CASE (RESEARCH)

Case (Research)

Case (Research)

The three important questions are:

What duties do a principal and an agent owe each other?

What is the liability of the principal and the agent on contracts made by the agent?

When is the principle liable for the torts of the agent?

The standard imposed is more correctly stated as the standard of care expected from a reasonable professional in the same circumstances. That is, where the person is a professional, it is the reasonable doctor, lawyer, accountant, etc. Thus, the standard required from a professional is much higher than that required from a normal person. A professional is required to have that degree of skill and ability which would be present in a reasonably experienced member of the profession, but must exercise that skill as a responsible professional. When the average standard or accepted practice of the profession falls below what the judge considers appropriate from a reasonably prudent professional, a higher standard will be required. Thus, common practice will not always justify the conduct of a professional in a given situation.

A sole proprietorship is a business that is owned by one person only and is considered to be his personal property. The owner may hire and pay employees, but the financial and taxable duties and responsibilities as well as income derived from the business belong entirely to the owner.

A general partnership is a business run by two individuals and the responsibilities and income derived from the conducting of business belong equally to both partners. In a general partnership, neither partner is entitled to be paid for their work performed and any losses sustained are equally shared amongst the partners - regardless of how much individual investment into the business either partner contributed. A limited partnership allows a general partnership to act more like a corporation by allowing outside investors invest in the business and share in the business profits without risking any more than they have invested.

A corporation is different than a sole proprietorship or a partnership in that the business - or corporation - is considered legally separate from its owners (or the shareholders). The corporation is considered its own legal entity and the losses sustained by the company belong to the corporation - shareholders do not lose more than they put into the business. In a close corporation, the shareholders are a small group of people that decide to go into business together - often a family. In a publicly held corporation the company's stock is sold to the public who have little or no interest in the workings of the business apart from its investment potential. A corporation is run by those that the shareholder elects to manage the business - this person may or may not be a shareholder (but often is).

Limited liability means that the shareholders to the company are only responsible for the capital that they have invested into the business. Should the company accrue large amounts of debt, be sued, or otherwise fail, the limited liability shareholders only lose their investment and ...