law quiz 1

Undisclosed Principal

A principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for a principal at the time the agent and the third person form a contract.

define an agent

A relationship between two parties in which one part (the agent) agrees to represent or act for the other (the principal) Agency relationships exist between: Employers and employees Employers and independent contractors who are hired to perform special tasks and services All employees who deal with third parties are deemed to be agents

termination by operation of law

death, insanity/incompetence, destruction of subject matter, impossibility, bankruptcy, war. Note: changed circumstances has limited application

agreement

no liability

diclosed principal (most common)

•- A principal whose identity is known to a third party at the time the agent makes a contract with the third party.

respondeat superior

•A doctrine under which a principal-employer is liable for any harm caused to a third party by an agent-employee in the course or scope of employment. •The doctrine imposes vicarious liability because the principal-employer is being held liable for torts committed by an agent-employee.

Fiduciary Duties are a core concept of agency law as well as partnerships, corporations and many professional relationships

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Partially Disclosed Principal

A principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third party form a contract.

Advantages of Sole Proprietorship

Easiest to start Least regulated Single owner keeps all the profits Taxed once as personal income

Disadvantages of Sole Proprietorship

Limited to life of owner Equity capital limited to owner's personal wealth Unlimited liability Difficult to sell ownership interest

Fiduciary Duties of Agent to Principal: Performance, Loyalty, Obedience, Accounting, Notification

Performance- •An implied condition in every agency contract is the agent's agreement to use reasonable diligence and skill in performing the work. •When an agent fails to perform his or her duties, liability for breach of contract may result. •The degree of skill or care required of an agent usually is that expected of a reasonable person under similar circumstances. •If an agent has represented herself or himself as possessing special skills, however, the agent is expected to exercise the degree of skill claimed. Loyalty-••The agent has the duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party. •Any information or knowledge acquired through the agency relationship is confidential. •Examples: Trade secrets and customer lists compiled by the principal •It is a breach of loyalty to disclose such information either during the agency relationship or after its termination. Obedience-•When acting on behalf of the principal, an agent has a duty to follow all lawful and clearly stated instructions of the principal. •Any deviation from such instructions is a violation of this duty (except during emergency situations when the principal cannot be consulted). Accounting-•Unless the agent and principal agree otherwise, the agent must keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf. The agent has a duty to maintain a separate account for the principal's funds and must not intermingle these funds with the agent's personal funds Notification-An agent is required to notify the principal of all matters that come to her or his attention concerning the subject matter of the agency.

Sole Proprietorship

a business owned and managed by a single individual

Duties of Principal to Agent: Compensation, reimbursement (for expenses), indemnification (for legal liability), cooperation, safe workplace

compensation-•The principal has a duty to pay the agent for services rendered and to pay that compensation in a timely manner. •Unless the agency relationship is gratuitous and the agent does not act in exchange for payment, the principal must pay the agreed-on value for the agent's services. reimbursement (for expenses)-•Whenever an agent distributes funds at the request of the principal •For any necessary expenses incurred in the course of the reasonable performance of her or his agency duties indemnification (for legal liability)-•For liabilities incurred because of authorized and lawful acts and transactions •Example: If the agent, on the principal's behalf, forms a contract with a third party, and the principal fails to perform the contract, the principal is obligated to compensate the agent for any costs incurred by the agent as a result of the principal's failure to perform the contract. •For the value of benefits that the agent confers on the principal •This rule applies to acts by gratuitous agents as well. cooperation- •A principal has a duty to cooperate with the agent and to assist the agent in performing his or her duties. •The principal must do nothing to prevent that performance. •Example: If a principal violates an exclusive agency, he or she is exposed to liability for the agent's lost profits. safe workplace-•The common law requires the principal to provide safe working premises, equipment, and conditions for all agents and employees. •The principal has a duty to inspect working areas and to warn agents and employees about any unsafe conditions.

Key Principal remedies against Agent: Constructive Trust, Indemnification, Termination

constructive trust- indemnification- termination-

Vicarious liability "respondeat superior"

form of strict, secondary liability that arises under the common law doctrine of agency - "respondeat superior" - the responsibility of the superior for the acts of their subordinate, or, in a broader sense, the responsibility of any third party that had the "right, ability or duty to control" the activities of a violator.

considerations for starting a business

how hard it'll be to raise capital personal liability legal responsibility for business debts & obligations

frolic

if the agent was on a "frolic of their own" and not in any way on their master's business, the master will not be liable ex: pizza drives to his girlfriend's house and runs into a parked car, the master is NOT liable

Key Agent remedies against Principal: Indemnification, Accounting, Breach of Contract

indemnification- accounting- breach of contract-

factors that indicate independent contractor status

the key is control** almost always someone who does work without supervision real estate agent, an attorney client doesn't control how lawyer or real estate agent does their job has a great deal of skilled- as in they were hired for a specific job

Scope of Employment

the realm of activities engaged in by an agent when acting on behalf of a principal

Equal Dignity Rule

•A rule requiring that an agent's authority be in writing if the contract to be made on behalf of the principal must be in writing. •Failure to comply with the equal dignity rule can make a contract voidable at the option of the principal. •Modern business practices allow several exceptions to the equal dignity rule: 1.An executive officer of a corporation normally can conduct ordinary business transactions without obtaining written authority from the corporation. 2.When the agent acts in the presence of the principal, the rule does not apply. 3.When the agent's act of signing is merely a formality, then the agent does not need written authority to sign.

termination rules

•An agency may be terminated by certain acts of the parties, which include: •Lapse of time * By a specific time specifies or a reasonable time when time is unstated •Achievement of purpose •Occurrence of a specific event •Mutual agreement •At the option of one party •As a general rule, either party can terminate the agency relationship without the agreement of the other.

work for hire

•Any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is a "work for hire," and the employer owns the copyright to the work. •An exception is made if the parties agree in writing that the work is a "work for hire" and the work falls into one of nine specific categories, including: •Audiovisual works •Motion pictures •Textbooks •Tests

Express Authority:

•Authority expressly given by one party to another. •In agency law, an agent has express authority to act for a principal if both parties agree, orally or in writing, that an agency relationship exists in which the agent has the power (authority) to act in the place of, and on behalf of, the principal.

Apparent Authority

•Authority that is only apparent, not real. •An agent's apparent authority arises when the principal causes a third party to believe that the agent has authority, even though she or he does not. ex: An agent does not have express or implied authority to do an act, but a third party reasonably believes the agent has such authority.

detour

•If a servant merely took a detour from his master's business, the master will be responsible.

travel time

•If travel is part of a person's position, as it is for a traveling salesperson, then travel time is normally considered within the scope of employment.

Ratification

•The act of accepting and giving legal force to an obligation that previously was not enforceable. •Ratification can be either express or implied. •When ratification occurs: •The principal is bound to the agent's act. •The act is treated as if it had been authorized by the principal from the outset.

wrongful (liability)

•Wrongful termination can subject the canceling party to a lawsuit for breach of contract. •Even in an agency at will—in which either party may terminate at any time—the principal who wishes to terminate must give the agent reasonable notice. •The notice must be at least sufficient to allow the agent to recoup his or her expenses and, in some situations, to make a normal profit.