Lindsey R. Davis
November 15, 2012
Michael Schmidt, CPA, J.D., CIA
The Nature of Agency Video Analysis
The Nature of Agency Video is a scenario where Non-Linear Pro is suing Quick Takes Video for money owed on a lease of a video editing system. In the scenario, Hal (part owner of Quick Takes Video) had agreed to a trial basis of Non-Linear Pro’s video editing system. Hal had allowed Janet (employee) to negotiate the agreements of the trial basis with the Non-Linear Pro’s salesperson. The leased video editing equipment did not work as promised and Quick Takes Video tried to return the leased equipment after the first month without making the full three-month lease payment. Non-Linear Pro is suing Quick Takes Video claiming that Janet signed a three-month contract upon delivery of the video editing system. Janet claims that she inadvertently signed the contract with the belief that she was signing a delivery slip. According to Quick Takes Video’s lawyer, Henry, Non-Linear Pro can sue stating that Janet is an agent of Quick Takes Video making her legally allowed to bind Quick Takes Video to the signed contract. However, the owners of Quick Takes Video, Hal and Karen, want to know how Non-Linear Pro can sue because neither owner signed the contract (University of Phoenix, n.d.). A principal-agency relationship formation occurs when an employer gives rights to an employee to act or enter into contracts on his behalf [ (Cheeseman, 2010) ]. An employer-employee relationship occurs when an employer hires an employee to do a specific task or performance but does not give rights to act or enter into contracts on his behalf [ (Cheeseman, 2010) ]. An employee is only an agent if he or she has the power to enter into a contract on the employers behalf. The party that employs another person to act on his or her behalf is a principal. The party that agrees to act on behalf of another person is an agent. This...