Regulation Ch 7

Regulation Ch 7 - REG - Notes Chapter 7...

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REG - Notes Chapter 7 Agency Agency – legal relationship in which one person or entity (the principal) appoints another person or entity (the agent) to act on his behalf To create an agency the principal must have capacity (not a minor or incompetent) and consent Writing not required unless impossible to perform in 1 year, or purchase or sale of land Agent need not have capacity – minor can be an agent Consideration not required Power of attorney – written authorization of agency by principal Duties of agent to principal – fiduciary duty Duty of loyalty – act solely in principals interest - no kickbacks/self dealings, avoid conflicts of interest, do not disclose confidential information Duty of obedience – obey reasonable instructions. Do not exceed your authority Duty of reasonable care – liable id negligent to both principal and third party If agent breaches the duties, the principal can recover damages from the agents Contract damages – principal collects the money/consideration that was paid to agent Duties of principal to agent Compensation is an implied duty Reimbursement/indemnification – an implied duty to reimburse the agent for all expenses incurred in carrying out the agency Either party generally has the power to terminate the relationship at any time. However, the parties don’t necessarily have the right to terminate at any time Exception: Agency coupled with an interest (agent is a creditor of the principle) - Principal cannot terminate an agency, only the agent can terminate An agency relationship arises when the principal appoints an agent to act to his behalf. By this appointment, the agent can bind the principal in contract. Agency power can arise through Actual authority Apparent authority or estoppel, or Ratification Type 1: Actual authority – agent reasonably believes he possesses because of the principals communications to the agent. Actual authority can be either express or implied: Express actual authority – oral or written instructions Implied actual authority – the authority to do things reasonably necessary (in the ordinary course of business) to carry out the agency - Implied authority to hire/fire employees, purchase inventory and pay business debts - No implied authority to sell business fixtures or borrow money on the principals behalf Termination of actual authority is automatic by operation of law due to the following events Death Incapacity of the principal Discharge in bankruptcy of the principal Failure to acquire a necessary license 1
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REG - Notes Chapter 7 Destruction of the subject matter of the agency Subsequent illegality\ New employees are sub agents, who owe a fiduciary duty to both principal and primary agent Type 2: Apparent authority – an agent might not have actual authority, but still has the power (not the right) to bind the principal Title/position carries apparent authority
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This note was uploaded on 05/11/2010 for the course CPA 2010 taught by Professor ?? during the Spring '10 term at Becker College.

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Regulation Ch 7 - REG - Notes Chapter 7...

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