Law for Accounting wk7 Flashcards
Define the principal in agency law.
The person/company that is entering into an agreement, the principal beneficiary of the activity.
Define the agent in agency law.
The person/company that is facilitating the agreement, acting on behalf of the principal beneficiary of the activity.
What’s the difference between an explicit and an implicit agreement?
Explicit - “Express actual authority” An agreement that one party will act as agent on behalf of the principal. In words or in writing.
Implicit - “Implicit actual authority” given by actions/conduct of both parties.
Implicit cannot contradict explicit.
Explain Ostensible Authority.
“Apparent” to a third party. e.g. the principal tells a third party that xyz are their agents. The principal cannot go back on this.
“Holding out” - if the principal holds out the agent as such, an agency relationship can be held.
If the agent holds themselves out as an agent, an agency relationship cannot be held (the agent is liable for the contract).
What is necessity in terms of agency law?
Where the confirmation of an agency relationship can’t be confirmed, but action is required immediately.
Must be an economic emergency
Must be done in good faith
Must be impossible to confirm with principal
What is Ratification in terms of agency law?
Subsequent retrospective agreement.
Agents act in good faith to meet needs of principal, and agrees after the event.
What are the conditions for ratification regarding agency law?
Agent must have made clear they were acting as such with the 3rd party.
Principal must have been able to enter contract at the time.
Ratification made on the basis of all facts (or acceptance of them regardless).
What is the difference between disclosed and undisclosed principals?
Disclosed: If agent makes it clear they’re acting on behalf of another, the liability for the contract is between the principal and the 3rd party.
Undisclosed: If agent doesn’t make it clear they are acting on behalf of another.
What are the duties and obligations of agency law?
Obey instructions Care and Skill Personal Performance (not to delegate)
What are the fiduciary duties of agency law?
Avoid Conflicts of Interest No Secret Profits Not to Take a Bribe Duty to Account Duty of Confidentiality (Even after termination)
