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Quiz #3

Terms in this set (79)

PRINCIPAL-AGENT RELATIONSHIP
A person or firm represented by another in business or personal dealings with third parties.
AGENT
The person who represents another.
PRINCIPAL
The person the agent represents or performs duties for.
CONTRACT OF AGENCY
An agreement between a principal and an agent by which the agent is vested with authority to represent the principal.
GENERAL AGENT
A person authorized to assume complete charge of principal's business or entrusted with general authority to act for principal in all business matters.
SPECIAL AGENT
A person delegated to act only in a particular transaction, under definite instructions, and with specific limits on the scope of his or her authority.
CREATION OF AGENCY
Most common method is by contract or agreement.

States the rights and duties of principal and agent, the agency duration and any other agreements made between parties.
ATTORNEY IN FACT
Legal term for person appointed as agent.
POWER OF ATTORNEY
Legal document that formally creates agency.

A durable power of attorney should be executed if principal intends for agent's authority to remain intact if principal becomes incompetent.
AGENCY BY RATIFICATION
Occurs when principal approves agent's unauthorized act or unauthorized person's act in principal's name.

Ratification applies to entire act. Principal cannot accept transaction benefits and not accept transaction obligations.

Ratification occurs after the fact, where authorization occurs before the fact.
AGENCY BY NECESSITY
When circumstances make such agency necessary.
AGENCY BY OPERATION OF LAW
When court finds need for agency to achieve desired social policy.
GUARDIAN AD LITEM
Court appointed agent with authority to purchase necessities parent had failed to provide.
EXPRESS AUTHORITY
Authority of agent to perform duties specifically stated in contract of agency.
IMPLIED AUTHORITY
Authority agent reasonably assumes he or she has that relates to express authority granted by principal.
APPARENT AUTHORITY
Authority third party reasonably assumes agent possesses that agent does not actually possess.
GRATUITOUS AGENT
One who works on behalf of principal without being paid.
DISCLOSED PRINCIPAL
When agent informs third party that he/she is acting on behalf of another and makes third party aware of principal's identity.
PARTIALLY DISCLOSED PRINCIPAL
When the agent informs third party that he/shebos acting on behalf of another, but does not disclose principal's identity.
UNDISCLOSED PRINCIPAL
When agent does not inform third party that he/she is acting on behalf of another.
IRREVOCABLE AGENCY
An agency coupled with interest.
DIFFERENCE BETWEEN PRINCIPAL-AGENT AND EMPLOYER-EMPLOYEE RELATIONSHIPS
Main difference: An employer's power to control the activities of a non-agent employee whereas an agency agreement brings about a relationship between a principal and a third party that results in a contract.
ORGANIZATIONAL FORMS
Business are structured as:

Sole proprietorship
Partnership
Corporation
Limited liability company (LLC)
SOLE PROPRIETORSHIP
A business owned and operated by one person.
PARTNERSHIP
a business owned and operated by two or more persons.
JOINT VENTURE
Individuals become partners for only a short period of time or for only a single project.
LIMITED PARTNERSHIP
A business in which there are one or more general partners and one or more limited partners.
CORPORATION
A business formed by a separate legal entity.
ARTICLES OF INCORPORATION
List the general powers of the company.
BYLAWS
Provide rules for the meetings of the corporation.
QUORUM
This is required for action to be taken at a meeting.
ADVANTAGES TO CORPORATIONS
Limited liability to shareholders.

Easy for a corporation to raise capital and obtain additional financing by issuing and selling new shares.
DISADVANTAGES TO CORPORATIONS
Required to pay separate income taxes at a special corporate rate for any year during which profit is earned.
SUBCHAPTER S CORPORATION
A corporation but with the advantage of being taxed as a partnership.
DIRECTOR
Voted by shareholders of corporation. Responsible for managing overall strategy and operations of firm over long term.
MEMBERS OF THE BOARD
The directors are members of a board. Responsible for managing overall strategy and operations of firm over long term.
OFFICERS
Directors appoint officers. Exercise control over normal, routine matters that arise on daily basis.

Example: President, Vice President, etc...
DUTY OF LOYALTY
a director has a legal and ethical obligation to administer to the affairs of the corporation with personal integrity, honesty, and candor.
DUTY OF CARE
Director has legal and ethical obligation to act diligently and prudently in conducting corporate affairs.
ADVANTAGES OF LLC
Provides all members with limited liability, while allowing them to participate in the management of the business.

