Ch.25, 26, 27 - Agency and employment

Question 1

Relation where one party (the principal) delegates authority to another party (the agent) to act on behalf of the principal.

Answer 1

Agency

Question 2

What are some examples of agents

Answer 2

-Power of attorney
-Employment
-Estates: executors and administrators
-Corporations: officers/ directors
-Partnerships: all partners are both principals and agents
-Administrative agencies: Principal is legislature, Agent is the board of directors. (Funeral directors {or employees} are third party)

Question 3

What is the difference between an executor and an administrator?

Answer 3

A will. Executors handle cases with a will

Question 4

Statement made by principal giving authority, not written

Answer 4

Express authority

Question 5

An agent’s power to act on behalf of a principal without an express authority from that principal.
-“I want you to be the manager of this business.” What does that mean?

Answer 5

Implied authority

Question 6

Principal is aware of a contract the agent has made.

Answer 6

Apparent authority

Question 7

Agent creates a contract that the principal is not aware of.
-Agent does not have the authority because principal never granted it
-Principal can ___ a contract created by agent “as is” to accept it

Answer 7

Ratification

Question 8

What are the agent’s duties to the principal?

Answer 8

-Loyalty and good faith (fiduciary duty: the highest form)
-Obedience
-Reasonable skill and diligence
-Accounting
-Information

Question 9

What are the principals duties to the agent?

Answer 9

-Compensation
-Reimbursement (for advanced costs)
-Indemnification (agent suffers legal harm, principal has to pay)
-Noninterference (perform contracts properly entered by the agent

Question 10

What are the legal ways to terminate an agency?

Answer 10

-Subsequent liability (tour guides have to get a license)
-Death or incapacity
-Destruction of subject matter (before agency)
-Bankruptcy
-Dissolution of a corporation
-War

Question 11

Who is the principal and who is the agent in an employment contract?

Answer 11

-Employer is the principal
-Employee is the agent

Question 12

Employment type where an employer can fire employee at any time with or without reason

Answer 12

Employment at will

Question 13

What is the difference between an employee and an independent contractor in terms of tax?

Answer 13

-Employee: employer pays SS and other taxes (W4)
-Independent contractor: employee pays SS and other taxes (1099)