ACCT Chapter 33
Which of the following is a recognized source for the definition of agency?
The Restatement of Agency
The remedies available to an agent when a principal violates an agency agreement include the standard tort and contract remedies.
True
Agency law is especially important for: _______.
U.S. firms doing business globally
A(n) Blank______ is 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.
agency
What is apparent agency AKA...
agency by estoppel.
What is the type of agency in which the principal falsely leads a 3rd party to believe another individual serves as the principal's agent?
apparent agency
Identify the main remedies a principal has for an agent's breach of fiduciary duties in a principal-agent agency relationship. (Check all that apply.)
Avoidance Constructive trust Indemnification
Which are the following remedies are potentially available when a principal violates agency agreement?
Both tort and contract remedies
The ___ defines agency 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."
Restatement of Agency
A general power of attorney grants ___ authority.
broad
What type of law is principal-agent significant to?
contract law
Whenever a duty is imposed on the principal, a(n) Blank______ right exists for the agent.
corresponding
Does the employer provide the tools?
employee - yes independent contractor - no
What relationship is when an employer hires an employee to perform some sort of physical service where the employee is subject to the employers control?
employer-employee
A lawyer is a ___ for a client.
fiduciary
A(n) Blank______ is a person who has a duty to act primarily for another person's benefit.
fiduciary
Who is a person who has a duty to act primarily for another person's benefit?
fiduciary
The usage of agents and independent contractors allows corporations to enter contracts and conduct business in...
multiple locations simultaneously.
Employers are liable for employees actions, but not...
independent contractors.
How are agency relationships formed?
informal oral agreements or formal written contracts
Are independent contractors employees?
no
Can a principal enact power of attorney after becoming incompetent?
no
What is a gratuitous agent?
one who acts without consideration - meaning the agent is not paid for his or her services
The duty that requires an agent to perform his or her duties as required by the agency agreement is known as the duty of: Blank______.
performance
What establishes an agency by agreement that gives an agent authority to sign legal documents on behalf of the principal?
power of attorney
What is the most basic type of agency relationship?
principal-agent relationship
What business relationships are agency laws relevant to?
principal-agent, employer-employee, employer-independent
Agency relationships exist primarily for the benefit of the...
principal.
Agency law is primarily ________ law
state
Agency law can vary...
state to state.
When a contract exists and a principal agrees to certain conditions but refuses to perform, under contract remedies the agent may seek court assistance in forcing the principal to perform the contract as stipulated. Unless...
the agency relationship is not contractual or the contract is for personal services. *the agent may get recovery from services rendered and more but not force the principal to fulfill the agreements
Who is the legal owner of anything an agent may come to possess through the employment or agency relationship?
the principal
If the agent makes numerous contracts the principal could not possibly carry out what happens?
the third party can sue the principal, then the principal can sue the agent
When is an independent contractor paid?
when the job is complete
Does the agent have to share all offers with the principal?
yes
If the agent breaches their duties can the principal be entitled to remedies beyond what is listed in the contract?
yes
What is expressed agency AKA...
agency by agreement.
What is the type of agency in which the agency relationship is implied by the conduct of the parties?
agency by implied authority
Can the agent represent the principal and a third party in an agreement?
no because it causes a conflict of interest
Are all independent contractors agents?
no, they CAN be but need authorization
What relationship is when an employer hires an employee to enter contracts on its behalf?
principal-agent relationship
Which of the following is the most important factor in deciding whether a person is an employee or an independent contractor?
The degree of control the employer has over the individual's work
Is power of attorney or durable power of attorney stronger for the agent?
durable power of attorney
What is a written document that expresses his or her wishes for an agent's authority not to be affected by the principal's subsequent incapacity OR agency will become active only after a principal becomes incapacitated in any matter?
durable power of attorney
What duty says that the agent must keep an accurate account of the transactions of money and property made on behalf of the principal and keep agent and principal accounts separate?
duty of accounting
the principal must assist the agent in performance of their duties and cannot do anything to interfere with the agent's reasonable conduct
duty of cooperation
What is the most important duty that an agent owes to a principal?
duty of loyalty
What duty covers the necessity to share any information that the agent thinks could be important to the principal in a timely matter?
duty of notification
What duty says the agent must follow lawful instruction and direction of the principal?
duty of obedience
If a contract exists and the principal agrees to certain conditions but fails to perform them, the agent may seek court assistance in forcing the principal to: Blank______.
perform the contract as specified
What are the 2 requirements for agency by ratification?
1. an individual must misrepresent their identity as an agent for another party 2. the principal must accept or ratify the unauthorized act and ALL parts of the agent's act
What are the 2 criteria for the creation of agency relationships?
