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My CPA-REGmodule32

Notecards I made from Wiley's 2012 CPA Exam Review

QuestionAnswer
What is an agency relationship? Is a contract required 1.one party (agent) is authorized to act on behalf of another party (principal) with respect to third parties 2.No, but frequently present
Can agent act on its own accord? Yes, but subject to control of principal/and specific authority is determined by principal but normally given right to bind the principal contractually w/3rd parties
If you come across the terms master and servant what does this mean? master is principal, servant is agent and you are looking at an older CPA question
Is the employer employee relationship considered an agency? Who isnt considered an employee? 1.Yes employer is principal employee is agent (most commonly tested agency relationship on exam) 2.directors, general partners, professional support staff, independent contractor
If a principal is granting another power of attorney, does it need to be in writing? Does the other person need to be an attorney? What kind of power is given? 1.Yes 2.No 3.may grant general authority or restricted authority
What is a broker? Exclusive mean? A Del credere? E agent? General agent? Subagent? 1.special agent in business transaction 2.principal only deal w/specific agent for life of contract 3.sales agent guarantees principal get accounts of customers 4.cpu takes some action w/o human review 5broad range of powers 6.agent hired by another
What if the agent has an interest in the subject matter through a security interest? Can the principal still terminate the agency? 1.not a relationship because one who creates relationship surrenders power (term principal and agent still used) 2.No, not if agent has interest
How can an agency relationship be created? Contract, be implied by conduct that allows 3rd party to reasonably believe an agency exists (agency by estoppel)
When must an agency contract be in writing? If agency contract cant be completed within 1 year -some states need written if agent buys/sells specific piece of real estate named in agency contract
In terms of capacity and an agency contract what must the principal have? the agent? 1.ability give legal consent(act requires legal capacity, principal doesnt have, agent does, agent cant act. Capacity cant increase by contract) 2.Agent can have less capacity, must merely have sufficient mental/physical ability to carry out instructions
What are the principals duties (obligations) to the agent? Fiduciary duties? What remedies does a principal have? 1.most determined by contract principal/agent entered in -compensate agent, reimburse for reasonable expenses, cooperate/assist agent, inform of risks 2.no 3.discharge agent, restitution, damages, injunction
What are the agents duty to principal? fiduciary(must act in best interest of principal), carry out instructions, dont commingle funds, dont compete or act for oneself, give info to principal that he would want/need to know, after termination cease acting as agent
What two issues of agency contract liability to third parties based on? what authority did agent have to enter into contract and was the principal disclosed to third party
What is actual authority? Apparent? 1.comes from principal may be explicit or implied 2.comes from 3rd partys REASONABLE, but mistake belief agent has authority to enter into contract- focus on if 3rd parties belief is reasonable
When does the disclosure of the principal to the third party occur? 3rd party knows of existence AND identity of principal -partial disclosure if know of existence only
When is the principal liable to third parties? -agent acts with actual or apparent authority (disclosure status doesnt matter) -act with no authority then need principal to ratify contact to hold principal liable
What is needed for a principals ratification of an agents act to be valid? Can the principal ratify only party of a contract? Does it have to be explicit? 1.valid if 3rd party knew of principals existence when enter into contract, principal has knowledge of all material facts, 3rd party doesnt withdraw before ratification 2.No 3.No can be implied by principals actions too
When is the agent personally liable for contracts with third parties? if the agent acts without authority or principal is partially disclosed or undisclosed, regardless of authority
What can tort liability arise from? Whose liable? 1.agent creates loss for third party through careless conduct or negligence or purposeful conduct (intentional tort) 2.agent is personally liable for tort
What does the principals liability for the tort arise from? Do they need to occur inside the work environment? What does respondeat superior mean? 1.whether the agents tort was committed in the scope of employment 2.No may occur slightly outside (called detour) can NOT occur substantially outside (called frolic) 3.principal is liable for agents tort if committed under the scope of employment
Can principals be liable for an intentional tort if it occurs within the scope of employment? Yes normally outside, but if are foreseeable and relate to job or committed to primarily benefit principal then they are in the scope of employment
If the agent committed a tort within the scope of employment, is the principal only liable? No principal and agent are jointly and severally liable. 3rd party may sue both jointly or sue just one or the other
What are the ways a principal or agent can individually terminate the relationship? Is there away that neither can terminate? 1.-either party breaches duty owed, other can terminate -if no length of relationship specified then either may terminate without liability (time specified and one terminates then liable for breach of contract) 2.Yes agency coupled w/interest irrevocabl
After the principal agent relationship is terminated, could the agent still hold apparent authority? How is apparent authority lost? 1.yes if third party is unaware the relationship was terminated 2.Actual notice to 3rd parties dealt w/before, constructive notice(newspaper) sufficient if not dealt w/before, law terminates then NO notice needed
When would the law terminate a principal-agent relationship? subject of agreement becomes illegal or impossible, death/insanity/court determined incompetence of a party (not agency coupled w/interest tho), bankruptcy of principal, subject matter for performance destroyed
Created by: Bsantoro