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Required Resource
Text
Rogers S. (2012).Essentials of Business Law[Electronic version]. Retrieved from https://content.ashford.edu/
Recommended Resources
Article
Muhl C. J. (2001).The employment-at-will doctrine: Three major exceptions(Links to an external site.)Links to an external site..Monthly Labor Review124(1) 3-11. Retrieved from http://www.bls.gov/opub/mlr/2001/01/art1full.pdf
Interactive Exercise
Rogers S. (2012). Essentials of Business Law [Electronic version]. Retrieved from https://content.ashford.edu/
Week Three Lecture
Agency and Relationships With Third Parties
Agency
Duties of Agent to Principal:Agents owe duties to the principal and these duties are usually defined in the contract while law imposes other duties unless the parties agree otherwise. An agent is a fiduciary (a person in a position of trust and confidence) and owes his principal the duties of obedience good conduct diligence inform and account. The agent also owes the principal a fiduciary duty. The fiduciary duty requires that an agent demonstrates utmost loyalty and good faith in conducting the principal’s business. For example an agent cannot compete with his principal or act on behalf of a competitor.Incentivization at Apple: Can greater executive buy-in solve the corporate principal-agent problem? ReviewSolving the Principal Agent Problem: Apple Insists That Executives Must Hold Company Stock(Links to an external site.)Links to an external site.for more information.Duties of Principal To Agent:An agency relationship may exist in the absence of a contract between the principal and agent. However many principals and agents do enter into contracts in which case a principal has a duty to act in accordance with the express and implied terms of any contract between the principal and the agent. The principal owes the agent the contractual duties of compensation reimbursement and indemnification but agents may agree to exclude or modify any of these.Corporate management not CEOs or the principal-agent problem as the cause for rising salary inequality is discussed inSoaring Inequality and CEO Pay Are Not Caused by the Principal/Agent Problem(Links to an external site.)Links to an external site..Relationships With Third Parties:The power of an agent is the ability to change the legal status of the principal. An agent who has either actual or apparent authority has the power to bind the principal. Thus whenever an agent acting within the authority makes a contract for the principal the agent creates new rights or liabilities for the principal and thus changes the principals legal status. This power of an agent to act for the principal in business transactions is the basis of agency.A principals contract liability also depends on whether the principal is disclosed or undisclosed. The principal is a disclosed principal if when an agent and a third party interact the third party has noticed that the agent is acting for a principal and also has notice of the principals identity. A principal is undisclosed if the third party did not know of his existence. Thus a principal can be liable for the acts of an agent who is not in fact acting with authority if the principal does something that causes a third party to reasonably believe that the agent is authorized. The issue of apparent authority is what the principal has done not the agent.Lets consider an example: Suppose you were a business owner and you told your employee to run an errand in the company car. If the employee gets into an accident who is responsible? The employer? The employee? In this scenario the employer is the principal because they were delegating power to another person. The employee is the agent because they were acting on behalf of the principal. Since the principal has given authority to the agent the principal has created a legal relationship with third parties. When determining if the principal is responsible for the actions of the agent it is necessary to find out if the acts were done within the principals authority either actually or apparently.Forbes School of Business Faculty
References
Liuzzo A. L. (2013).Essentials of business law(8th ed.). New York NY: McGraw-Hill.
Rogers S. (2012).Essentials of business law. Retrieved from https://content.ashford.edu/
Wood R. W. (2014 August 27).FedEx misclassified drivers as independent contractors rules Ninth Circuit. Retrieved fromhttps://www.forbes.com/sites/robertwood/2014/08/27/fedex-misclassified-drivers-as-independent-contractors-rules-ninth-circuit
Worstall T. (2013 March 1).Solving the principal agent problem: Apple insists that executives must hold company stock. Retrieved from https://www.forbes.com/sites/timworstall/2013/03/01/solving-the-principal-agent-problem-apple-insists-that-executives-must-hold-company-stock
Worstall T. (2014 July 20).Soaring inequality and CEO pay are not caused by the principal/agent problem. Retrieved fromhttps://www.forbes.com/sites/timworstall/2014/07/20/soaring-inequality-and-ceo-pay-are-not-caused-by-the-principalagent-problem
DISCUSSION 1
Should the law allow an employer to fire an employee without a good reason? Conduct research to provide examples to support your position and use your own personal employment experiences when possible. Have you observed situations where an employee was fired? Did the employer give a reason? Do you believe the employers actions were legal?
Guided Response: Review your classmates responses. Respond to at least two of your classmates postings by Day 7 expressing whether you agree or disagree with their assessment of the employers actions. Explain your position.
DISCUSSION 2
Karen is shopping at Big Mart. She has with her an umbrella which is the same brand Big Mart carries. When a Big Mart employee Steve sees her leave with the umbrella without going through the checkout lane he asks her to come back into the store. Steve says that he thinks Karen is shoplifting the umbrella. Karen tells him that she has had the umbrella for years and shows him marks of wear and tear. Steve apologizes and tells Karen she is free to go. Can Karen successfully sue for false imprisonment or defamation? From what you have learned about the relationship between a principal and an agent analyze whether Steve or Big Mart could be liable because of Steves actions.
Guided Response: Review your peers responses. For at least two of your classmates determine if your analysis of the facts is the same. Do you agree with their assessment or do you see the issue differently? Explain. Respond to at least two of your classmates posts by Day 7.
ASSIGNMENT
Final Paper Proposal
For detailed information regarding outlines introductions thesis statements and an APA references list visit the Ashford Writing Center.
Review the assignment instructions for the Final Paper in Week Five. Submit an outline for your Final Paper that includes the following:
The outline must be two to three pages in length (excluding title and reference pages) and formatted according to APA style as outlined in theAshford Writing Center(Links to an external site.)Links to an external site..
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