Business Law Study Set 13

Business

Quiz 37 :
Agency

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Quiz 37 :
Agency

Definitions Agent - is someone who is hired by a principle to act for the principle. The agent is seen to be controlled by the principle and any liability caused by the agent will make the principle liable. Independent Contractor - is someone who is hired to produce a certain product or service. However, they are not controlled by the hirer and are independent in making choices required to complete the job according to the hiring agreement. Discussion The most important difference between an agent and independent contractor is the liability on the principle/hirer. An agent's action will cause liability for the principle and will also bind the principle on contracts as they are seen to represent the principle. Contrarily, independent contractors are not controlled by the hirer and make not represent the hirer in contracts; they only do what is necessary to fulfill their duty.

Not all agents represent the principles in all affairs. For example, an accountant may only be authorized to sign checks for payroll on behalf of the principle, but not to write checks for purchase of supplies. The principle can authorize the agent's action by appointment or ratification: • Authorization by appointment : the agent is given the right to act for the principle. In the example, the accountant's endorsement of the check was within his given role as agent. • Authorization by ratification : the agent is not given the right to act for the principle in the manner, but the action from the agent is ratified. In the example, if the accountant purchase supplies with company check and the principle allows for it, then it is ratified by the principle. Thus, the difference is whether the agent was given the right to act for the principle in such a manner. If they were, then they are authorized by appointment, if not, then they must seek authorization by ratification from principle.

Refer to the case Kotsch v Kotsch Case Issue The facts to this case are: • The father (plaintiff) created a durable power of attorney with his son (defendant) as agent. • The son was authorized to manage the father's real estate and personal property and maintain care for his father. • The son later transferred his father's assets in a trust naming his children as beneficiaries. The issue is whether the son has the authority to create such a trust. Relevant Terms, Laws, and Cases Agent - is someone who is hired by a principle to act for the principle. The agent is seen to be controlled by the principle and any liability caused by the agent will make the principle liable. Power of Attorney - creates a principle agent relationship by written agreement. The relationship is usually terminated at death of principle. Durable Power of Attorney - a power of attorney that is not terminated by death of principle. Opinion The court held for the father. They argued that: • The power of attorney is revocable. The father can cancel this agency relationship at any time. • The power of attorney did not give any property interest to the son. • The son has no right to transfer those assets as gifts to his children in the trust. • Any action relating to the property must only be for the care of the father as stated in the power of attorney. Thus, the court decided that the son exceeded his role as agent ; the trust is void.

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