© 2006 Prentice Hall Ch THE LEGAL ENVIRONMENT OF BUSINESS A Critical Thinking Approach Fourth Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne Nancy K. Kubasek Bartley A. Brennan M. Neil Browne 1

© 2006 Prentice Hall Ch CHAPTER 15 Agency Law THE LEGAL ENVIRONMENT OF BUSINESS

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Agency Relationships Agency: A fiduciary relationship between two persons in which one acts on behalf of the other Principal: (P) is bound by acts of agent Agent: (A) acts on behalf of principal, subject to P’s control

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Types of Agency Employer-Employee Employer- Independent Contractor Corporation-Officer/ Director/Employee

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Authority Express Authority: arises from statements Actual Authority: includes implied authority P gives authority to A to act for P

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Creating an Agency Expressed agency Implied authority Ratification of A’s previous acts Apparent agency (estoppel)

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Expressed Agency Example: Power of Attorney A written expression of the grant of authority by P and the acceptance of authority by A Example: Power of Attorney A written expression of the grant of authority by P and the acceptance of authority by A Application: Health care (durable power of attorney) Application: Business (brokerage agreements)

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Agency by Implied Authority Agency created by: CustomsCircumstancesFacts In the absence of an express agreement

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Agency by Ratification Unauthorized person misrepresents self as agent, A A performs act in favor of P P later accepts the benefits of the act Result:P has ratified A’s actions and created agency relationship

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Agency by Estoppel, or Apparent Authority Agency by Estoppel, or Apparent Authority P leads Third Party, T to believe, by words or acts, that A is his agent P is bound by acts of A, with regard to T P is estopped to deny agency Result:“Apparent” authority is established

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Duties of Agents and Principals P’s Duties to A: Compensation Reimbursement and Indemnification Cooperation Safe Working conditions

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Duties of Agents and Principals A’s Duties to P: Loyalty Obedience Accounting Performance

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability Disclosed Principal: P is liable, A is not Partially Disclosed Principal: P is liable, A is not Undisclosed Principal: Both A and P are liable

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Issues: Did A act in the scope of employment? Acting for P? During work hours? On regular business? Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability Context: Cases arise in the area of employment relationship Respondeat superior = vicarious liability

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability General Rule: P not liable for criminal acts of A Exceptions: When P participates in crime When P knows crime is taking place

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Termination By Agreement By Operation of Law

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Termination by Agreement Agency may terminate by its own terms Duty to notify third parties via actual or constructive notice Lapse of time may cause termination

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Termination by Law Death of P or A Insanity Bankruptcy of P Impossibility of performance by A War

© 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch Global Dimensions Agency laws of other jurisdictions differ: Japan: express authority and more disclosure EU: good faith, and rights of A are favored Agency frequently used in international business FCPA applies to all U.S. P’s and A’s operating overseas