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Business Law, Fill in the blanks Maria, an accountant, hired Jerod to be her assistant. She...

Business Law,

Fill in the blanks

Maria, an accountant, hired Jerod to be her assistant. She asks Jerod to take her car to the mechanic for repairs. Jerod drives the car to the mechanic, but then turns it around and heads for Atlantic City, where he decides to stay and start a new life. Jerod has likely committed ----------------

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Answer #1

In this example, Maria is said to be Principal and Jerod is said to be Agent.

The problem in which Agent cheats with Principal after the occurrence of the transaction is called problem of Moral Hazard. This occurs when Principal cannot supervise the actions of the Agent.

Jerod is in a contract of employment with Maria to take care of her essentials. This denotes that the transaction has already occurred between the two.

Jerod's wrong actions and his decision to stay in Atlantic City proves only that Jerod has committed MORAL HAZARD.

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