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Legal Envi. of Bus
FINAL EXAM (Chapters 17-23, 28) Chp 20
| Question | Answer |
|---|---|
| agreement between two parties that one party (the agent) can and shall act on behalf of the other party (the principal) in negotiating/transacting business with third parties | Agency |
| ______ is a fiduciary relationship, meaning agent owes to the principal the highest duty of loyalty and ethical conduct | agency |
| Two categories of agent: | employee & independent contractor |
| ________ of any type of business enterprise who deal with third parties are agents—relationship is governed by agency law and by various aspects of employment law | employees |
| non-employee who performs services but who is not controlled by the principal in how they perform those services | independent contractor |
| -how much control does principal have -does agent work in principal’s business, or another business -is work usually done under principal’s supervision -who supplies tools | IRS has developed set of rules to determine status: |
| -does the agent work for more than one principal -how long will the relationship last -how is agent paid -what is the degree of skill required to perform | IRS has developed set of rules to determine status: |
| Agency relationship generally is ________—parties agree on terms, duration etc.—principal must have capacity to contract, agent does not—no consideration required for agency contract | contractual |
| Formation of the Agency Relationship express or implied agreement that agent will act on behalf of principal—can be written or oral agreement—agent can only act for principal in a way that is consistent with the terms of the agreement | Agency by agreement |
| Formation of the Agency Relationship agent acts before agency contract is formed; principal accepts or affirms act of agent (“ratifies” act) | Agency by ratification |
| Formation of the Agency Relationship principal causes third party to believe that another person is the principal’s agent | Agency by estoppel |
| Formation of the Agency Relationship based on a social or legal duty, often occurs in family context | Agency by operation of law |
| -performance -notification -loyalty -obedience -accounting | Agent’s duties to the principal: |
| implied in every agency contract is the agent’s duty to use reasonable diligence and skill in performing the work contemplated by the agreement | Performance |
| agent must keep principal informed of all developments in work contemplated by agreement—law assumes that notice to agent is notice to principal | Notification |
| agent must act solely in principal’s interest, not his/her own and not on behalf of anyone else, including another principal of same agent | Loyalty |
| agent has duty to follow principal’s instructions | Obedience |
| agent must account to and be responsible to principal for any money or property handled by agent in performing the work contemplated by the agreement | Accounting |
| -compensation -reimbursement and indemnification -cooperation -safe working conditions | Principal’s duties to agent: |
| payment for services rendered | Compensation |
| duty to ______ agent if agent has expended their own funds during performance of work contemplated by the agreement | Reimburse |
| duty to _______ if agent gets sued or incurs loss during performance of work contemplated by the agreement | Indemnify |
| principal cannot hinder agent in performance of work contemplated by the agreement | Cooperation |
| Indemnification is a word for ________ | insurance |
| duty of principal to provide safe workplace, warn of any known dangers | safe working conditions |
| can be written or oral, but should be clear and definite | Express authority |
| if performance of work contemplated by the agency agreement must be in writing, the agency agreement must be in writing | Equal dignity rule |
| written document giving express authority | Power of attorney |
| authority to do what is reasonable and necessary to accomplish agency | Implied authority |
| principal causes third party to believe that agent has authority when in fact agent does not—usually arises from course of conduct over time | Apparent authority |
| agent can act in principal’s best interest even though no express authority | Emergency powers |
| action by agent is beyond scope of agency, but principal accepts or does not repudiate after the fact | Ratification |
| third party is made aware that agent represents a specific principal | Disclosed principal |
| third party knows agent is an agent, just not for whom | Unidentified principal |
| third party does not know that agent is an agent or for whom | Undisclosed principal |
| If contract was within scope of agent’s authority: principal only is liable | disclosed |
| If contract was within scope of agent’s authority: principal and agent can be liable | unidentified |
| If contract was within scope of agent’s authority: agent will be liable to third party but principal will be liable to agent | undisclosed |
| If contract was NOT within scope of agent’s authority, principal (is or is not) liable to third party and agent (will or will not be) liable | -principal is not liable -agent will be liable |
| Principal can be liable for agent’s torts if agent acted within scope of agency—principal not liable if agent acted outside the scope of agency | respondeat superior doctrine |
| a ____ is within scope, | detour |
| a ____ is outside scope | frolic |
| can be terminated just as contracts can | Agency is based on contract |
| -lapse of time -performance -occurrence of specific event -mutual agreement -termination by one party | Termination by parties: |
| Termination by parties: agent performed work contemplated by the contract | performance |
| Termination by parties: as agreed upon | occurrence of specific event |
| Termination by parties: a rescission is also a ____ _______ | mutual agreement |
| Termination by parties: can be a breach of the agency contract | termination by one party |
| Termination by parties: can be specific defined time, or “a reasonable time” | lapse of time |
| -death of one party -impossibility of performance -changed circumstances -bankruptcy of one party -war between principal’s nation and agent’s nation | Termination by operation of law: |
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