Law for Business, 17e, by Ashcroft and Ashcroft, © 2011 Cengage Learning 26.1 Law for Business, 17e by Ashcroft and Ashcroft Chapter 26: Nature and Creation of an Agency

26.2 Chapter 26 Objectives Explain the nature of an agency and identify the parties involved. Describe the different classifications of agents and the corresponding authority of each. Discuss how an agency is usually created. Distinguish between an agency and independent contractor or employer- employee relationships.

26.3 Agency Principal – the person who appoints another to contract with third parties. Agent – the person appointed to contract on behalf of another. Agency – contract under which one party is authorized to contract for another.

26.4 Powers of an Agent Generally, people can do through agents anything they can do themselves. If a person can’t do something lawfully, an agent can’t do it either. Anyone legally competent can employ an agent. Anyone legally competent can act as an agent.

26.5 Types of Agents 1. General 2. Special 6. Attorneys in fact 6. Attorneys in fact 3. Factors 5. Brokers 4. Factors del credere 4. Factors del credere

26.6 Extent of Authority Express authority: specifically delegated to agent by the agreement creating the agency. Implied authority: agent’s authority to do things in order to carry out express authority. Customary authority: authority that an agent possess by custom. Apparent authority: authority that an agent believes to possess because of principal’s behavior.

26.7 Creation of an Agency Appointment: Oral or written statement of the principal to the agent. Ratification: Johnson’s approval of the unauthorized act of Miller done in the Johnson’s name. Estoppel: Johnson’s words or conduct leads Pippin to believe that Murphey is an agent. Necessity: Arises out of family relationships and unforeseen emergencies.

26.8 Example of a Power of Attorney Illustration 26-1 Power of Attorney

26.9 Other Types of Agency Independent contractor Performs tasks for a fixed fee. Other contracting party does not control independent contractor. Employer and employee Employer controls employee in work done and manner in which it is done. The degree of control that employer or principal exercises over employee or agent is the main difference between employee and agent.

Law for Business, 17e, by Ashcroft and Ashcroft, © 2011 Cengage Learning The End Any questions or problems ?

Law for Business, 17e, by Ashcroft and Ashcroft, © 2011 Cengage Learning Law for Business, 17e by Ashcroft and Ashcroft Chapter 27: Operation and Termination of an Agency

26.12 Chapter 27 Objectives Specify the duties an agent owes the principal and the principal owes the agent. Describe the agent’s and principal’s liabilities to third parties. State how an agency may be terminated, either by the parties or by operation of the law.

26.13 Agent’s Duties to Principal Loyalty and good faith Obedience Routine obedience Discretionary obedience Reasonable skill and diligence Accounting Information

26.14 Principal’s Duties to Agent Compensation Contract determines compensation. If contract is silent, agent may obtain reasonable or customary compensation. Reimbursement Agent gets reimbursed for expenses or for disbursements paid from agent’s personal funds. Expenses because of an illegal act must be paid by the agent.

26.15 Principal’s Duties to Agent Indemnification Contractual payment made by agent for principal is an expense of principal. Abidance to the terms of the contract Everybody must abide by terms of the contract, or a breach will result.

26.16 Agent’s Liabilities to Third Parties 1. Agents who contract in their own names and do not disclose names of principles become liable. 2. Agents may make themselves personally liable to third parties by express agreement to be responsible. 3. People who assume to act for others but have no authority are personally liable. 4. Agents who incur personal liability for fraud or other wrongdoing.

26.17 Termination by Acts of the Parties Original agreement Original agreement Revocation Renunciation by the agent Renunciation by the agent Subsequent agreement Subsequent agreement

26.18 Termination by Operation of the Law Subsequent illegality Subsequent illegality Destruction Dissolution War Bankruptcy Death or incapacity Death or incapacity

Law for Business, 17e, by Ashcroft and Ashcroft, © 2011 Cengage Learning Do you now have a better grasp of what agencies are? Be sure to study the cases in the textbook.