Ch. 7 Agency, Partnerships and Corporations Flashcards
______ is the relationship where one person, known as the principal, intends for another person, known as the agent, to act on her behalf.
Agency
An agency is created by:
a. an agreement, express or implied
b. by estoppel- the principal indicates to a third party that someone has the ability to act as her agent
c. by ____________, - meaning that the principal agrees to be held liable for the actions of a third party, even when those actions were not originally authorized by the principal AND
d. by __________ - a principal will be held responsible for the agent’s acts during an emergency situation
ratification; necessity
True / False: A written agreement is needed to create an agency.
False, only in some states when the contract involves the Statute of Frauds
An agent owes 3 fiduciary duties to a principal:
- duty of _______ - the agent cannot act in ways that benefits herself in detriment to the principal.
- duty of ________ - they must obey all reasonable instruction from the principal.
- duty of ____ - agent must carry out her duties on behalf of the principal in good faith and with reasonable care.
loyalty; obedience; care
A principle will be held liable for actions of an agent so long as the agent acted with _________.
authority
Two forms of authority:
______ authority - agent reasonably believes she has based on her interactions with the principal (express actual authority or implied)
________ authority - when the principal leads a third party to reasonably believe that the agent has the authority to act on her behalf.
actual; apparent
Implied actual authority may arise from ____________ - when the agent has performed an action for the principal in the past and they had notice of the performance, but failed to object to it within a reasonable period of time.
acquiescence
True/False: If the agent does not have authority to act, then the agent will be liable for any transactions they enter.
True
If a principal is __________, meaning their existence AND identity are known to the third party, then the agent will have no liability unless the parties intend otherwise. A principal is _________ _________ if a third party has knowledge of their existence, but not their identity, and an ___________ principal is one whose identity and existence are not knows to the third party.
disclosed; partially disclosed; undisclosed
If a principal is partially disclosed, then both the agent and principal are liable for the transaction. However if a principal is __________, only the agent is liable.
undisclosed
A ___________ is an association of two or more people who enter into a business together for the purpose of making profit. It can be formed without any formalities, and need not be in ______.
partnership; writing
If one person enters a business to make profit, it’s referred to as a _____ _____________.
sole proprietorship
To determine a partnership, the sharing of ______ is prima facie evidence.
profits
A partnership by ________ arises when a person indicates to a third party that he is a partner, when in fact he is not. The person will be held liable to the third party for any harm created by his ________________.
estoppel; misrepresentation
True/ False : All partners share equally in profits and losses of the business and have equal rights to manage the affairs of the partnership.
True
A partnership is subject to ___-through tax treatment where the partnership itself is not taxed, but each partner is taxed on their share of the profits, whether or not the profits have been distributed.
flow
A partnership is an ________ relationship
agency
Each partner is ___________ _______ for the debts and obligations of the partnership, sometime referred to as a ________ partnership.
personally liable; general