Video: Introduction to Principals and Agents

In this lesson, Nick Palazzolo, CPA, dives into the realm of agency law, illuminating the dynamic relationship between principals and agents. With a clear definition in hand, he illustrates the concept by explaining how principals hire agents to act on their behalf, while agents have a duty to act in the principal's best interests and according to their directions. Nick emphasizes the significance of distinguishing roles within agency examples, particularly in the context of employer-employee, client-attorney, and company-broker relationships. He also sheds light on the legal intricacies such as fiduciary duties and the scope of authority which fundamentally steer the principal-agent connection. This engaging run-through sets the stage for understanding accountability and protection on both sides of these intricate relationships.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Diving into the wonderful world of agency law, we've got a definition here. Agency law is a set of legal rules that governs the relationship between a principal and an agent. Not too shocking. Pretty much makes sense. In this relationship, the principal hires an agent to act on their behalf and make decisions or carry out tasks while the agent agrees to act in the best interests of the principal and follow their instructions. We're going to dive through so many types of agency examples. Who is the agent? Who's the principal? A good general rule for any sort of question asking about agency law when you're taking the exam or practicing questions, even if it doesn't matter per se, try to identify who is the principal, who is the agent, and who is a third party if there is a third party mentioned. That will for sure be a good way to help practice and understand kind of who is responsible for what, who has different rights and obligations to whom. Very good practice there. Now, some examples here are going to include the all too common employer-employee relationship. Well, when you work for your employer, you are an agent. You are getting hired by a principal, by the employer, to carry out tasks on their behalf, such as making sales, doing accounting, projects, services, all that good stuff. For the client-attorney relationship, a client hires an attorney to represent them in legal matters, such as drafting contracts, negotiating deals, or appearing in court. So any time someone else is acting on the behalf of a principal, that's an agency relationship. I mean, there's plenty of examples, many more than we see on this slide. We'll talk about the important ones as we run through other slides. We've

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Agency & Contract Law

Module: 2 Concepts, 34 Videos

Principals & Agents: Authority, Duties, and Liabilities Overview

2:02

Introduction to Principals and Agents

3:30

Formation of Agency

5:58

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