Business Law Exam 4 Flashcards Preview

Commonwealth 2nd Quarter > Business Law Exam 4 > Flashcards

Flashcards in Business Law Exam 4 Deck (56):
1

Agency

Specialized business relationship between one party known as the “principal” and another known as the “agent”

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Nature of Agency Relationship

Parties
Delegation of powers

3

Parties

Principal
Agent

4

Principal

Party who appoints a second party to serve as an agent

5

Agent

Party appointed by a principal to enter into a contract with a third party on the principal’s behalf

6

Delegation of Powers

From principal to agent
Act in good faith on behalf of principal’s interests
Enter into contracts on principal’s behalf

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Classification of Agents

General agent
Special agent

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General Agent

Authorized to carry out particular kind of business or all business at a location
• FDIC
• Funeral Director in Charge

9

Special Agent

Authorized to transact specific act or act(s)

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Creation of Agent's Authority

Express authority
Implied authority
Apparent authority

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Express authority

Stated in agreement creating agency
Authority by appointment
Example:
Written Power of Attorney

12

Implied authority

Authority to do things in order to carry out express authority

13

Apparent authority

Authority agent believed to have because of principal’s behavior

14

Other Employment Relationships

Independent contractor
Employer
Employee

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Independent Contractor

Person who undertakes to perform a specified task according to the terms of a contract
Other contracting party has no control except as stated in the contract

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Employer

Party who hires employees to do certain work

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Employee

Person hired to perform work

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Employer and Employee

Employee performs work for employer
Employee under control of employer for work and manner of completion
Employer liable for injuries to third parties caused by negligence of employees
Employer liable for torts committed by employee acting within scope of employment
Employer must comply with laws relating to employees
Social security deductions (FICA)
Worker’s compensation (FUTA and SUTA)
Federal and state income tax withholdings

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Agent's Duties to Principal

Loyalty and good faith
Obedience
Reasonable skill and diligence
Accounting
Information

20

Principal's Duties to Agent

Compensation
Wages
Reimbursement
Expenses incurred during course of employment
Indemnification
Compensation for sustained losses
Adherence to terms of employment contract

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Termination of Agency

By act of the parties
By operation of law

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By Act of the Parties

Original agreement
Subsequent agreement
Revocation
Renunciation by agent

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By Operation of Law

Subsequent illegality of subject matter
Death or incapacity of either party
Destruction of subject matter
Bankruptcy of principal**
Dissolution of the corporation

24

Termination of agency

by war

25

Types of Business Organizations

Proprietorship
Partnership
Corporation

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Proprietorship

Business owned by one person who is subject to claims of creditors
Simple form of business organization
Proprietor receives all profits and assumes all losses
Proprietor bears all risks and has personal liability for all debts
Death of the proprietor terminates the business

27

Partnership

Voluntary association of two or more people who have combined their resources to carry on as co-owners of a lawful enterprise for their joint profit

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Kinds of Partners

General
Silent
Limited

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General Partner

Individual actively and openly engaged in the business and held out to everyone as a partner

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Silent Partner

Individual who takes no active part in management of a business, but has capital invested in the business

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Limited Partner

Partner who has his/her liability for the firm’s debts limited to the amount of their investment

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Operations of a Partnership

Duties of a partner
Rights of a partner
Liabilities of a partner

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Duties of a Partner

Exercise loyalty and good faith
Use reasonable care and skill
Conform to contract of partnership
Maintain records
Inform

34

Rights of a Partner

Participate in management
Inspect financial data
Contribution
Withdraw advances (business money for personal use)
Withdraw profits

35

Liabilities of a Partner

For contracts of the partnership
For torts

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Dissolution of a Partner

By acts of the parties
By court decree
By operation of law

37

Dissolution by Acts of the Parties

By agreement
By withdrawal or alienation
By expulsion

38

Dissolution by Court Decree

Insanity
Incapacity
Misconduct
Futility
Bankruptcy

39

Dissolution by Operation of Law

Illegality
Death

40

Corporation

An artificial being, invisible, intangible, and existing only in contemplation of law
An entity that is something that has a distinct existence separate and apart from the existence of its individual members

41

Classifications of Corporations

Public
Private

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Public Corporations

Formed to carry out government functions
• State university
• Public hospital

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Private Corporations

Formed by individuals to perform some non-governmental function
• For profit
• Non-profit (not-for-profit)

44

Formation of a Corporation

Articles of Incorporation
Charter

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Articles of Incorporation

written document setting forth facts about a corporation prescribed by law for issuance of a charter and asserting the corporation has complied with legal requirements.

46

Charter

grant of authority from a government to exist as a corporation

47

Corporate Structure

Stock holders
Board of Directors
Officers

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Stock Holders

Those having title to one or more shares of stock in a corporation.
Represent combined ownership of the corporation.
Shareholders
Conduct stockholders meetings at least once a year.

49

Rights of Stockholders

Receive properly executed stock certificates as evidence of ownership
Attend corporate meetings and vote (unless denied by express agreement).
Receive proportionate shares of profits when distributed as in dividends.

50

Proxy

Person authorized to vote for another, written authorization to vote for another.

51

Board of Directors

Body elected by stockholders to act on behalf of the corporation and carry out the board’s policies.

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Officers

(President / Vice-President / Secretary / Treasurer)
Authorized by Board of Directors to carry out board policies.

53

Dissolution of a Corporation

Voluntary
Involuntary

54

Voluntary Dissolution

By vote of the stockholders
Corporation pays debts,
Distributes remaining assets to stockholders as to number of stocks owned, and
Surrenders articles of incorporation

55

Involuntary Dissolution

Action of the court or state
Due to forfeiture or abuse of corporate charter,
Violation of state or federal law,
Fraud in obtaining the charter, or
Failure to pay specified taxes.

56

Manner of Dissolution

Existence terminated except to complete its business.
Cannot sue, own property, or form contracts.
Except to convert assets to cash.