Unit 3 study guide law - Unit 3 study guide VERY...

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Unit 3 study guide - VERY THOUROUGHLY complete this guide and you should be able to answer all the questions on the examRecognize, define, and give examples of an agency relationship.Angency- is a legal relationship in which the parties agree, in some form, that one party will act as an agent for another party, called principal, subject to control of the principal. oEx. A common form of agency arises in an employer-employee relationshipIn all agency relationships, the principal authorizes the agent to provide services or accomplish some task on behalf of the principal and under the principal’s charge. (generally exists on thestate statutory level)Classify agents as either employees or independent contractors by applying the direction and control tests.Employee agents-a category of agents including anyone who performs services for a principal who can control what will be done and how. oPrincipals are liable for actions or negligence of employeesoNOT EVERY EMPLOYEE IS AN AGENT! Must have a source ofauthority to represent employer. Ex. At the bank the teller and managers are agents and have authority to transact business on the banks behalf, but the guard is NOT an agent.Independent contractor agent-a category of agents including anyone who performs services for a principal who has the right to control or direct only the result of the work and not the means and methods of accomplishing the resultoHas no legal protections such as minimum wage and overtime compensation and employer generally has no liability oEx. Attorneys, outside accountants, architects. Gratuitous agents-category of agents who acts on behalf of a principal without receiving any compensation. oEx.doing your roommate a favorIRS’s three pronged test (regarding agency status)oBehavioral aspectsoFinancial arrangements
oWorking relationshipExplain the process for creating an agency relationship and the impact of that relationship on the liability of the principal.
Courts apply objective standard: Given the parties’ outward expressions, actions, and words would a reasonable person believe that the principal intended an agency be created and the agent give consent?

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