Legal Aspects - Final Exam Ch (20, 21, 22) (15, 16, 17) (18, 25) (23, 24) (26,27), Updated 2024.
Agent
Is a person who acts on behalf of someone else for a specific purpose
Example: A lawyer acting as an agent represents a client in court, making legal decisions and taking actions on the cli...
Legal Aspects - Final Exam Ch (20, 21, 22) (15,
16, 17) (18, 25) (23, 24) (26,27), Updated 2024.
Agent
Is a person who acts on behalf of someone else for a specific purpose
Example: A lawyer acting as an agent represents a client in court, making legal
decisions and taking actions on the client's behalf, such as presenting arguments and
negotiating settlements.
Principal
Is a person whom an agent represents for a specific purpose
Example: When a person hires a real estate agent to sell their property, the property
owner is the principal because they grant the agent the authority to handle the sale on
their behalf.
Agency
Is the legal relationship between a principal and an agent
Example: The relationship between a company and its sales representative is an
agency. The company (principal) grants the sales representative (agent) the authority to
negotiate sales and enter into contracts on its behalf.
Commercial representation agreement
Occurs when a manufacturer of goods agrees to allows someone to sell its goods on its
behalf.
Example: A manufacturer signs a commercial representation agreement with a sales
agency to have them sell their products in a specific region. The agreement details the
agent's responsibilities, commission structure, and the duration of the representation
arrangement.
Actual authority
Is the authority that a principal gives an agent to act on its behalf
Example: A homeowner gives their real estate agent actual authority to accept offers
and negotiate the sale of their house up to a certain price. The agent can only act within
the limits of this specific authority granted by the homeowner.
Apparent authority
Exists when the principal creates the reasonable impression that an agent is authorized
to act on the principal's behalf
Example: If a retail store manager tells a customer that an employee can offer a
discount of up to 20% on any purchase, even if the employee doesn't have explicit
permission from the store's owner, the customer might reasonably believe the employee
has the apparent authority to grant discounts.
A person ratifies
,A contract when they accept a contract that was negotiated on their behalf but without
their authority
Example: A person's attorney, without proper authorization, enters into a contract on
their behalf. Later, the person learns about the contract and decides to ratify it by
accepting its terms and benefits, making the previously unauthorized action legally
valid.
Usual authority
Of a position is the authority that is usually associated with that position
Example: In a corporation, the CEO typically has the usual authority to make major
business decisions, like signing contracts, without needing specific authorization for
each action, as these powers are inherent to the role.
Undisclosed principal
Exists when the agent purports to contract without disclosing that they are acting on
behalf of a principal
Example: An art dealer acts as an agent to purchase a valuable painting on behalf of an
undisclosed buyer. The seller of the painting is not informed about the true identity of
the buyer (the undisclosed principal). This can create legal implications if disputes arise
because the seller was unaware of the actual party they were dealing with.
Breach of warranty of authority
Occurs if an agent indicates that they are authorized to act for a principal when they are
not so authorized
For example, if a salesperson at an electronics store claims to have the authority to give
a customer a 50% discount on a laptop but doesn't actually possess such authority, it
can be a breach of warranty of authority. If the customer relies on this representation
and the store refuses to honor the discount, legal issues can arise, potentially resulting
in a breach of warranty of authority claim against the store.
Fiduciary duty
Requires an agent to act in good faith and in the best interest of the principal
For example, a financial advisor has a fiduciary duty to their client. This means the
advisor must provide advice and make financial decisions that are in the best interest of
the client's financial well-being, rather than for personal gain or the gain of the advisor's
firm.
Duty of care
Requires an agent to take reasonable care in the performance of their responsibilities
For instance, a lawyer has a duty of care to their client. This means the lawyer is
obligated to provide competent legal advice, research, and representation, ensuring that
they act with the level of care and expertise expected in the legal profession.
Joint venture
Is any arrangement in which two or more parties combine their resources for limited
purpose, a limited time, or both
, For example, two technology companies might form a joint venture to develop a new
software product.
Strategic alliance
Is any arrangement in which two or more parties agree to co-operate for some purpose
For instance, two pharmaceutical companies might form a strategic alliance to jointly
research and develop new medications. They could share knowledge, resources, and
research facilities without forming a separate business entity.
Distributorship
Exists when one business enters into a contract to sell another product
For example, a beverage manufacturer may enter into a distributorship agreement with
a local company to distribute its products to retail stores and restaurants in a particular
region.
Franchise
Is a contractual relationship under which the franchisor gives the franchisee the right to
operate its "business system" in return for a set of fees
For example, a fast-food chain like McDonald's operates through a franchise model.
Individuals or businesses can buy a McDonald's franchise and operate their own
McDonald's restaurant using the company's brand, menu, and business processes
while adhering to established standards.
Sole proprietorship
Exists when a person carries on business on their own, without adopting any other form
of business organization
Unlimited personal liability
Of a sole proprietor means that third parties may take all the sole proprietor's personal
assets to satisfy the business's obligations
For Example: If a sole proprietor's business faces financial trouble and accrues
significant debt, creditors can go after the personal assets of the owner to satisfy those
business debts.
Business licence
Is government permission to operate a certain kind of business
General partnership
Is a form of business organization that comes into existence when two or more people
carry on business together with a view to a profit.
Partnership agreement
Is a contract between partners regarding the operation of the partnership
Fiduciary duty
Requires a partner to act honestly and in good faith with a view to the best interests of
the partnership
Limited liability partnership
Individual partners are not personally liable for the professional negligence of their
partners and same other obligation if certain requirements are met
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