BADM 300 Exam 2 – Study Guide, Key Concepts & Practice Questions Review
What is agency? - correct answer ✔✔You give someone else authority to act upon your behalf
2 parties of agency and their roles - correct answer ✔✔Principal - person in charge
Agent - Takes on responsibility from principal
Express Agency - correct answer ✔✔Most common - famous athlete hires an agent. Power of
attorney.
Implied Agency - correct answer ✔✔When principal and agent haven't specifically stated their
relationship, but their actions implied.
Ratification Agency - correct answer ✔✔Really want to work for a company, but not an
employee. Go out and build up some business for this company and go to company. You weren't
their agent - they have no obligation to follow through on those business ideals. But if they like
it and accept - they are bound.
Parent Agency - correct answer ✔✔3rd party reasonably believe that someone is your agent.
Duties an agent owes to a principal - correct answer ✔✔Obedience - obey what principal asks
them to do
Notify - if agent knows something then principal has the right to know that too
Account - Agent has to be able to give principle a complete account of how they are using their
resources
Loyalty - can't enrich yourself at the expense of the other (usurp, self-dealing)
Agents rights - correct answer ✔✔*Flexible - depends on agreement*
,Accounting
Other tort and contractual rights
Principal duties - correct answer ✔✔Compensate - principal has duty to pay for agent services
Reimburse
Idemnify - principal paying for something the agent had to pay for (being sued)
Cooperate
Principal rights - correct answer ✔✔Idemnification
Avoidance - Principal has the right to nullify other rights in the event of breach of duty
Contructive trust - If agent breaches a duty and gains profit for themselves, the principal has the
right to those profits
2 types of liability - correct answer ✔✔Tort - a wrongful action that causes injury or damage
Contract - agreement between 2 parties
Are agents liable for principal's torts? - correct answer ✔✔No
Are principals liable for agent's torts? - correct answer ✔✔Yes - within scope of relationship
Respondeat Superior (Vicarious liability)
Special Tort Rules - correct answer ✔✔Frolic & Detour
Dual-purpose missions
Coming and going rule - not liable coming and going to work
Intentional tort
, When is the agent liable in contract liability - correct answer ✔✔Agent is liable when principal is
not disclosed in business transactions
When is the principal liable in contract liability - correct answer ✔✔If agency relationship exists
or principal made 3 party reasonable believe it exists
Requirement for terminating an agency relationship on the principals behalf - correct answer
✔✔Give notice (people know that this person has been your agent)
What is a wrongful termination? - correct answer ✔✔Breach of contract, in an acceptable
manner and acceptable time
Methods of Termination - correct answer ✔✔Action of the parties (completion of contract, after
certain time)
Unusual change in circumstance
Operation of Law (die/bankruptcy/country of residence declares war on eachother)
Is a principal liable for an independent contractor? - correct answer ✔✔No
Trixie is employed by ATX Meats. Her contract with the company calls for her to decide which
suppliers to use to meat for ATX to cook. A certain supplier offers Trixie a bribe in exchange for
buying meat from it, even though its products are not as good of a value as its competitors. ATX
finds out and immediately fires her. In this scenario, Trixie has breached her
________________, and ATX has exercised its ________________. - correct answer ✔✔Duty of
loyalty; right of avoidance
Taking a bribe is a violation of the duty of loyalty because the agent is being enriched at the
expense of the principal. When an agent breaches her duties, the principal's right to terminate
its contract with the agent is called the right of avoidance
What is agency? - correct answer ✔✔You give someone else authority to act upon your behalf
2 parties of agency and their roles - correct answer ✔✔Principal - person in charge
Agent - Takes on responsibility from principal
Express Agency - correct answer ✔✔Most common - famous athlete hires an agent. Power of
attorney.
Implied Agency - correct answer ✔✔When principal and agent haven't specifically stated their
relationship, but their actions implied.
Ratification Agency - correct answer ✔✔Really want to work for a company, but not an
employee. Go out and build up some business for this company and go to company. You weren't
their agent - they have no obligation to follow through on those business ideals. But if they like
it and accept - they are bound.
Parent Agency - correct answer ✔✔3rd party reasonably believe that someone is your agent.
Duties an agent owes to a principal - correct answer ✔✔Obedience - obey what principal asks
them to do
Notify - if agent knows something then principal has the right to know that too
Account - Agent has to be able to give principle a complete account of how they are using their
resources
Loyalty - can't enrich yourself at the expense of the other (usurp, self-dealing)
Agents rights - correct answer ✔✔*Flexible - depends on agreement*
,Accounting
Other tort and contractual rights
Principal duties - correct answer ✔✔Compensate - principal has duty to pay for agent services
Reimburse
Idemnify - principal paying for something the agent had to pay for (being sued)
Cooperate
Principal rights - correct answer ✔✔Idemnification
Avoidance - Principal has the right to nullify other rights in the event of breach of duty
Contructive trust - If agent breaches a duty and gains profit for themselves, the principal has the
right to those profits
2 types of liability - correct answer ✔✔Tort - a wrongful action that causes injury or damage
Contract - agreement between 2 parties
Are agents liable for principal's torts? - correct answer ✔✔No
Are principals liable for agent's torts? - correct answer ✔✔Yes - within scope of relationship
Respondeat Superior (Vicarious liability)
Special Tort Rules - correct answer ✔✔Frolic & Detour
Dual-purpose missions
Coming and going rule - not liable coming and going to work
Intentional tort
, When is the agent liable in contract liability - correct answer ✔✔Agent is liable when principal is
not disclosed in business transactions
When is the principal liable in contract liability - correct answer ✔✔If agency relationship exists
or principal made 3 party reasonable believe it exists
Requirement for terminating an agency relationship on the principals behalf - correct answer
✔✔Give notice (people know that this person has been your agent)
What is a wrongful termination? - correct answer ✔✔Breach of contract, in an acceptable
manner and acceptable time
Methods of Termination - correct answer ✔✔Action of the parties (completion of contract, after
certain time)
Unusual change in circumstance
Operation of Law (die/bankruptcy/country of residence declares war on eachother)
Is a principal liable for an independent contractor? - correct answer ✔✔No
Trixie is employed by ATX Meats. Her contract with the company calls for her to decide which
suppliers to use to meat for ATX to cook. A certain supplier offers Trixie a bribe in exchange for
buying meat from it, even though its products are not as good of a value as its competitors. ATX
finds out and immediately fires her. In this scenario, Trixie has breached her
________________, and ATX has exercised its ________________. - correct answer ✔✔Duty of
loyalty; right of avoidance
Taking a bribe is a violation of the duty of loyalty because the agent is being enriched at the
expense of the principal. When an agent breaches her duties, the principal's right to terminate
its contract with the agent is called the right of avoidance