Treated as a partnership by the IRS

Easy to form in most states.
DISADVANTAGES TO LLC
Owners frequently have difficulty in raising additional funds to expand or maintain business.

There may be times when members disagree on how business should be run.
COMMERCIAL PAPER
A term widely used to describe a number of legally binding and commercially acceptable documents.
NEGOTIABLE INSTRUMENT
A commercial paper is an unconditional written promise to pay, or pay to the order of another party, a certain sum of money or n demand or at a definite time.
PRESUMPTION OF CONSIDERATION
It is assumed that the commercial paper is issued for value.
NEGOTIABILITY VERSUS ASSIGNABILITY
Ordinary contracts may usually be assigned, but the assignee or the person to whom rights are transferred, may receive only those rights held by the person making the assignment (assignor) at the time of transfer.
PROMISSORY NOTE
A written note or letter in which one person promises to pay a certain amount of money to another at a definite time.
NEGOTIABILITY
The ability to be transferred freely from one person to another and be accepted readily as cash.
ORDER INSTRUMENT
An item of commercial paper containing the key words of negotiability: Pay to the order of.
ESSENTIALS FOR NEGOTIABILITY OF COMMERCIAL PAPER
Must be in writing and signed by the maker or drawer.

It must contain an unconditional promise or order to pay a definite sun of money.

Must be on demand or at a definite time.

Must be a payable to order, to bearer or to cash.

A draft or check must name or indicate the drawer with unreasonable certainty.
STALE CHECK
A check presented more than six months after it's date; will not be honored by banks.
CHECK 21
Federal law that revolutionizes the manner in which checks are being handled by banks. It became active in 2004 and created efficiency in check handling by allowing banks to create digital substitutions for checks.
CERTIFIED CHECK
A check that the bank has promised to pay when it is presented for payment.
CASHIER'S CHECK
A check issued by the cashier or other designated officer of a bank.
BAD CHECK
One against a bank in which the drawer has insufficient funds on despot to cover the check or no funds at all.
FORGERY
The act of fraudulently making or altering a note, check, draft or some other document, causing the financial loss of another.

Two common types of forgery: Forged check & Raised check.
REAL PROPERTY
The ground and everything permanently attached to it, including land, buildings, trees and shrubs. The airspace above and below the land are also included.
PERSONAL PROPERTY
Tangible and intangible property that is not real property.
INTER VIVOS GIFT
A gift between the living that meets all of the legal requirements for a gift.
GIFT CAUSA MORTIS
A gift given by a living person who expects to die from a known cause, that meets all of the legal requirements for a gift.
ACCESSION
The right of an owner of property to any increase in the property.
SEVERALTY OWNERSHIP
Ownership of a particular piece of property that is held by one person.
JOINT TENANCY
When two or more persons own equal shares of personal property with right of survivorship.
TENANCY OF THE ENTIRETY
A form of joint ownership of property by husband and wife in which both have a right to the entire property and the right of survivorship.
TENANCY IN COMMON
A form of joint ownership of property by two or more persons in which any owner's interest can be sold, transferred or inherited.
COMMUNITY PROPERTY
Property acquired during marriage that, in some states, belongs to both husband and wife.
EASEMENTS
A right or interest in land granted to a party to make beneficial use of the land owned by another.
PROFITS
A right to enter another person's land and remove some product of the land or it's natural resources.
FREEHOLD ESTATE
An estate in which a person owns the land for the life or forever.
LEASEHOLD ESTATE
An estate in which a person has an interest in real property that comes from a lease.
FEE SIMPLE
When an owner of a freehold estate holds it absolute.
LIFE ESTATE
A freehold estate in which a person has an ownership interest only for his or her lifetime.
LEASEHOLD ESTATE
An estate that does not involve an ownership interest in real property.
QUITCLAIM DEED
Transfers whatever interest a grantor has in real property.
WARRANTY DEED
One in which the grantor asserts that he or she has title and that the property is free of the claims of other.
GENERAL WARRANTY DEED
The seller promise to warranty the entire chain of title to the buyer.
SPECIAL WARRANTY DEED
The seller limits his or her warranty to those title problems that occurred during the time the seller owned the property.
BAILMENT
A transaction in which the owner of tangible personal property transfers it to another party while still retaining ownership.

Characteristics of bailments: Sale, Transportation & Repair or service.
BAILOR
Party who retains ownership and transfers possession of goods.
BAILEE
The party in bailment who receives the goods.
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