1. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-1 The Legal Environment of Business A Critical Thinking Approach 5 th Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

2. CHAPTER 15 Agency Law THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-2

3. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-3 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 Agency Relationships

4. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-4 Types of Agency  Principal – Agent  Employer-Employee  Employer-Independent Contractor  Corporation-Officer/ Director/Employee

5. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-5 Authority Express Authority: arises from statements Actual Authority: includes  express authority  implied authority  authority customarily given to an agent in an industry P gives authority to A to act for P

6. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-6 Creating an Agency  Expressed agency  Implied authority  Ratification of A’s previous acts  Apparent agency (estoppel)

7. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-7 Expressed Agency 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)

8. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-8 Agency by Implied Authority Agency created by:  Customs  Circumstances  Facts In the absence of an express agreement

9. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-9 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

10. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-10 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

11. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-11 Duties of Agents and Principals P’s Duties to A:  Compensation  Reimbursement and Indemnification  Cooperation  Safe Working conditions

12. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-12 Duties of Agents and Principals A’s Duties to P:  Loyalty  Obedience  Accounting  Performance

13. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-13 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

14. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-14 Liability to Third Parties  General rule: P is liable for acts of A when performed within scope of duties.  Contractual liability: Cases arise in the area of employment relationship Disclosed Principal: P is liable, not A Partially disclosed principal: P is liable, not A Undisclosed Principal: A is liable, not P

15. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-15 Liability to Third Parties  General rule: P is liable for acts of A when performed within scope of duties.  Tort Liability : “Respondeat superior” equals vicarious liability Rule: A principal is liable for the intentional or negligent torts of his agent if done within the scope of his employment. If outside the scope of employment, agent is liable. Issues: Did A act in the scope of employment? Acting for P? During work hours? On regular business?

16. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-16 Liability to Third Parties  General rule: P is liable for acts of A when performed within scope of duties.  Criminal liability Rule: Principal is not liable for criminal acts of Agent. Exceptions:  When P participates in crime  When P knows crime is taking place

17. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-17 Termination  By Agreement  By Operation of Law

18. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-18 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

19. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-19 Termination by Law  Death of P or A  Insanity  Bankruptcy of P  Impossibility of performance by A  War

20. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-20 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

21. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 15-21 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall