Business Law, Chapter 32, Exam 3

True This is the principal's right of avoidance

True or False: When an agent breaches the agency agreement or agency duties under a contract, the principal has a right to avoid any contract entered into with an agent

False; the independent contractor normally owns the copyright

True or False: When an employer hires an independent contractor, the employer normally owns the copyright

True The agent can recover for past services and future damages but cannot force the principal to allow him or her to continue acting as an agent

True or False: When the principal-agent relationship is not contractual, the agent has no right to specific performance

True

True or False: Whenever instructions are not clearly stated, the agent can fulfill the duty of obedience by acting in good faith and in a manner reasonable under the circumstances

Independent contractor

a person who contracts with another to do something for him or her but who is not controlled by the other nor subject to the other's right to control with respect to his or her physical conduct in the performance of the undertaking.

b.

After Medellin flops at the Cannes film festival, Lloyd, eager to leave behind his days as Ari's assistant and finally become an agent, tells Vince that he'll represent Vince for half Ari's rate. Lloyd has most likely breached a. no duty b. the duty of loyalty c. the duty of notification d. the duty of obedience

a.

After Vince returns from Italy, fresh off the success of The Great Gatsby and Ferrari, he invests in a number of properties and asks Turtle to manage them. Consistent with the duty of _________, Vince asks Turtle to show him records of all funds received and paid out relating to the properties a. accounting b. performance c. obedience d. notification

Agency by operation of law

A spouse is liable for payment of the necessaries because of either a social policy or a legal duty to supplement necessaries to family members. This is called what?

employer

If the IRS decides that an employee is misclassified (should be classified as an employee, not an independent contractor) the __________ will be responsible for paying any applicable Social Security, withholding, and unemployment taxes

reasonably believed that an agency relationship existed

In agency by estoppel, the third party must prove that he or she ______________.

a.

In the Season 5 finale, Johnny Drama becomes the co-owner of a Queens bar that he renames -- what else? -- "Johnny Drama's" and so he decides to move back to the old neighborhood for good. He asks Ari to act as his agent to sell his condo. As a courtesy to Vince, Ari agrees. At Johnny's request, Ari lists the condo at $500,000. Ari subsequently receives an offer of $490,000 but thinks it's too low and so he doesn't tell Johnny. Ari most likely has breached the duty of a. notification b. performance c. obedience d. accounting

d.

In the Season 6 finale, Vince and Drama leave for Rome, to start shooting a film based on the life of Enzo Ferrari. Vincent asks Ari to find him a mansion that he can move into upon his return, consistent with his "A-list" status. Ari learns that Bob Saget wants to sell one of his many homes for $10,000,000 informs Vince, and makes an offer of $9,000,000 on Vince's instruction. The offer is rejected. Ari a. breached the agent's fiduciary duties to the principal b. failed to take advantage of a business opportunity c. made an unreasonable offer based on current market conditions d. did nothing wrong

True

True or False: A gratuitous agent must perform in an acceptable manner and is subject to the same standards of care and duty to perform as other agents

True

True or False: In emergency situation, when the principal cannot be consulted, the agent may deviate from the instructions without violating their duty of obedience

False; they are binding on the principal (employer) because the employee is an agent of the employer

True or False: Representations of fact with respect to goods being sold made by the salesperson (employee) are not binding on the principal (store's owner)

True

True or False: The principal's duty of indemnification applies to gratuitous agents

False

True or False: The relationship between a principal and an independent contractor always involves an agency relationship

True

True or False: Under the duty of loyalty, the agent's actions must be strictly for the benefit of the principal and must not result in any secret profit for the agent

False

True or False: When a principal is sued by a third party for an agent's negligence conduct, they cannot sue the agent for indemnification (equal to the amount of the damages); This is part of the principal's risk in creating an agency relationship

False They cannot be liable for breach of contract because there is no contract

True or False: When an agent acts gratuitously (without payment), they can still be held liable for breach of contract

True

True or False: When an agent acts gratuitously, they are subject to tort liability

True

True or False: After Vince fires Ari, Aris negotiates a deal with Pablo Escobar on behalf of Vince with the hope that Vince will retain him directly. Although Ari did not represent Vince at the time, Vince may ratify the contract after the fact

False

True or False: Agents can recover for expenses incurred as a result of their own misconduct under the principal's duty of reimbursement

True

True or False: All employees who deal with 3rd parties are deemed to be agents

False any legal purpose

True or False: An agency relationship can be created for any purpose

True

True or False: An agency relationship is a fiduciary relationship, based on trust and confidence. Stated somewhat differently, Ari Gold owes a fiduciary duty to Vincent Chase, his client.

