blaw hw test 3-worsheet 28-31

Acceptance of the benefit of an unauthorized transaction or failure to repudiate it, thereby making the transaction binding as if it had been authorized.

Ratification

What must be true for Costello and Giordano to be personally liable to Ridgaway's estate in Ridgaway v. Silk?

Ridgeways death is attributable to Costello and Giordano's own negligence, recklessness, or tortious conduct.

If Dirk consents to being Percival's agent, an agency relationship will not be created if _______________

Percival does not have control over Dirk

What happens when an agent receives an outside benefit while working in the scope of her agency?

She must inform her principal, who may take the benefit or allow the agent to keep it

A corporation that registers for S corp status with the IRS is not necessarily treated as a close corporation under state law unless it complies with the state statute's particular requirements.

True

A joint venture is not its own legal entity. Rather, its participants retain their own separate identities and simply partner for a limited purpose, such as a specific project.

True

A limited liability company may go public, but once it does so it loses its status as a flow-through tax entity.

True

Agents are always responsible for their own torts.

True

An agent may compete with her principal once the agency relationship ends.

True

General partners have equal management rights in the partnership unless they agree otherwise.

True

Generally, a principal is not liable for the physical torts of an independent contractor.

True

In general, a principal cannot rescind contracts entered into by the agent.

True

In the past professional corporations were the only business formation other than general partnerships available to professionals, such as lawyers and accountants.

True

Operating agreements are not required but can be extremely helpful for LLCs

True

Principals have substantial liability for the actions of their agents.

True

Sole proprietors are personally liable for all of the debts incurred by their business.

True

Unless they agree otherwise in advance, the agent or the principal can terminate the agency relationship at any time.

True

Implied Authority:

Unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it

If an agent hires subagents, is the principal liable for the acts of the subagent?

Yes, as long as the agent was authorized to hire the subagents

Can an agent ever work for two principals whose interests conflict?

Yes, as long as the principals know about the conflict and consent to the agency relationship

Wyatt, a Certified Public Accountant, misinterprets a basic provision of the tax code when filing a client's taxes, and the error ultimately costs his company several thousand dollars to fix. Is Wyatt liable?

Yes, because Wyatt has special skills and will be held to a higher standard of care

Is it possible for Colleen to owe a fiduciary duty to Bobby without Bobby controlling Colleen?

Yes, but it is not an agency relationship

Sole proprietorships work best for small businesses because

debt is generally the only source of generating capital

In National Franchisee Association v. Burger King Corporation, the court held that Burger King Corporation

did not act in bad faith because there may well me a legitimate business reason to sell products below cost

Which of the following are characteristics that apply to LLCs?

different classes of stock permitted, nontransferable interests, flow-through tax entity, members may be corporations partnerships or nonresident aliens

When a partner leaves a partnership, it is called a ______. The partnership can either ______ the departing partner and _________ or _____ (Drag and drop the correct answer in ascending order.) the business and ________ the partnership.

disassociation. buy out. continue in business. wind up. terminate.

Duties of Agents to Principals:

duty of care, duty of loyalty, duty to obey instructions, duty to provide information

Duties of Principals to Agents:

duty to compensate as provided in the agreement, duty to cooperate, duty to reimburse reasonable expenses

S corporations and close corporations were both created to _________________

encourage entrepreneurship

A corporation protects managers and _________ from _______ for the debts of the corporation and _______, but not against liability for __________negligence, torts, or crimes.

investors. personal liability. actions of others. their own

Which of the following are features of professional corporations?

limited liability, complicated tax structure, shareholders must be members in the same profession, strict legal formalities

Which of the following are advantages of a sole proprietorship?

low formation costs, flow-through tex entity

Under which of the following circumstances will a court hold LLC members personally liable for the liabilities of the LLC?

members commit fraud, members fail to treat the LLC like a separate organization, members fail to provide adequate capital

A close corporation has a small number of _______ whose stock is not ________ and who play an active role in _______. A close corporation is entitled to special treatment under _________.

shareholders. publicly traded. management. state law.

