1. What is Agency? n Agency-relationship in which one person represents another in making contracts. n Principal-one who authorizes an agent to make contracts n Agent-the person authorized to alter a legal relationship n Third Party- a person who works through an agent to reach an agreement that binds a principal. n Scope of Authority-the range of acts authorized by the principal. n Fiduciary Duties-require that the agent serve the best interests of the principal.

2. Who Can Be a Principal? n Minors and others who lack contractual capacity. n Warranty of the Principal’s Capacity-a warranty imposed by law on the agent so that if the principal injured the third party, the third party could recover from the agent.

3. Who Can Be An Agent? n Minors and others who lack contractual capacity.

4. How Is Agency Authority Created? n Four Ways: n 1) Express grant of authority n 2) Implied grant of authority n 3) Apparent authority n 4) Ratification

5. Terminology Gratuitous Agency-agency relationship in which the agent receives no consideration. Express Authority-the oral or written power to do anything directly communicated by the principal to the agent. Power of Attorney-any writing that appoints someone as an agent.. Implied Authority-the power to do anything that is reasonably necessary or customary to carry out the duties expressly authorized. Apparent Authority-created when a principal leads the third party to reasonably believe that a particular person has agency authority. Ratification-Approval of a voidable contract; also, approval of a previously unauthorized act`

6. What Are An Agent’s Fiduciary Duties? n 1) Loyalty and Obedience n 2) Reasonable Care and Skill n 3) Confidentiality n 4) Accounting

7. Terminology Duty of Loyalty-Requires that agents must place the interests of their principal’s above the interests of all others. Duty of Obedience-the agent must obey the instructions of the principal. Duty of Reasonable Care and Skill-requires the agent to exercise the degree of care and skill that a reasonably prudent person would use in a similar situation. Duty of Confidentiality-requires the agent to treat information about the principal with great caution. Duty of Accounting-requires an agent must account to the principal for all money and property of the principal that comes into the agent’s possession. Commingling-mixing the funds or property of the agent with those of the principal.

8. What Duties Does A Principal Owe An Agent? n A principal owes many of the same obligations to an agent that an employer owes to an ordinary employee.

9. When Is A Principal Liable To Third Persons? n 1) Contractual Liability to the Third Person n 2) Liability for Fraud, Torts, and Crimes

10. When Is An Agent Liable To Third Persons? n 1) Agent Acts Outside the Scope of Authority n 2) Principal Lacks Capacity – Undisclosed principal-a principal whose identity is kept secret from the third party by the agent