Business Law Chapter 9

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

agency

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

agents

If the two parties in the agency agreement disagree about how much the principal owes the agent, the agent may suspend performance and demand ____.

an accounting

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An independent contractor is not an employee but may be an agent

independent contractor

Any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is called a ____.

work for hire

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 become an agent.

Which of the following is NOT a duty the agent owes the principal? a. performance b. superior competence c. notification d. loyalty e. obedience f. accounting

B. superior competence

Which of the following is NOT one of the four ways in which an agency relationship can arise? a. agency by agreement b. agency by ratification c. agency by federal law d. agency by estoppel e. agency by operation of law

C. agency by federal law

Which of the following is NOT a duty the principal owes the agent? a. compensation b. reimbursement and identification c. substantial ownership in the business d. cooperation e. safe working conditions

C. substantial ownership in the business

A gratuitous agent may be held liable for breach of contract.

False

When the principal-agent relationship is not contractual, the agent may receive an order for specific performance from the court to ensure that the agency relationship may continue.

False

In which situations may the courts find an agency relationship in the absence of a formal agreement.

In family relationships, in emergency situations

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 does employment law.

True

Generally, the liability of the principal will depend on whether the agent was authorized to form a contract.

True

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

True

The agency relationship is a fiduciary relationship based upon trust, and each party owes the other the duty to act with the utmost good faith.

True

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

True

In agency law, ratification occurs when:

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

When an agent fails to perform his or her duties, for what may the agent be liable to the principal?

breach of contract and tort liability

The principal has several remedies available, including ____ for breach of fiduciary duties and ____ remedies if the agent engages in misrepresentation, negligence, deceit, libel, slander, or trespass. Anything that the agent obtains by virtue of the agency relationship belongs to the ____ and will be considered held in ____ for the principal. If the agent breaches the agreement, the principal also has a right of ____. Finally, if the principal is sued for the agent's negligent conduct, the principal can sue the agent for ____.

contractual, tort, principal, constructive trust, avoidance, indemnification

Courts will determine independent contractor status by asking several questions. These include the following: How much ____ does the employer exercise over the details of the work? Is the worker engaged in a(n) ____ or business distinct from that of the employer? Is the work usually done under the employer's direction of by a(n) ____ without supervision? Does the employer ____ the tools at the place of work? For how long is the person ____? What is the method of ____, by time period or at the completion of the job? What degree of ____ is required of the worker?

control, occupation, specialist, supply, employed, payment, skill

A familiar example of an agent is a:

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

Agency by ____ is created when the ____ causes a third party to reasonably believe that an agency relationship exists.

estoppel, principal

When the principal grants an agent an exclusive territory, we say the principal has created a(n) ____.

exclusive agency

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

Whether a worker is an employee or an independent contractor can affect the employer's ____ for the workers' actions. If the Internal Revenue Service decides that an employee is misclassified as an independent contractor, the employer will be ____ for paying Social Security, withholding, and unemployment taxes.

liability, responsible

The degree of skill or care required of an agent is usually that expected of a(n) ____ person under similar circumstances.

reasonable

An agent's actions must be strictly for the benefit of the principal and must not result in any ____ profit for the agent.

secret

The agent has the duty to act ____ for the benefit of the principal and not in the interest of the agent or third party.

solely