chapter 32 agency formation and duties

Delia gives her agent, Mike, money to purchase a commercial oven. Mike takes the cash and deposits it into his personal checking account and then accidentally spends some of it. Mike has violated his duty of

accounting

Which of the following is NOT one of the four ways in which an agency relationship can arise?

agency by federal law

With respect to their employers, employees who deal with third parties are generally deemed to be

agents

The majority of agency relationships are based on:

an expressed or implied agreement

Protection under employment-discrimination statutes provides a significant ___________________ for workers to claim that they are employees rather than independent contractors.

incentive

Brittany works at home making unique children's clothing. Liam buys Brittany's clothing to sell in his store. With respect to Brittany's legal relationship to Liam, she is probably a(n)

independent contractor

Kip owns Kip's Construction. He agrees to renovate Simha's bathroom. Kip is likely to be classified as a

independent contractor

Facts and circumstances must show that an ordinary, prudent person familiar with business practice and custom would have been _____________________ in concluding that the agent had authority.

justified

Whether a worker is an employee or an independent contractor can affect the employer's ____________________ for worker's actions.

liability

How the Courts Determine Employee or Independent Contractor Status

1. How much ______control________ does the employer exercise over the details of the work? 2. Is the worker engaged in an ______occupation__________ or business distinct from that of the employer? 3. Is the work usually done under the employer's direction or by a ______specialist________ without supervision? 4. Does the employer ________supply__________ the tools at the place of work? 5. For how long is the person _____employed_______? 6. What is the method of ____payment_________ - by time period or at the completion of the job? 7. What degree of _____skill______ is required of the worker?

A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal).

Agency

Generally, agency agreements must be in writing and there must be consideration

False

When a person who is not an agent makes a contract on behalf of a principal, the principal cannot benefit from the contract.

False

As a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking. As an adjective, a relationship founded on trust and confidence.

Fiduciary

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer.

Independent contractor

Which of the following is NOT one of the duties the agent owes the principal.

Payment

You walk into a restaurant and check your coat to a person behind a counter. You see a sign that says "I work for tips." What can you assume the relationship is between the owner of the restaurant and the person who took your coat?

There is an implied agreement that the coat check person is an agent of the restaurant.

Agency relationships are normally consensual, coming about through voluntary consent and agreement between the parties.

True

Agency relationships can exist outside an employer-employee relationship, and thus agency law has a broader reach than employment law does.

True

An agency by estoppel arises when the principal's actions have created the appearance of an agency that does not in fact exist.

True

In an agency relationship involving two parties, the agent agrees to act for the principal

True

With respect to who can become a principal and who can become an agent,

a person must have contractual capacity to be a principal, but any person can be an agent.

In agency law, ratification occurs when:

a principal, by words or by actions, affirms a contract made by a person who in fact is not an agent.

Perry tells Jamie that Selena has agreed to allow him to sell her high-end trail bike. Selena is present at the time, hears the conversation, and says nothing. Jamie wants to buy a bike like Selena's so he agrees with Perry to buy her bike. Selena then refuses to sell it. She claims she is not bound by the agreement formed by Perry and Jamie because Perry is not her agent. Selena is:

bound by the contract under a theory of agency by estoppel

A familiar example of an agent is a(n):

corporate officer who serves in a representative capacity for the owners of the corporation

Federal statutes governing employment ___________________ apply only when an employer-employee relationship exists.

discriminiation

Clarence buys $221 worth of groceries using his wife's credit card. Under agency law, his wife will probably be deemed:

liable for the purchase, based on the creation of an agency by operation of law.

The agent has the right to be compensated, to be reimbursed and indemnified, and to have a safe working environment. What other right does the agent also have in performing his agency duties?

no interference by the principal

It is the deeds or statements of the ________________ that create an agency by estoppel.

principal

The party represented by the agent is known as the

principal

For an agency by estoppel, the third person must prove that he or she __________________ believed that an agency relationship existed.

reasonably

If the IRS decides that an employee is misclassified as an independent contractor, the employer will be ______________________ for paying Social Security, witholding, and unemployment taxes.

responsible