ACCT 324 TEST 2

Agency by Ratification

1. An individual must misrepresent himself as an agent for another party 2. The principal must accept or ratify the unauthorized act a) For ratification to be effective, two additional requirements must be met (1) the principal must ratify the entirety of the agent's act (2) The principal must have complete knowledge of all material facts regarding the contract

Duty of Accounting (A-P)

The agent must keep an accurate account of the transactions made on behalf of the principal and provide the accounting information to the principal on request

Duty of notification (A-P)

The agent must notify the principal of any relevant information in a timely manner

Duty of Performance

The agent must perform the duties as specified in the agency agreement with reasonable skill, care and professionalism.

Duty of Cooperation (P-A)

must assist the agent in the performance of his duties.

duty of compensation (P-A)

principal must compensate the agent for the services provided unless the partied have agreed the agent will act gratuitously. Principal must also compensate for any damages incurred within the scope of the agent's duties.

Duty of reimbursement (P-A)

the principal has a duty to reimburse or indemnify the agent for any authorized expenditures or any losses the agent incurs in the sources of working on behalf of the principal.

employer-employee relationship

whenever an employer hires an empoyee to perform some sort of physical service- subject to employers control example: generally all employees are agents to their employer

the 4 types of agency

1) expressed agency 2) agency by implied authority 3) apparent agency 4)Agency by ratification

Two criteria for the creation of an agency relations

1) created for a lawful purpose 2) almost anyone can act as an agent, however, an individual who does not have contractual capacity (like a minor) cannot hire an agent to make contracts on his behalf

employee or independent contractor?

1) employee-employer relationship is subject to workers' compensation, workplace safety, discrimination, and unemployment statutes while the employer- independent contractor relationship is not.

Demand for an Accounting

If an agent feels he has been shorted pay, for example if he believes that his commission was not correct he can demand a an auditor perform an audit to determine whether he is owed money.

Classification of Prin: Undisclosed Principal

If the third party does not know that an agent is acting on behalf of a principal

Classification of Prin: Partially Disclosed Principal/Unidentified Principal

If the third party is aware of the principal's existence but not his identity

Duty of Obedience (A-P)

The agent must follow the lawful instruction and direction of the principal

Principal's duties to the agent

The principal owes specific duties to the agent, Failure to fulfill these rights provides the bassi for a tort or contract action against the principal.

Agents Rights and Remedies Against the Principal

Tort and Contract remedies Demand for an Accounting Specific Performace

Principal's rights and remedies against the agent

When an agent breaches his or her duties to the principal the principals can terminate the agency relationship and seek remedies (constructive trust, avoidance, and indemnification)

Agent's duties to the principal

When an agent fails to fulfill his duties to the principal, that failure provides the basis for a contract or tort action against the agent

Specific Performance

When principal agrees to specific actions but fails to perform, agent can seek court support to force the principal to perform as the contract stipulated.

Fiduciary

a person who has a duty to act primarily for another person's benefit

Durable power of attorney

a written document where the principal expresses his wished for an agent's authority not to be affected by subsequent incapacity.

Things about Employees that are not the same for independent contractors

a) do not engage in a distinct occupation or an independently established business b) Their work is done with supervision c) Employer supplies tools d) No specialized skill e) employed for a long time f) is a regular part of the employer's business g) Regular payments 3. Independent Contractor a) engages in a distinct occupation or an independently established business b) Their work is done without constant supervision c) Employer does not supply tools d) Specialized skill e) employed for irregular amount of time f) is not a regular part of the employer's business g) Payed when job is complete

Duty of Loyalty (A-P)

agent has a responsibility to act in the interest of the principal. including avoiding conflicts of interest and protecting the principal's confidentiality

employer-independent contractor relationship

agents, but not employees. But they cannot enter into contracts on behalf of the principal unless the contractor possesses authority from the principal. Examples: Building contractors, doctors, stockbrokers, and lawyers are all independent contractors.

General Power of Attorney

allows the agent to conduct all business for the principal

agency relationship

an agent is authorized to act for and on behalf of the principal who hires the agent to represent himself

Classification of the principal

are classified based on the third party's perspective and knowledge about them. Important because it helps determined the principal's liability

Tort and Contract Remedies

available when principal violates agreement.

Creation of the Agency Relarionship

consensual relationships formed by informal oral agreements or formal written contracts can only be created for a lawful purpose

power of attorney

established an agency by agreement that gives an agent authority to sign legal documents on behalf of the principal. often given for business/health care purposes type of expressed agency

Special Power of Attorney

expresses power over specifically outlined events

Agency

generally defined as a relationship between a principal and an agent. More elaborately defined as "the fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act"

What do US countries operating in foreign countries normally do?

hire agents in those countries who know the local laws

agency by implied authority

if a homeowner asks a real estate broker to sell his house authority is implied, however implied authority cannot conflict with express authority

apparent agency (agency by estoppel)

if a principal falsely leads a third party to believe another individual serves as his agent. Can only be created on the acts of the principal, never on the basis of what the purported agent says or does. THIRD PARTY MUST PROVE -that he reasonably believed, on the basis of the principal's conduct, that an agency relationship existed FOR IT TO ENFORCEABLE

Duty to Provide Safe Working Conditions (P-A)

including equipment and premises

Constructive Trust

when the agent illegally benefits form the agency relationship, the principal may enact a constructive trust- is an equitable trust imposed on someone who wrongfully obtains or holds legal right to property he should not possess. The court then gives the principal the right of possession.

principal-agent relationship

typically exists when an employer hires and employee to enter into contracts on his behalf example: sales clerk

Avoidance

when an agent breaches an agency contract or his fiduciary duties, the principal may use his right of avoidance to nullify at his discretion an contract the agent negotiated.

expressed agency (agency by agreement

when parties form an agency relationship by making a written or oral agreement. This is the most common type. If it is written it must meet all the elements of a contract

Idemnification

when sued by a third party, a principal may sue his agent to recover the amount assessed to the third party. When agent acts without authority.

Classification of Prin: Disclosed Principal

when the third partty is aware that the agent is making an agreement on behalf of a principal and also knows who the principal is