An agent has a duty to provide the principal with all information in her possession that _____________ . She also has a duty to provide ____________.

she has reason to believe the principal wants to know. accurate information

Which of the following are disadvantages of a corporation?

strict legal formalities, high formation costs, taxable entity

An employee is acting within the scope of employment if the acts are which of the following?

takes place during hours that the employee is generally employed. is similar to the one the principal authorized. is one that employees are generally responsible for

Few corporations have converted to LLC's, even though it is legally possible, because ______________________.

the IRS would treat the changes as a sale of corporate assets and tax the assets accordingly

Which of the following is true of so-called social enterprises?

the common forms are benefit corporations and low profit limited liability companies

Which of the following are circumstances under which a principal is liable for an employee's intentional physical torts?

the employee intended to serve some purpose of the employer. the employer was negligent in supervising the employee. the employer negligent in hiring the employee

Under which of the following circumstances is a partnership not created?

the partners operate a charitable organization and do not intend to make a profit. the partners do not share profits

Select the three obligations imposed on a principal under his duty to cooperate with his agent:

the principal must perform her part of the contract. the principal must furnish the agent with the opportunity to work. the principal cannot unreasonably interfere with the agents ability to accomplish his task

Which of the following are the court's holdings in Doe v. Liberatore?

the principal was not negligent in hiring the agent. the agents criminal behavior was not within the scope of his employment

Jane is in debt to Jack, and is also a partner in Mother Goose, LLP. Jane may transfer to Jack ______________

the value of her partnership interest in Mother Goose.

Most states require sole proprietors to register ____________

their business name if it is different from their own

The Federal Trade Commission (FTC) requires franchisors to provide the Franchise Disclosure Document (FDD) to franchisees prior to signing a franchise agreement ____________________

to allow the franchisee to make an informed decision

Historically, partnerships were the only form of organization available to professionals, such as accountants, lawyers, and doctors, but that is no longer the case today.

true

According to the UPA, the association of ________ persons to carry on as _________ a business _______ forms a partnership _________ the persons intend to form a partnership.

two or more. co owners. for profit. whether or not.

A sole proprietorship is a(n) ________ business owned by ________ person. It is the _________ common form of business.

unincorporated. one. most.

A general partnership is a(n) _______ association of _______ owner/co-owners who carry on a business ________. Each owner is a ________.

unincorporated. two or more. for profit. general partner.

A principal is liable for the nonphysical torts of an employee in which of the following situations?

when the employee acted with apparent authority, express authority, and implied authority

Which of the following are factors that a court will consider in determining a partnership exists?

whether there is a partnership agreement. whether the parties intend to make a profit. whether the parties are involved in the management of the business. how profits and losses are divided

Apparent Authority:

A principal can be liable for the acts of an agent who is not acting with authority if the principal's conduct causes a third party to reasonably believe that the agent is authorized

Nick agrees to work for Carmine until Carmine's baseball card business sells $7,000 worth of cards. What type of agency agreement is this?

A term agreement for achieving a mutual purpose

Unidentified Principal:

Agent and principal are both liable. The third party knew of the principals existence, but not of his identity

Undisclosed Principal:

Agent and principal are jointly and severally liable. Third party did not know of the existence of the principal.

Unauthorized Agent:

Agent is liable. The agent has no authority

Fully disclosed principal:

Agent is not liable. The third party knows of the principals existence and knows his identity.

Express Authority:

Authority granted by the principals words of conduct that, reasonably interpreted, cause the agent to believe the principal desires her to act on the principal's account

Which of the following elements are not required for an agency relationship?

Compensation, a written agreement, a formal agreement

In Zankel v. United States of America, the defendant should argue that _________________

Dreyer had abandoned the principals business.

Select the four elements of the duty an agent owes to his principal:

Duty to provide information, duty of care, duty of loyalty, duty to obey instructions

A partnership must make a formal filing with the Secretary of State containing basic information about the entity.

False

Although corporations were widely celebrated and encouraged when they were originally created centuries ago, they have been treated with growing suspicion since the stock market crash that led to the Great Depression.

False

An agent's obligation not to engage in behavior that reflects badly on the principal applies only to his conduct when he is on-duty.

False

Ann becomes Bruno's agent if Ann does something for Bruno, even if Ann has not consented to act as an agent.

False

Apparent authority can be created by the conduct of the agent

False

If an employee has not signed a non-compete agreement, she may solicit the employer's clients for her own future benefit.

