BA definitions assignment Flashcards
(100 cards)
What is a sole proprietorship?
A business owned by a single person who has the sole right to manage, is solely entitled to the profits, and has unlimited personal liability for the debts of the business.
Example: Sarah owns a bakery, keeps all the profits, and is personally responsible for any debts or liabilities.
Define independent contractor.
An individual with authority to act without principal’s approval, fulfilling their duty to the principal without receiving direction from them.
Example: A plumber hired to fix a homeowner’s pipes works independently, decides how to complete the job.
What is agency?
The legal relationship that involves one person (the agent) acting on behalf of another (the principal).
Example: A real estate agent represents a homeowner in selling their house.
Describe the master-servant relationship.
The master must either possess actual control or have the right to control the physical conduct of a servant in the discharge of his duties.
Example: A manager at a retail store directs an employee on how to stock shelves.
What is required for agency by agreement?
A valid, legal purpose and both parties must exhibit a manifestation of intent to be bound; the principal must have capacity to contract.
Example: A homeowner verbally agrees to let a neighbor act as their agent to sell an old car.
Explain agency by ratification.
An agency relationship is created if the principal accepts the benefits or confirms the conduct of the agent.
Example: Sarah sells Mark’s bike without permission, but Mark accepts payment, creating an agency by ratification.
What is agency by estoppel?
If a third party relies on principal’s misleading representations regarding an agent, the principal cannot deny the agency relationship.
Example: Jane tells a customer that Tom is her authorized sales agent.
List the types of authority that can bind a principal.
- Actual authority
- Apparent authority
- Ostensible authority
- Power arising from agency relationship
Example: Emma tells Mia to order supplies (actual authority).
Define actual authority.
Authority derived from duties expressly assigned to the agent by the principal, which may also be implied from customary usage or the principal’s behavior.
Example: David hires Alex as a property manager and assigns him the duty to collect rent.
What is apparent authority?
If the principal leads a third party to believe that another acts as her agent, an agency relationship based upon apparent authority arises.
Example: Maria tells a client that John is authorized to negotiate deals on her behalf.
Explain apparent authority derived from apparent ownership.
If the principal gives the agent the indicia of ownership, the agent may deal with the property as if he/she had actual ownership.
Example: Sophia gives Ethan signed documents and keys to her car.
What is ostensible authority?
Applies when a principal has intentionally misled a third party that the agent has power to act for the principal.
Example: Olivia tells a supplier that Ben is her authorized purchasing agent.
Describe inherent powers of agents.
Powers that cannot be taken away by the principal, including making express or implied warranties and representations.
Example: A sales agent negotiates a contract and makes an implied warranty about the product.
What is imputed notice?
A principal will not be subject to imputed notice unless the agent had actual or apparent authority to receive notice from a third party.
Example: If an employee is informed about a legal matter, the employer is considered to have received that notice.
Define imputed knowledge.
A principal will not be subject to imputed knowledge unless the facts concern the subject matter of the agency and fall within its scope.
Example: If Alex learns of critical terms during a deal, that knowledge is imputed to his employer.
What happens when an agent’s unauthorized act is ratified?
The ratification establishes the agency relationship and the agent’s authority, exposing the principal to liability for the agent’s actions.
Example: If Emma signs a contract without authorization and Sarah accepts the benefits, Sarah ratifies Emma’s actions.
What are the principal’s duties to the agent?
- Pay the agent
- Not interfere with agent’s duties
- Aid in discharging agent’s duties
Example: Mark hires Alex and must support him in performing sales duties.
List the agent’s duties.
- Use reasonable care
- Skill and diligence in performing under the contract
- Avoid negligence
Example: Sarah must act diligently in representing Emma.
What is fiduciary duty?
The agent is bound by a fiduciary duty to act loyally and notify the principal of material items.
Example: Michael must inform Anna of any offers for the property.
Define conflict of interest.
An incompatibility between one’s own interests and duties owed to another.
Example: Sarah represents both a buyer and seller in a real estate transaction.
What is a subagent?
A person to whom an agent has delegated the performance of an act for the principal.
Example: Emma delegates tasks to her assistant Jake.
What is the subagent’s duty?
A subagent is bound by the same fiduciary duty as the agent if hired with the principal’s consent.
Example: Mia owes the same fiduciary duty to the principal as Sarah does.
What is vicarious liability in agency?
Holds a principal accountable for the actions of their agent based on their relationship.
Example: Sarah’s company can be held liable for David’s actions while delivering packages.
Explain the liability of agent and principal to third parties.
If the agent acts for an undisclosed principal and has actual authority, the principal is also liable to the third party.
Example: Anna’s actions bind Funky Panda Inc. even if she didn’t disclose her role.
