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AGENCY OUTLINE 1 1. INTRODUCTION. Agency is a consensual contractual relationship between the Principal or master and the agent or servant. An agent may be an employee. Partners are agents of each other and the Partnership. Corporate officers and Directors are agents of the corporation. Issues usually involve whether the Agent can bind the Principal in contract and tort. 2. CREATION OF RELATIONSHIP a. Principal must have contractual capacity. Minors cannot be principals except for necessaries. b. Agent need only have minimal capacity, thus a minor can be an agent. c. Agents cannot represent both parties in a transactions nor may the agent act secretly on his own account. d. There are few formalities. No consideration is necessary. No writing is required. Relationship may be created by express agreement, which gives the agent actual authority to bind the principal; the principal may hold a person out as his agent to a third party, creating apparent authority; or the principal may agree to be bound after the fact, which is called ratification. 3. AGENT MAY BIND PRINCIPAL IN CONTRACT a. If the agent had actual authority the principal will be bound to the contract with a third party even if the principal and the agency relationship is unknown to the third party. The agent cannot be held liable for breach of the principal if the agent acted within the scope of his authority. b. Express authority is that conferred by the agreement, whether written or oral. c. Implied authority is that the agent reasonably believes he has as a result of principal’s actions. It can be implied from a grant of express authority, be implied from custom and usage, it can be implied by the principal’s acquiescence to series of unauthorized acts, because of
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This note was uploaded on 10/28/2011 for the course BUSINESS ACCT 305 taught by Professor Poletti during the Spring '09 term at DeVry Columbus North.

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