Video: Principals & Agents: Authority, Duties, and Liabilities - Practice Questions

In this lesson, join Nick Palazzolo as he tackles practical questions on agency law, which is a critical component for anyone keen on mastering the intricacies of principles and agents. Watch as Nick deftly navigates through multiple-choice questions, dissecting scenarios to determine which duties and obligations have been fulfilled or breached within an agency relationship. He specifically addresses issues related to the duty of loyalty, including conflicts of interest, rebates, and kickbacks. Nick further explores the implications of oral agency agreements and real estate transactions, particularly focusing on the legal enforceability of these agreements under the statute of frauds. Get ready to deepen your understanding of principal-agent dynamics through practical examples that could prove pivotal in navigating real-world legal defenses and auditor responsibilities.

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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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Welcome back everyone to some multiple choice questions. Today we've got them on our agency law. Let's dive right in, see what we got. Baker sold an automobile to Bob's Old Autos where Fuller is a manager. Fuller took $100 from Baker for encouraging the sale. What duty to Bob's Old Autos did Fuller violate? Now, presumably we don't see anything here about this being part of the contract. It's not like it mentions anything about commissions. And as such, it looks like we have some sort of conflict of interest. Fuller is the manager. Fuller is an agent. Fuller is an agent of Bob's Old Autos. Now, Baker gave the money to Bob's Old Autos. Fuller had a duty to Bob's Old Autos to give all of that money to the company, right? And Fuller didn't. So what's going on? What did they breach? Now, these are all different rights, but specifically here, rights and duties. What did Fuller violate? Well, reasonable care. I don't think Fuller violated reasonable care. There's nothing to indicate that. This question's not saying that Fuller didn't inspect the car before purchasing it and didn't do their due diligence. So I'm gonna eliminate that one. Reimbursement. Reimbursement happens when someone expends money and then is supposed to get money back for it. And that's not really what happened here at all. Now, loyalty. That's a good one, I think, because while loyalty deals with acting solely in the interest of principle, it's specifically calling out that there should not be any kickbacks. And that's kind of what looks like what happened here. Fuller took a little money for themselves, slid a little off to the side, and said, I deserve this. Now, it doesn't matter what the rationale was. If you're thinking back to

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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

Terms Related to Principals and Agents