False

Some states order disloyal employees to pay punitive damages.

False

Which of the following are remedies available to a principal when an agent breaches a duty?

If the agent violates a duty of loyalty, the principal may rescind the transaction. Principal may recover the agents profits. Principal may recover damages

Authority in Agency Relationships:

Implied, apparent, express

In Abkco Music, Inc. v. Harrisongs Music, Ltd., the court held that

Klein violated his fiduciary duty to Harrison

Why do venture capitalists sometimes prefer to invest in C corporations over LLCs?

LLC's involve arcane tax issues, C corporations are easier to merge sell and take public, the law governing LLS's is still developing and is therefore less certain

Which of the following are circumstances under which the principal is liable for the acts and statements of his agent?

The agent had authority, the principal ratified the acts of the agent

In Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp LLC, the court held that

a duty of loyalty exists even when employment is at-will

Limited liability companies offer the best of both worlds:

a flow-through tax entity and limited liability

Either party in an agency agreement has the power to terminate the agreement but not the right. This means that

a person can be fined for terminating an agency relationship but cannot be prevented from leaving it.

An employer is generally liable for a physical tort committed by an employee ____________ and a nonphysical tort of an employee _____________.

acting within the scope of the employment. acting with authority

The Huatuco case demonstrates the danger of ________________.

adopting an operating agreement without thinking through the practical consequences of each provision

to create a _______ relationship, the principal and the agent must mutually agree that the _______ will act on behalf of the _____, and be subject to the ________, thereby creating a ____________ relationship.

agency, agent, principal, principals control, fiduciary

A _____ is a person who acts for someone else

agent

In general, there is no reason why the bankruptcy of a(n) _________ would prevent him from continuing to work. The bankruptcy of a(n) ______ is different because once he _________ he may be forced to terminate the agreement.

agent, principal, loses control of his assets

To become a socially conscious organization, an enterprise typically must:

all are correct

Under the theory of respondent superior, _____________________.

an employer is liable for the misbehavior of his employee even if the employer tried to prevent the employee from misbehaving.

A partnership can raise capital in which of the following ways?

contributions from partners and borrowing

A ______ tax entity ________ pay ______ tax on its profits, but passes them through to its ______, who pay tax at _______ rates

flow-through. does not. income. owners. their individual.

An agent who is not being paid is called a(n) _______ agent. They are held to a ____ standard of care than a typical agent. They are _____ for gross negligence; they are _________ for ordinary negligence.

gratuitous, lower, liable, not liable

Once an agency relationship ends, the agent no longer ____________ . If she continues to act, she __________________ .

has the authority to act for the principal. is liable to the principal for any damages she incurs as a result

If a court pierces the LLC veil it________________.

hold LLC members liable for the debts of the company

A social enterprise must balance the interests of which of the following when making business decisions?

investors, stakeholders, environment, communities

Which of the following must be true for a company to qualify as an S corp?

no more than 100 shareholders, all shareholders agree that the company should be a S corp, no shareholders are partners or corporations, only one class of stock, shareholders are U.S. citizens or residents

If a lawyer asks hospital employees to administer a blood test to his client, the hospital employees are

not acting as agents of the lawyer or his client if they do not consent to being agents

An act is within the scope of employment, even if it is expressly forbidden, if it is __________________ or _____________.

of the same general nature as that authorized. incidental to the conduct authorized

A principal is liable for the physical torts of an independent contractor ___________________

only if the principal has been negligent in hiring or supervising the contractor.

Franchises are appealing to franchisees because they allows them to ________________

own their own business while also receiving the benefit of an established brand and support structure.

___________ applies when the parties ________, in fact, _______ but are _______ as if they were.

partnership by estoppel. are not. partners. held liable

Corporations have a _______ existence. They are also a _______ form of business because they have stock that can be _______ easily.

perpetual. flexible. bought and sold

In an agency relationship, the role of the _____ is generally less complicated than the role of the ______. The range of tasks undertaken by agents is ______ than the range of tasks undertaken by the principal.

principal, agent, greater

A ___________ is someone who has someone else acting for him

principle

The Uniform Partnership Act (UPA) _______________

provides many default rules that apply to a partnership unless the partners agree otherwise