Chapter 10

Question 1

Describe the agency relationship

Answer 1

An agency exists when one person, the agent, is authorized to act on behalf of another, the principle or in dealings with third parties

Question 2

Describe representation in an agency relationship

Answer 2

Agents can enter into binding agreements on behalf of their principles with third parties

Question 3

Explain how an agency relationship can be created

Answer 3

Agency can B established by contract, estoppel, ratification or necessity

Question 4

Explain what expressed authority is

Answer 4

Expressed authority is given by clear communication

Question 5

Explain what implied authority is

Answer 5

Implied authority arises from the conduct or situation

Question 6

Explain the agents duties in an agency relationship

Answer 6

Performing tasks as directed, exercising care and acting in good faith

Question 7

Explain principle duties in an agency relationship

Answer 7

Include compensating the agent and indemnifying them for acts conducted within the scope of their authority.

Question 8

Explain fiduciary duty in terms of the agency relationship

Answer 8

Agent is obligated to act only in the best interests of the principle

Question 9

Explain liabilities of the agent in an agency relationship

Answer 9

Acting beyond authority or breach of contract

Question 10

Explain liabilities of principle in an agency relationship

Answer 10

Acts committed by the agent within the scope of their authority, including torts committed by the agent during their employment.

Question 11

Explain how an agency relationship can be terminated

Answer 11

Can occur by mutual agreement, completion of the agency purpose, or through certain events like death or bankruptcy of the principle.

Question 12

What are the three major types of business organizations

Answer 12

Sole proprietorship, partnership, and corporation.

Question 13

Explain what is sole proprietorship

Answer 13

An individual conduction business alone, responsible for all liabilities.

Question 14

Explain what a partnership is in terms of business

Answer 14

A relationship between two or more persons carrying on a business with the aim of making profit

Question 15

Explain how a partnership can be created

Answer 15

By contract, estoppel, or inadvertently if actions suggest a partnership exists

Question 16

What are the rights vs duties of partners

Answer 16

Rights: sharing of profits and participation in management. Duties: acting in good faith and in the best possible interest of the partnership.

Question 17

What are the liabilities that may be incurred by partners

Answer 17

Partners are liable for business debts and obligations, and for each others actions within the scope of business