent terminates the agency
d) When the principal appoints a new agent
Answer: b) When the principal approves an unauthorized act by the agent

8. An agent’s duty includes:
a) Loyalty to the principal
b) Disclosure of relevant information
c) Obedience to lawful instructions
d) All of the above
Answer: d) All of the above

9. The principal is liable for acts of the agent when:
a) The agent acts within authority
b) The agent acts outside authority
c) The agent acts fraudulently
d) The agent acts without consent
Answer: a) The agent acts within authority

10. Which of the following can create agency by estoppel?
a) Principal’s conduct leading third parties to believe agency exists
b) Written agreement only
c) Court order only
d) None of the above
Answer: a) Principal’s conduct leading third parties to believe agency exists

11. Who bears the risk if an agent acts outside the scope of authority without ratification?
a) Principal
b) Agent
c) Third party
d) All parties equally
Answer: b) Agent

12. An agent is entitled to:
a) Compensation from the principal
b) No compensation
c) Punishment for unauthorized acts
d) Transfer ownership of principal’s property
Answer: a) Compensation from the principal

13. What happens if the principal becomes insolvent?
a) Agency terminates automatically
b) Agent’s authority continues
c) Agent can claim damages
d) Agent can act on behalf of the insolvent principal
Answer: a) Agency terminates automatically

14. Which document usually creates an agency relationship?
a) Power of attorney
b) Will
c) Deed of trust
d) Partnership deed
Answer: a) Power of attorney

15. An agent cannot delegate his authority unless:
a) Principal permits
b) Agent is dead
c) Third party agrees
d) Agent is busy
Answer: a) Principal permits

16. Which of the following is a personal contract?
a) Contract between principal and agent
b) Contract between agent and third party
c) Contract between principal and third party
d) Contract between two agents
Answer: a) Contract between principal and agent

17. Who is liable when an agent acts within the scope of authority?
a) Agent only
b) Principal only
c) Both principal and agent
d) Third party
Answer: b) Principal only

18. Which one is NOT a mode of termination of agency?
a) Death of the principal
b) Insolvency of the agent
c) Completion of the purpose
d) Mutual agreement
Answer: b) Insolvency of the agent

19. What does “agency by necessity” mean?
a) Agency created by law in emergency situations
b) Agency created by mutual consent
c) Agency created by estoppel
d) Agency created by ratification
Answer: a) Agency created by law in emergency situations

20. What is the duty of an agent regarding confidentiality?
a) Agent must disclose all information to third parties
b) Agent must keep principal’s information confidential
c) Agent can share information freely
d) Agent has no confidentiality duty
Answer: b) Agent must keep principal’s information confidential

21. What does ‘delegation of authority’ imply?
a) Agent transferring all duties to another without principal’s consent
b) Agent appointing a sub-agent with principal’s consent
c) Agent acting for himself
d) Agent ending the agency
Answer: b) Agent appointing a sub-agent with principal’s consent

22. Which section of the Indian Contract Act deals with agency?
a) Section 182 to 238
b) Section 101 to 120
c) Section 50 to 60
d) Section 1 to 50
Answer: a) Section 182 to 238

23. What is the agent’s duty of care and skill?
a) To act negligently
b) To act with reasonable care and competence
c) To act only when instructed
d) To act on behalf of a third party
Answer: b) To act with reasonable care and competence

24. An agent can be compensated by:
a) Commission
b) Salary
c) Percentage of sales
d) All of the above
Answer: d) All of the above

25. What is a ‘sub-agent’?
a) An agent appointed by the principal directly
b) An agent appointed by the agent with principal’s consent
c) An independent contractor
d) None of the above
Answer: b) An agent appointed by the agent with principal’s consent

26. Can an agent bind the principal in contracts with third parties?
a) Yes, if within authority
b) No, never
c) Only if agent owns the property
d) Only with court approval
Answer: a) Yes, if within authority

27. What happens if the agent acts fraudulently?
a) Principal is always liable
b) Agent is personally liable
c) Third party is liable
d) Agency is automatically terminated
Answer: b) Agent is personally liable

28. Which of the following is NOT an essential element of agency?
a) Consent of principal and agent
b) Capacity of agent
c) Consideration
d) Legal purpose
Answer: c) Consideration

