Business Law Chapter 28

Business Law Chapter 28 - Business Law Chapter 28...

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Business Law Chapter 28 Introduction - Agency law presents trade off: if you do everything yourself, you have control over the result, but the size and scope of your business (and life) will be severely limited. Creating an Agency Relationship - Principals have liability for actions of their agents. - In an agency relationship, someone (agent) agrees to perform a task(s) for, and under the control of, someone else (principal) - To create agency relationship there must be o Principal – person for whom the agent is acting o Agent – person acting on behalf of principal o Both principal and agent mutually consent that agent will act on behalf of principal o Agent is subject of principal’s control o This creates a fiduciary relationship Consent - To establish consent, principal must ask the agent to do something and agent must agree Control - Principals are liable for the acts of their agents because they exercise control over the agents - If principals direct agents to commit an act, it is fair to hold the principal liable when that act causes harm. - Control and consent must both be present in a relationship Fiduciary Relationship - A special relationship with high standards. - A beneficiary places special confidence in fiduciary who in turn, is obligated to act in good faith and candor, putting his own needs second. o The purpose of a fiduciary relationship is for one person to benefit another. - AGENTS HAVE FIDUCIARY DUTY TO THEIR PRINCIPALS
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- All three elements - consent, control, and fiduciary duty – are necessary to create an agency relationship - Example Case: pg 671 Elements NOT required for an agency relationship - A written agreement – it does not have to be in writing, an oral agreement is valid except in one circumstance: the Equal Dignities Rule – if an agent is empowered to enter into a contract that must be in writing, then the appointment of the agent must also be written. - A formal agreement – they don’t need a formal agreement, they don’t even need the word agent when they establish an informal agreement. All that is needed is for them to act like a principal and agent – and the law will treat them as such - Consideration – an agency relationship need not meet all the standards of contract law. A agency agreement is valid EVEN IF AGENT IS NOT PAID. Duties of Agents to Principals S2 - Agents owe a fiduciary duty to their principals. There are 4 elements to this duty - 1. Duty of Loyalty - an agent has a fiduciary duty to act loyally for the principals benefit in all matters connected with agency relationship. The agent has obligation to put principal first, to strive to accomplish the principal’s goals. The components of duty of loyalty are: o Outside benefits – an agent may not receive profits unless principal knows and
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This note was uploaded on 06/29/2011 for the course MGT 3000 taught by Professor Murrmann during the Spring '11 term at Virginia Tech.

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Business Law Chapter 28 - Business Law Chapter 28...

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