chapter 13 notes.docx - Nature of Agency Agency...

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Nature of Agency Agency – relationship that exists whe none party represents another in formation of legal relations - Agent – person authorized to act on behalf of another - Principal – person who has permitted another to act on her behalf Is common relationship, such as sports agent negotiating deal on behalf of player or stockbroker buying and selling shares on behalf of indiduals o This may be essential for athletes of investors who cannot manager or promote his business single-handedly, resulting in reliance on agents In business, corporation enters into contract through agency of one of directors or employees - Even small businesses may employ office managers, sale clerks or cashiers to carry out critical tasks on behalf of owner - Agent may also help you find business (auditors must ensure that there is no bribery performed by agent, because if agents perform illegal acts, it means principal has as well) o Overall is delegation of authority that makes it possible for businesses to conduct in wide variety of transactions Agency Defined Agency principal relationship – involves questions such as what duties of agent are, what obligations of principal are, what kind of authority does agent have, and how A becomes agent (when is A considered agent) Relationship between principal and party whom agent does business - Outsider – party with whom agent does business on behalf of principal (third party) - Raises question of when agent is liable, and when principal is liable These relationships have resulted in law of agency – law governing relationship where one party, agent, acts on behalf of another, the principal Creation of Agency Often created by contract, but sometimes relationship arises by conduct (parties agree through words or actions -> can be written or oral) Agency by agreement Involves principal authorizing agent to act on behalf in return for fee - Can be for a single purpose such as hiring someone to help you find customers or suppliers (for a fee) - May also be broader contract, involving carrying out certain duties such as greeting customers, entering sales transactions, etc Not all employees are agents for business that employ them Agency agreements can be expressed or implied, oral or in writing, or writing under seal (if agent must sign cheques, contract should be written) Special Agency Agreements - Power of attorney (type of agency agreement in writing and under seal) allows agent to sign documents on behalf of principal under seal o Power of attorney is very risky as allows whatever an individual can do (ex. even take your money and finances) Concept of authority - if agent acts within scope of agent’s authority and negotiates contract, principal is bound by contract regardless
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- If agent is outside scope of authority in entering into contract, contract may still bind the principal Actual Authority Actual authority – power of agent that derives from either express or implied agreement -
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