29. What is ‘agency by estoppel’?
a) Agency created by express agreement
b) Agency created by law due to principal’s conduct
c) Agency created by ratification
d) Agency terminated by estoppel
Answer: b) Agency created by law due to principal’s conduct

30. When can an agent pledge the principal’s goods?
a) Always
b) Never
c) Only with authority
d) Only with third party’s consent
Answer: c) Only with authority

31. What is the ‘principal-agent relationship’?
a) Employer-employee relationship
b) Relationship where agent acts on behalf of principal
c) Partnership relationship
d) Contract of sale
Answer: b) Relationship where agent acts on behalf of principal

32. Who can ratify an unauthorized act of an agent?
a) Principal only
b) Agent only
c) Third party
d) Court
Answer: a) Principal only

33. What is the effect of ratification?
a) It validates the agent’s unauthorized act
b) It cancels the contract
c) It terminates the agency
d) It transfers liability to the agent
Answer: a) It validates the agent’s unauthorized act

34. Which of the following can NOT be an agent?
a) Minor
b) Adult with sound mind
c) Company
d) Government official
Answer: a) Minor

35. What is the ‘authority’ of an agent?
a) Power to act on behalf of the principal
b) Permission to hire employees
c) Legal ownership of principal’s property
d) None of the above
Answer: a) Power to act on behalf of the principal

36. Can an agent delegate their authority to someone else without principal’s permission?
a) Yes
b) No
c) Only in emergencies
d) Only if agent is busy
Answer: b) No

37. What is ‘implied authority’?
a) Authority expressly granted
b) Authority inferred from conduct
c) Authority rejected by principal
d) None of the above
Answer: b) Authority inferred from conduct

38. What is the duty of an agent when acting?
a) Act honestly and in good faith
b) Act against principal’s interest
c) Hide information from principal
d) None of the above
Answer: a) Act honestly and in good faith

39. What is ‘agency by necessity’?
a) Agency created in emergency without prior authority
b) Agency created by written contract
c) Agency created by ratification
d) Agency created by estoppel
Answer: a) Agency created in emergency without prior authority

40. When is the principal liable for an agent’s torts?
a) Always
b) When agent acts within scope of authority
c) Never
d) Only if agent is negligent
Answer: b) When agent acts within scope of authority

41. Who appoints an agent?
a) Third party
b) Principal
c) Court
d) Agent themselves
Answer: b) Principal

42. What is ‘actual authority’?
a) Authority agent believes they have
b) Authority expressly or impliedly granted by principal
c) Authority of sub-agent
d) None of the above
Answer: b) Authority expressly or impliedly granted by principal

43. What is ‘apparent authority’?
a) Authority visible to third parties due to principal’s conduct
b) Authority granted secretly
c) Authority rejected by principal
d) Authority of sub-agent
Answer: a) Authority visible to third parties due to principal’s conduct

44. What happens if an agent exceeds authority?
a) Principal is bound
b) Agent personally liable
c) Contract is void
d) Third party liable
Answer: b) Agent personally liable

45. Which type of agent has continuous authority?
a) Special agent
b) General agent
c) Sub-agent
d) None of the above
Answer: b) General agent

46. Who is liable if the agent contracts in their own name without disclosing principal?
a) Principal only
b) Agent only
c) Both agent and principal
d) Third party
Answer: b) Agent only

47. Which is NOT a duty of the principal?
a) Compensation to agent
b) Indemnification of agent
c) Obeying agent’s orders
d) Providing necessary information
Answer: c) Obeying agent’s orders

48. Can an agent act as a principal for the same contract?
a) Yes, always
b) No, never
c) Only with principal’s consent
d) Only if third party agrees
Answer: c) Only with principal’s consent

49. What is the effect of revocation of authority?
a) Agency continues
b) Agency ends
c) Agent gains ownership rights
d) Contract becomes void
Answer: b) Agency ends

50. Which of the following is NOT a remedy for breach of agency duties?
a) Damages
b) Specific performance
c) Rescission of contract
d) Punitive imprisonment
Answer: d) Punitive imprisonment

ecpgurgaon.com