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Unit C Objective 07.01 Agency Law


AGENCY Relationship in which one person, called an agent, represents another person, called a principal, in some sort of business transaction with a third party. In most cases a binding contractual agreement is formed.  Principal -> Agent -> Third Party 

– Example: You picked up and paid for a pizza ordered by a family member.


TYPES OF AGENTS 

 

General Agent-given authority to perform any act within the scope of a business. Special Agent-employed to accomplish a specific purpose or to do a particular job. Subagents-appointed by another agent. Agent’s Agent-has no power to appoint a subagent but does so anyway. Coagents-two ore more agents hired by the principal.


RELATIONSHIPS ARE CREATED By agreement (contract)  By law (circumstantial or specific)  By statute (special interest of a state) 


AGENCY RELATIONSHIPS Gratuitous Agent: agent works for free (no contract)  Master: has the right to control the conduct of his or her servant  Independent Contractor: agent is hired by the other party, but not controlled 


AGENCY RELATIONSHIPS, Continued Partially Disclosed Agent: principal’s existence but not identity is known to the third party.  Fiduciary: relationship is based on trust.  Actual Authority: real power the principal gives to an agent to act on his or her behalf 


AGENCY RELATIONSHIPS, Continued Apparent Authority: agency by estoppel  Third Party: must be notified if an agency has been terminated  Consensual: both parties of a principal/agent relationship agree or consent to relationship 


AGENCY RELATIONSHIPS, Continued Agent is obligated to act in good faith (within the scope of the principal’s needs and wants). Therefore, a principal is not liable for criminal acts.  When an agency is created by statute (law), the agent is known as a statutory agent. 


AGENCY RELATIONSHIPS, Continued ď‚­

If unauthorized agent works on your behalf, you have two options: 1. Charge agent with fraud (agent is liable to the third party) 2. Accept actions of agent (ratify)


TYPES OF AUTHORITY Actual-real power given to agent  Express-all orders, commands, or directions given to agent when relationship created  Implied-understood acts or powers implied from express terms 


AGENT’S DUTIES TO PRINCIPAL Obedience-obey reasonable orders  Good faith-deal honestly  Loyalty-faithfulness or acting in best interest  Duty to account-accountable for all money entrusted to him/her 


PRINCIPAL’S DUTIES TO AGENT Compensation-payment for services  Reimbursement-repayment for own money spent  Indemnification-repayment for amount lost  Cooperation-working together 


TERMINATION OF RELATIONSHIP 

By operation of law – Death of principal or agent – Bankruptcy – Impossibility of performance – Agent’s objective becomes illegal


TERMINATION OF RELATIONSHIP continued 

Termination of acts – Performance – Mutual agreement – Agent’s withdrawal – Agent’s discharge


TERMINATION OF RELATIONSHIP continued 

Notice to third parties – Credit has been given to principal. – Cash business has been done. – No notice when third party never heard of agency relationship.

B 07.01 Unit_C_Agency_Law,  
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