CPA Agency-2 - AGENCY I CREATION AGENCY DEFINED An agent is...

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AGENCY I. CREATION AGENCY DEFINED: An agent is someone who acts for and on behalf of another, the principal. This is a three-party relationship: the Agent represents the Principal’s interests in relations with Third Parties. NOTE: Since all partners in a partnership are agents of one another all the rules of agency will apply in partnership law . 1. The only element generally necessary to create an agency relationship is mutual consent : the agent must consent to act for and on behalf of the principal and the principal must consent to be represented by the agent. 2. A written K is generally not necessary UNLESS: a) the agency/employment relationship is for more than one year (Statute of Frauds applies) or b) if the agent’s services have been primarily retained to enter into Ks that are governed by the S of F (i.e., a real estate agent is engaged to enter into Ks for real property) since the S of F applies to these Ks, the agency agreement must also be written. 3. AGENCY BY ESTOPPEL: A person may be held liable as a principal for the acts of another if they create the illusion that the person is their agent. NO ACTUAL AGENCY RELATIONSHIP IS PRESENT! (usually because mutual consent is lacking). W/agency by estoppel, the 3rd party must reasonably rely on the representations made by the principal. Note: an agent cannot create the illusion. 4. Distinguish between employee/agents and independent contractors . W/ the former, the P has the right to not only set the goal(s) but also has the right to CONTROL the means by which the goal(s) is/are accomplished. W/independent K’ors, the P does not have the right to control the means by which the goals are accomplished. Independent K’ors usually represent/work for more than principal/employer. They usually supply their own tools/equipment, set their own working time. Note: Independent K’ors are NOT employees for purposes of state & federal employment laws.
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II. CONTRACT LIABILITY In order to determine contract liability in an agency relationship, you must make TWO determinations: the status of the P and the authority of the A. A. PRINCIPAL’S STATUS 1. DISCLOSED or (“fully” disclosed) P: In this instance the 3rd party (the person dealing w/ the P’s agent) knows that they are dealing w/someone’s agent AND they know the identity of the P.
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