Chapter 8 Lesson

Chapter 8 Lesson - Chapter 8 Principal Agent Relationships...

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Chapter 8 - Principal / Agent Relationships and Partnerships OBJECTIVES: After completing this lesson, the required reading, and the assignments, learners will be able to: 1. Describe the different types of agency relationships and the duties and liabilities of agents and principals. 2. List the characteristics of the various forms of business organizations. 3. Discuss the key legal attributes of partnerships. 4. Explain the concepts of personal liability and partnership responsibility for torts and contracts. 5. Detail the special characteristics of partnerships, limited partnerships, limited liability partnerships, and limited liability limited partnerships. Creation of Agency Relationships In all likelihood, all of you are or have been an agent at some point in your lives. Those of you who are employees are agents - the work you do is on behalf of your employer, the principal . Your book discusses the difference between a general agent and a special agent (not 007!). For purposes of this class, I will usually say employee for general agent and independent contractor for special agent because those are the most common types of each of those agents. A general agent is typically one who performs a wide range of duties for the principal and uses his own discretion in a variety of areas. For instance, my former husband hires a manager to manage each of the stores his family owns here in Boise (Tates Rents). Each manager has a wide range of authority - ordering parts, hiring / firing employees, purchasing new equipment (at least small items) etc., although the owners make major decisions about the direction the company should take, large equipment purchases, etc. Contrast those manager/employees to an independent contractor, such as a plumber. Imagine that your 15-year old son turned the heat off in your house before you left for a winter vacation. When you return, you discover your pipes have frozen and burst. You need a plumber immediately! When you (the principal) call the plumber (the agent, an independent contractor), who decides when he will arrive? Typically, the plumber works you into his schedule, not vice versa. When he arrives at your house, do you specify which tools he should use? Which parts he should use to repair your pipes? The method he should use? No. Independent contractors make those types of decisions themselves. An independent contractor, such as the plumber in this hypothetical, generally owns his own business. The principal typically does not supervise the independent contractor, who is usually hired to complete only one task. It is important to know the difference between a general agent and an independent contractor, as you'll see below.
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An agency relationship is created when both parties, agent and principal, consent to enter into such a relationship. The agent agrees that the acts she takes on behalf of the principal will not be for her benefit, but for the benefit of the principal. The principal
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Chapter 8 Lesson - Chapter 8 Principal Agent Relationships...

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