1. can only be created for a lawful purpose 2. the agent has contractual capacity
What is the copyright difference between an employee and an independent contractors when it comes to employer ownership?
1. employee - employer owns copyright (considered work for hire) 2. independent contractor - usually maintains ownership unless there is an agreement between parties
What are the 4 agency relationship types?
1. expressed agency 2. agency by implied authority 3. apparent agency 4. agency by ratification
When must an agency agreement be in writing?
1. when the agent will enter into a contract that the statute of frauds requires to be in writing 2. when in agent is given power of attorney
Which of the following is required for agency by estoppel?
A reasonable belief by the third party that an agency relationship existed
Which of the following is not a type of business relationship to which agency laws are relevant?
Agent-incidental beneficiary
Simon hired Becky as his agent. Becky's responsibilities included making real estate contracts on behalf of Simon. Which of the following is correct regarding the agency agreement between Simon and Becky?
It must be in writing.
An agency is defined as the relationship between...
a principal and an agent.
According to the Copyright Act of 1976, an employer can order an employee to complete work at the request of the employer. This product is known as: Blank______.
a work-for-hire
Arlene wants to give her friend, Marion, the power of attorney over her affairs. To do that, Arlene and Marion will need: Blank______.
a written contract specifying the agreement between them
Agents who work on commission have a right to demand a(n) Blank______ of funds.
accounting
If a person represents himself as an agent for an individual and that individual accepts the act of the person representing himself as the agent, this relationship is known as an: Blank______.
agency by ratification
What is the type of agency in which an individual misrepresents himself as another party's agent and the principal accepts the unauthorized act?
agency by ratification
What is a relationship in which the employee may be an agent of the employer and have the ability to bind that employer legally?
agency relationship
In the agency relationship, the ___ is authorized to act for and on behalf of the principal, who hires the ___ to represent the principal.
agent
Agents who feel they are not being properly compensated may demand:
an accounting and withhold further performance of their duties until the principal supplies appropriate accounting data
the principal has a duty to compensate the agent for services provided with an agreed upon amount or customary fee in the situation unless the parties have agreed that the agent will act gratuitously
compensation/duty to compensate
An agency relationship can be formed through the implied Blank______ of the parties.
conduct
Implied authority cannot ___ with expressed authority.
conflict
If the agent illegally benefits from the agency relationship, the principal may enact a(n) Blank______ trust on the goods, profits, or property in question.
constructive
When an agent illegally benefits from the agency relationship, the principal may enact a ___ on the profits, goods, or property in question.
constructive trust, where the courts give the principal possession
What is the most common type of agency?
expressed agency
What is the type of agency in which parties form the agency relationship by making a written or oral agreement?
expressed agency
The law typically assumes that a principal is aware of all of the information: ________.
regardless of whether the agent shares it with the principal
Generally, gratuitous agents function much like Blank______ agents.
regular
the principal has a duty to reimburse or indemnify the agent for any authorized expenditures or any losses the agent incurs in the course of working on behalf of the principal
reimbursement and indemnification/duty of reimbursement or indemnification (sue agent to recover amount sued by third party)
the principal has a duty to ensure safe working conditions and to warn the agent if the principal is aware of any potential danger or they will be fined
safe working conditions/duty to provide safe working conditions
What duty says that the agent must perform the duties as specified in the agreement and with the expected skill level?
duty of performance
When an agent breaches an agency contract or his fiduciary duties, the principal may use her right of __________ to nullify at her discretion any contract the agent negotiated
avoidance
Why does the IRS need to determine when people are employees or independent contractors?
because of different tax liabilities employers face with employees the employer is liable for social security and unemployment
When may a principal use the right of avoidance to nullify, at his or her discretion, any contract the agent negotiated?
When the agent breaches his or her fiduciary duties
When an agent breaches an agency contract or his fiduciary duties, which of the following remedies may the principal may use to nullify at her discretion any contract the agent negotiated?
The right of avoidance
Which of the following is correct if an employer has some control over the operations of a contractor?
This control does not always mean that the contract is an employee.
A principal always has the right of Blank______, so agents may not use the agency relationship to obtain goods or property for themselves if the principal desired to obtain the same goods or property.
first refusal
Who is a person who contracts with another to do something for another person but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking?
independent contractor
Can an individual without contractual capacity hire an agent to make contracts on their behalf?
no
In the duty of loyalty, does confidentiality end after a relationship does?
no
An agent who makes an unauthorized agreement may have violated his or her duty of: Blank______.
obedience
A specific power of attorney grants ___ authority.
specific (stuff listed in the agreement)
If duties are not fulfilled, the principal has violated the agent's rights and the agent can...
sue for contract or tort remedies or refuse to act on behalf of the principal until the failure is remedies.