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WVU BCOR 320 - Final Exam Study Guide

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BCOR 320 1nd EditionFinal Exam Final consists of chapters: 16, 17, 18, 19, 20 Chapter 16: Creating Agency Relationship:  Agency is a relationship in which the agent agrees to perform a task for, and under the control of, the principal To create an agency, there must be: ◦ Principal: Person who has someone else acting on him ◦ Agent: Person who acts for someone else◦ Who mutually consent that the agent will act on behalf of the principal◦ Be subject to the principal’s control◦ Creating a fiduciary relationship Consent – Principal must ask the agent to do something:◦ Agent must agree Control – Principals are liable for the acts of their agents ◦ They exercise control over the agents Fiduciary relationship – Trustee acts for the benefit of the beneficiary◦ Agents have a fiduciary duty to their principals Elements not required for an agency relationship include:◦ A written agreement Equal dignities rule: If an agent is empowered to enter into a contract that must be in writing, then: The appointment of the agent must also be written◦ Formal agreement◦ CompensationDuties of Agents to Principal: Duty of loyalty - The agent:◦ Must act for the benefit of the principal◦ May not receive outside benefits without approval of the principal◦ Can neither disclose nor use for her own benefit any confidential information◦ Is not allowed to compete with his principal within the scope of the agency business Duty of loyalty - The agent:◦ May not act for two principals whose interests conflict◦ May not become a party to a transaction without the principal’s permission◦ May not engage in inappropriate behavior that reflects badly on the principal An agent must obey the principal’s instructions, unless illegal or unethical Agent must act with reasonable care◦ An agent with special skills is held to a higher standard because he/she is expected to use those skills Agent must provide information◦ An agent has a duty to provide the principal with all information in her possession that: She has reason to believe the principal wants to knowPrincipal’s Remedies when the Agent Breaches a Duty: The principal can recover damages caused by the agent’s breach The agent must refund any profits made from the agency, if he breaches his duty of loyalty The principal may rescind a transaction with a disloyal agentDuties of Principal to Agent: Duty to reimburse the agent for reasonable expenses – Three categories◦ Principal must indemnify an agent for expenses reasonably incurred in carrying out his agency responsibilities◦ Principal must indemnify an agent for tort claims brought by a third party if: Principal authorized the agent’s behavior and the agent did not realize he was committing a tort Duty to reimburse the agent for reasonable expenses – Three categories◦ Principal must indemnify the agent for any liability she incurs from third parties as a result of: Entering into a contract on the principal’s behalf, including attorney’s fees and reasonable settlements Duty to cooperate◦ Principal must furnish the agent with the opportunity to work◦ Principal cannot reasonably interfere with the agent’s ability to accomplish his task◦ Principal must perform his/her part of the contractTerminating Agency Relationships: Termination by agent or principal◦ Three choices in terminating the relationship Term agreement Time Achieving a purpose Mutual agreement Agency at will Wrongful termination Principal or agent can no longer perform required duties◦ Failure to obtain license◦ Bankruptcy ◦ Death or incapacity of the principal or agent◦ Disloyalty of agent Change in circumstances◦ Change of law ◦ Loss or destruction of subject matter Termination of the agency ends the agent’s power to act on behalf of the principal Principal’s duty to reimburse expenses of the agent ends with the end of the agency Confidential information remains confidential and unusable, even after the end of the agencyPrincipals Liability for Contracts: The principal is bound by the acts of an agent if: ◦ The agent had authority ◦ The principal ratifies the acts of the agentAuthority: A principal is bound by the acts of an agent if the agent has authority There are three types of authority◦ Express - Granted by words or conduct that: Reasonably interpreted, cause the agent to believe the principal desires her to act◦ Implied - Authority to conduct a transaction includes: Authority to do acts that are reasonably necessary to accomplish it◦ Apparent - Principal can be liable for the acts of an agent who is not acting with authority if: Principal’s conduct causes a third party reasonably to believe that the agent is authorizedRatification and subagents: Ratification◦ If a person accepts the benefit of an unauthorized transaction or fails to repudiate it, then: He is as bound by the act as if he had originally authorized it Subagents◦ Intermediary agent – Someone who hires subagents for the principal◦ When an agent is authorized to hire a subagent: Principal is as liable for the acts of subagent as he is for the acts of regular agentAgents for liability for contracts: Fully disclosed principal◦ An agent is not liable for any contracts Unidentified principal◦ Third party can recover from either the agent or the principal Undisclosed principal◦ Third party can recover from either the agent or the principal◦ Third party is not bound to the contract with an undisclosed principal if: Contract provides that the third party is not bound to anyone other than the agent Agent lies about the principal because she knows the third party would refuse to contract with him Unauthorized agent◦ The principal is not liable and the agent isPrincipals liability for torts: Employer is liable for a tort committed by its employee acting within the scope of employment or acting with the authority Two kinds of agents◦ Employees◦ Independent contractors Principal may be liable for the torts of an employee but generally is not liable for the torts of an independent contractorEmployee or independent contractor: Courts consider whether:◦ Principal supervises details of the work◦ Principal supplies the tools and place of work◦ Agents work full time for the principal◦ Agents receive a salary or


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