REG: Chapter 5 Flashcards
Agency Formation
What is a prerequisite for the creation of an agency relationship?
- The principal must have capacity
- An agreement between the principal and agent on the relationship and subject matter
- Legality of the subject matter
Consideration is not a prerequisite
Agency Formation
What is a del credere agent?
- A del credere agent is a sales agent who guarantees the customer’s obligation
- The sales agent is the surety and is liable to the principal if the customer refuses to pay
Agent’s Authority and Duties
What is an agency?
- An agency is an express or implied consensual relationship where the principal and agent agrees that the agent will act on behalf of the agent
- An example of an agency is an attorney retained to handle the sale of a family home
Agent’s Authority and Duties
When is a principal liable to a third party because an act committed by the agent?
When an employee fails to notify the employer of a dangerous condition that results in an injury to the third party
Agent’s Authority and Duties
What is apparent authority?
- Apparent authority occurs from words or conduct from the principal directed to a third party
- The third party is under the impression that the agent has actual authority
Agent’s Authority and Duties
What is actual authority?
The agent receives the right and power to bind the principal to third parties
Agent’s Authority and Duties
When can an agent delegate their duties to a subagent?
- When an emergency occurs and the delegation is necessary to meet the emergency
- This exception applies to most contractual duties
Agent’s Authority and Duties
What remedies can a principal do when an agent fraudulently breaches a fiduciary duty?
- Terminate the agency
- Require the agent to hold resources for the benefit of the principal even though the agent does not hold legal title (aka Constructive Trust)
Agent’s Authority and Duties
What is duty of obedience?
- The agent must follow lawful explicit instructions of the principal
- The agent must act in good faith and in a reasonable manner
- If the agent cannot reach the principal, the agent may deviate from the instructions to the extent warranted
Principal’s Duties and Liabilities
How can a principal ratifies the contract?
- The principal must have knowledge of all material facts relating to the contract
- Ratification can occur if the third party did not withdraw prior to the ratification or the situtation did not drastically change the agreement
Principal’s Duties and Liabilities
What is respondeat superior?
- The employer is liable for the torts committed by the employee within the scope and during their employment
- The principals liability to the third party is for acts of the agent within the scope of the agent’s actual or apparent authority
- The doctrine does not apply to crimes committed by employees
Principal’s Duties and Liabilities
When can a principal be held criminally liable for the crime of an agent?
- The principal approves or directs the crime
- The principal participates in the crime
- Violation of regulatory statute caused the crime
Principal’s Duties and Liabilities
What remedies does an agent have with the principal violates a duty owed to the agent?
- Recovery of future damages
- Recovery of past damages
- Withholding future performance
Specific performance is not a remedy
Agency Termination
When there is an agent coupled with an interest, who can terminate the contract before the interest has expired?
- The agent may terminate at any time without liability if there isn’t a specific period that has been established
- The principal cannot terminate
Agency Termination
What is Agency Coupled with Interest?
The agent has a specific, current, beneficial interest in the property that is the subject of the agency
Agency Termination
When does apparent authority of a general agent for a disclosed principal end without notice to the third parties?
When the principal or agent dies
Agency Termination
When does an agent’s apparent authority end?
- When the third party believes that the agent has actual authority that is unreasonable
- Operation of law does not end apparent authority
Agency Termination
What are terminations by operation of law?
- Death
- Incapacity
- Bankruptcy of the principal
Employment Tax
How are unemployment taxes classified for an employer?
Unemployment taxes are reported by the employer as a deductible business expense
Employment Tax
What is the employer’s calculation to determine payroll tax?
Federal Income Tax Withheld
(+) Employer’s portion of Social Security Tax Withheld
(+) Employee’s portion of Social Security Tax Withheld
(+) Employer’s portion of Medicare Tax
(+) Employee’s portion of Medicare Tax
(+) Additional Medicare Tax
Qualified Health Plans
What is the goal of the Patient Protection and Affordable Care Act?
- Expand Medicaid
- Create insurance marketplaces
- Provide insurance subsidies for low and middle-class incomes
- Allowing nondependent children 26 or younger to be covered under the parent’s policy
- Requiring certain employers to provide coverage
Qualified Health Plans
How is the minimum value for an employer deteremined under the Affordable Care Act?
- The percentage of coverage that will be paid is based on an actuarial value
- The minimum value allowed for an eligible employer plan is 60%
- The minimum actuarial value is set by the ACA and will not reduce employer contributions
Qualified Health Plans
What is the calculation to determine the penalty fee for an employer who fails to follow the ACA?
- The annual penalty is paid when there are at least 50 full-time employees
- The penalty is based on $2,880
Annual Penalty = 2,880 x (Total EFTs - First 30 EFTs)
Bribery of Foreign Officials
What are PCAOB registrations required to do in accordance with the Foreign Corrupt Practices Act?
- Keep records that reflect the transactions and disposition of assets
- Applies to all corporations who securities are registered with the SEC
- Maintain a system of internal accounting controls
Bribery of Foreign Officials
What are the aspects of the Foreign Corrupt Practices Act?
- Prohibits bribes to foreign officials to improperly influence official acts
- An internal control system must be developed, implemented and maintained
- Subjects to fines and imprisonment for both the corporation and its officers by the Department of Justice
- Antibribary provisions applies to all domestic corporations engaged in interstate commerce