False

True or False: An agency relationship must be in writing

False

True or False: An agency relationship requires consideration

True

True or False: An agent can withhold further performance and demand that the principal give an accounting

True

True or False: An employer is normally not responsible for the actions of an independent contractor with whom the employer contracts

True

True or False: Any breach of a fiduciary duty by an agent may justify the principal's termination of the agency

True

True or False: At a press conference, Vincent Chase thanks "my agent Ari Gold" for landing him the title role in James Cameron's Aquaman. Ari purports to act as Vincent's agent in several endorsement deals shortly after that press conference. If Vincent in fact has not agreed to retain Ari as his agent for endorsement, and the other parties to the endorsement deals watched the press conference they should argue that Vincent is liable for Ari's actions with regards to those subsequent transactions under the doctrine of estoppel.

True

True or False: In an agency by estoppel, facts and circumstances must show that an ordinary, prudent person familiar with business practice could have been justified in concluding that the agent had authority

True This is agency by operation of law

True or False: In an emergency situation, if an agent cannot contact the principal and failure to do so would cause the principal substantial loss, the agent may take steps beyond the scope of her or his authority.

True

True or False: as part of the principal's duty of compensation to the agent, the principal must pay in a timely manner for the agreed-on value of the agent's services

d.

Turtle contracts with Vince to act as Vince's agent in an illegal tequila importing scheme. Turtle does not successfully complete the scheme. Vince can recover from Turtle for a. breach of contract b. breach of the duty of obedience c. breach of the duty of performance d. none of the above (i.e it's void)

c.

Turtle works as Vince's driver. Turtle is Vince's a. agent but not employee b. employee and agent c. employee or independent contractor, depending especially on whether Vince controls the details of his physical performance

work for hire; employer

Under the Copyright Act, any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is a __________ and the (employee, employer) owns the copyright to the work

constructive trust, avoidance, indemnification

What are 3 main actions available to the principal against the agent?

False It is the deeds or statements of the principal that create an agency by estoppel

True or False: Acts or declarations of a purported agent in and of themselves create an agency by estoppel.

idemnification

Which principal's duty is this? The principal must indemnify the agent for the value of benefits that the agent confers on the principal

constructive trust

Which principal's right is this? Anything that an agent obtains by virtue of the employment or agency relationship belong to the principal. An agent commits a breach of fiduciary duty if he or she secretly retains benefits or profits that, by right, belong to the principal

Independent contractor

Employee or independent contractor? A great deal of skill is required of the worker

Employee

Employee or independent contractor? The employer supplies the tools at the place of work

Independent contractor

Employee or independent contractor? The work is usually done by a specialist without supervision

Employee

Employee or independent contractor? The worker has been performing work for a long time

Independent contractor

Employee or independent contractor? The worker is engaged in an occupation or business distinct from that of the employer

Independent contractor

Employee or independent contractor? The worker is paid at completion of the job

Employee

Employee or independent contractor? the employer exercises a great deal of control over the work

Employee

Employee or independent contractor?The work is usually done under the employer's direction

By words or conduct

Agency by ratification involves a question of intent. How can intent be expressed?

fiduciary

(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)

agreement

Most agency relationships are formed by _______

voluntary consent, agreement

Agency relationships normally are consensual -- com about by _________ and _________ between the parties

agency by estoppel

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

d.

Ari agrees with Vince to act as Vince's agent on April 1. Unknown to Ari, Vince's brother, Johnny Drama, has Vince declared mentally incompetent on May 1, due to Vince's drug addiction. Ari entered into a contract on Vince's behalf on June 1. This contract is a. binding on Ari b. binding on Vince c. bind on Johnny Drama d. none of the above (i.e. it's void)

b.

Ari and Vince may create an agency relationship for a. a business purpose only b. a legal purpose only c. any purpose d. no purpose

d.

Ari is an agent for Vince. After Vince signs his contract with Warner Brothers for Aquaman, he buys a private jet. On Vince's behalf and at his request, Ari pays for certain plane maintenance and repair services. Ari's right to obtain the amount of those payments from Vince arises under the principal's duty of (a) compensation (b) cooperation (c) indemnification (d) reimbursement

b.

