2750achapter13notes

2750achapter13notes - Chapter 13: Agency and Partnership...

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Chapter 13: Agency and Partnership Introduction: Agency law is the basis of the law of partnership, and an understanding of it is essential for coming to terms with corporate law An agent’s function is to represent and act on behalf of a principal in dealings with 3 rd parties Agency refers to the service an agent performs on behalf of the principal. This service may be performed as an employee, an independent agent, or gratuitously Agency Relationship: The agency relationship can be created by an express of implied contract, by estoppels, ratification, or gratuitously, the key element being the granting of authority Formation by Contract: o Agency agreement , between and the principal, thus, general contract rules apply o The agency contract can cover such things as the authority of the agent, the duties to be performed, and the nature of payment to be received o Under the Bills of Exchange Act , where the agent is to sign cheques or other negotiable instruments, the granting of the agent’s authority must also be in writing o Not necessary that agency agreements be under seal, unless the agent will be sealing documents on behalf of the principal as part of his or her agency function o An agency agreement in writing and under seal is called a power of attorney o The lack of any one of these elements may void the agency contract, but that will not affect the binding nature of any agreement the agent enters into on behalf of the principal o The actions of an agent may be binding on the principal even when the agent is acting gratuitously Authority of Agents: Actual Authority: o Authority specifically given by the principal to the agent and usually set out in the agency agreement is call the agents actual authority o May be expressly stated by the principal or implied from the circumstances, such as from the position the agent has been given o If the principal has specifically stated that the agent does not have certain powers, no such authority is implied Apparent Authority – Authority Created by Estoppel: o When a principal does something by conduct or words to lead a 3 rd party to believe that an agent has authority, the principal is bound by the agents actions, regardless of whether there is or is not actual authority o Estoppel is an equitable remedy that stops a party from trying to establish a position or deny something that, if allowed, would create injustice o Equitable estoppel involves a promise or commitment to do something in the future. Here, we are dealing not with a promise but with a claim or a statement of fact made by the principal www.timetocram.com
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o A principal can also be bound by the actions of an agent that would normally be beyond the agent’s authority if the principal has sanctioned similar actions in the past o The existence of this apparent authority is based on the statements and conduct of the principal, not the agent o Reasonable person test has a significant role to play in determining the existence of
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2750achapter13notes - Chapter 13: Agency and Partnership...

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