Principal Resources Corporation Contracts with Quality Construction to Build an Addition

question 42

Essay

Principal Resources Corporation contracts with Quality Construction to build an addition to Principal's corporate office building.Quality contracts with Rite Supply Company for materials for the addition but refuses to pick up the materials.Meanwhile,Principal hires Skye,a certified public accountant,to work in its cost-accounting division as an employee,with no authority to hire or supervise others.Skye asks Theo,an outside experienced accountant,to advise her on certain accounting procedures but fails to pay Theo for the service.Principal also contracts with Uma,a salesperson,to solicit orders for its products in a designated territory.Uma obtains an order from Verity Industries,Inc. ,which is assured the order will be filled soon.But Uma does not follow through with the paperwork and fails to submit the order to Principal.Verity suffers a loss.Rite Supply,Theo,and Verity Industries claim Principal is liable under agency law.Discuss fully whether an agency relationship was created by Principal with Quality Construction,Skye,or Uma.

---

Definitions:

Depreciation

The process of allocating the cost of a tangible asset over its useful life, representing how much of an asset's value has been used up over time.

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased with a given budget at set prices.

Absolute Value

The distance of a number from zero on the number line, without considering direction.

Money Income

Refers to the total amount of monetary income received by an individual or household over a certain period of time, including wages, salaries, bonuses, and any other income in cash forms.