1-24

Question 1

Sole Proprietorship

Answer 1

Business owned by one person. Sole right to manage, sole right to profits, personal liability for debts of the business.

Question 2

Independent Contractor

Answer 2

One with authority to act without principals’ approval. Simply fulfill his duties and recieves no direction from the principal.

Question 3

Agency

Answer 3

Legal relationship between the agent acting on behalf of the principal.

Question 4

Master-Servant Relationship

Answer 4

Master possesses actual control or the right to control the servant in the discharge of his duties. Common example is employer/employee relationship.

Question 5

Agency by Agreement

Answer 5

Requires a valid legal purpose, and both parties must manifest an intent to be bound. Principal must have capacity to contract. No contractual formalities to be valid.

Question 6

Agency by Ratification

Answer 6

Principal accepts the benefits or conduct of the agent through expressed or implied means. Establishes Agency by Ratification

Question 7

Sub-agents duty

Answer 7

Hired by agent with principals’ consent and bound by same fiduciary duty as the agent.

Question 8

Vicarious Liability in Agency

Answer 8

Employer will be liable for torts of his employee if the employer authorizes, allows or ratifies the employees tortious acts.

Question 9

Liability of Agent and Principal to Third Party

Answer 9

When an agent acts for an undisclosed principal and no statement exists indicating an agency, the agent is liable. But if agent acts with actual authority, the principal is also liable. If third party has notice that agent acts for another , then evidence can be shown that the agent and principal did not intend to be bound.

Question 10

Agency by Estoppel

Answer 10

Third party detrimentally relies upon principals representation regarding agent. Principal estopped from denying the relationship.

Question 11

Agents Authority

Answer 11

Principal bound by agents act if there is: 1) Actual Authority 2) Apparent Authority 3) Inherant Authority

Question 12

Actual Authority

Answer 12

Agents duties are expressly assigned to the agent by the principal. May also be implied by customary usage or principals behavior.

Question 13

Apparent Authority

Answer 13

Principal leads third party to believe that another acts as his agent and third party reasonably relies upon statement. Principal is bound to third party.

Question 14

Inherent Powers of Agent

Answer 14

Agent has inherent powers which include power to make express and implied warranties and make representations regarding agency subject matter.

Question 15

Imputed Notice

Answer 15

Principal not subject to imputed notice unless agent had actual or apparent authority to receive notice from third party.

Question 16

Imputed Knowledge

Answer 16

Principal not subject to imputed knowledge unless the facts concern agency and fall within the scope.

Question 17

Principals Duties

Answer 17

Principal has duty to pay agent and not interfere with agents discharge of duty.

Question 18

Agents duties

Answer 18

Must use Reasonable care, Skill, and Diligence when performing contract.

Question 19

Rights of Third Party against Agent/Principal

Answer 19

Third party has right to bring action against principal and agent, but can only recover from one party. Minority, filing against one party releases other party. Majority, may file against both but make final decision regarding recovery prior to court decision.

Question 20

Rights of Agent and Principal against Third Party

Answer 20

Generally, only principal is entitled to enforce the contract against third party, but where agent has power to contract and an interest in agreement, agent entitled to recover.

Question 21

Borrowed Servant Doctrine

Answer 21

Employer may be held liable for actions of temporary employee.

Question 22

Fiduciary Duty

Answer 22

Duty of upmost good faith, candor, honesty, loyalty, and in the best interests of other partner.

Question 23

Conflict of Interest

Answer 23

Incompatibility between ones own interest and one’s duties to another.

Question 24

Sub-Agent

Answer 24

Person whom agent delegates to perform the act for the principal.