Business Entities

Question 1

Agency

Answer 1

Fiduciary relationship where one-person (agent) acts for another (principal)

Question 2

Agent Duties to Principal

Answer 2

Loyalty, Care, Obedience, and Accounting.

Question 3

Actual authority

Answer 3

grants the agent the right and the power to bind the principal to third parties

Question 4

Implied Actual Authority

Answer 4

incidental authority implied by words or conduct manifested by the principal to the agent. It is authority necessary to carry out the purposes for which the agency was established.

Question 5

Apparent Authority

Answer 5

power created in an agent as a result of the principal’s dealings with third parties. When a principal, whether by words or by conduct, holds out an agent to a third party as having authority to act on his or her behalf, the principal will be bound by the agent’s acts and representations to that third party.

Question 6

Two ways apparent authority it created

Answer 6

1) dictated by principal

2) failure of principal to act