At the end of Season 6, Lloyd graduates from admin to agent and now represents Johnny Drama. Drama gives Lloyd an exclusive territory in which to sell Johnny Drama branded merchandise. Drama cannot compete with Lloyd in that territory under the duty of a. compensation b. cooperation c. indemnification d. reimbursement e. loyalty

b.

Before he became Ari's long-suffering assistant, Lloyd worked in the mail room where the firm withheld federal taxes from his pay and controlled the methods and details of the performance of this work. Although he dreamed of meeting the rich and famous clients someday, at the time he had not contact with the firm's clients. Lloyd was most likely a. a independent contractor b. an employee and agent c. an employee d. an agent e. none of the above

a.

In the Season 7 finale, Mrs. Ari leave him and so Ari does some soul searching and decides to move him to Chicago to practice law as he had originally planned. After passing the Illinois Bar, he hangs out his shingle. As an agent in this context, he must exercise the degree of skill or care expected of a. a person having legal training b. an average, unskilled person c. a reasonable person d. the principal

yes contractual capacity for a principal Don't need contractual capacity to be an agent (anyone can be an agent, including minors)

Must a person have contractual capacity to be a principal? To be an agent?

agency by ratification

On occasion, a person who is in fact not an agent may make a contract on behalf of another. If the principal approves or affirms that contract by word or action, an agency relationship is created. This is called what?

that expected of a reasonable person under the circumstances (ordinary care) ** If an agent has represented herself or himself as possessing special skills, the agent is expected to exercise the degree of skill claimed

The degree of skill or care required of an agent is usually...

Agency by estoppel The principal is estopped to deny the agency relationship

Sometimes, a principal causes a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment on that belief. In this case, what happens?

the degree of control the business exercises over the worker

The IRS has its own criteria for determining whether a worker is an employee or an independent contractor (for tax purposes). What is the most important factor it considers?

1. How much control the employer exercises over the details of the work (most important factor) 2. If the worker is engaged in an occupation or business distinct from that of the employer 3. If the work is usually done under the employer's direction or by a specialist without supervision 4. If the employer supplies the tools at the place of work 5. For how long the person is employed 6. The method of payment (over time or at completion of the job) 7. The degree of skill required of the worker

What 7 things must the courts decide in determining whether a worker is an independent contractor or an employee?

notification, obedience, performance, accounting, loyalty (NOPAL)

What are the agent's duties to the principal?

1. Compensation 2. Reimbursement 3. indemnification 4. Safe working conditions 5. Cooperation They should C the RISC in having an agent

What are the principal's duties to the agent? (5)

written contract, oral agreement, or implied by conduct

What are the three ways in which an agency relationship by agreement can come about?

agent, principal

What are the two parties in an agency relationship?

any funds disbursed at the principal's request, any necessary expenses incurred in the course of the reasonable performance of the agent's duties

What does the principal have a duty to reimburse the agent for?

Five Star is an independent contractor for AAA because they do not control the manner and means of Five Star's work. Therefore, AAA is not liable for the damage Coker caused.

What is the conclusion in Coker v. Pershad?

whether 5 Star Auto Company is an independent contractor or employee of AAA

What is the issue in Coker v. Pershad?

fiduciary

What type of relationship is do a principal and an agent have to one another?

exclusive agency

When a principal grants an agent exclusive territory, the principal creates an ___________, in which the principal cannot compete with the agent or appoint or allow another agent to compete

obedience

Which agent's duty is this? The agent must follow all lawful and clearly stated instructions of the principal

Accounting

Which agent's duty is this? Unless the agent and principal agree otherwise, the agent must keep and make available to the principle 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

performance

Which agent's duty is this? an implied condition in every agency contract is the agent's agreement to use reasonable diligence and skill in performing the work

Loyalty

Which agent's duty is this? 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; must maintain confidentiality

compensation

Which principal's duty is this? The principal has a duty to pay the agent for services rendered

reimbursement

Which principal's duty is this? The principal has a duty to reimburse the agent for any funds disbursed at the principal's request

safe working conditions

Which principal's duty is this? The principal is required to provide safe working premises, equipment, and conditions for all agents and employees; must inspect working areas and warn agents and employees about any unsafe situations

cooperation

Which principal's duty is this? The principal must cooperate with and assist the agent in performing his or her duties

agent

the fiduciary relation that results from the manifestation of consent by one person to another that the other shall act in his or her behalf and subject to his or her control, and consent by the other to so act