1. Creation and Types of Agents Section 18.2

2. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency What You’ll Learn How to recognize the creation of an agency relationship by agreement (p. 404) How to recognize the creation of an agency relationship by operation of law (p. 405)

3. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency What You’ll Learn How to distinguish between a general agent and a special agent (p. 402) How to distinguish among a subagent, a coagent, and an agent’s agent (pp. 403-404)

4. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Why It’s Important Knowing when an agency relationship has been created will help you make sound judgments in business activities.

5. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Legal Terms general agent (p. 402) special agent (p. 402) agency by estoppel (p. 405) ratification (p. 407)

6. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Types of Agents Extent of Authority How Agents Relate to One Another Section Outline

7. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency How Agency Relationships Are Created By Agreement By Operation of Law By Ratification Section Outline

8. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Pre-Learning Question What are some different types of agents?

9. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency We can distinguish between types of agents in two ways. We can examine Types of Agents 1.the extent of the agents’ authority 2.how the agents relate to one another

10. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency The two types of agents distinguished on the basis of extent of authority are general agents and special agents. General agents have more authority than special agents. Extent of Authority

11. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency A person who has been given authority to perform any act within the scope of a business is a general agent. The manager of a department store is a general agent. General Agent

12. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency A person who is employed to accomplish a specific purpose or to do a particular job is a special agent. Sales representatives are special agents. Special Agent

13. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Agents may be classified according to the nature of their relationships with other agents. How Agents Relate to One Another

14. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency A subagent is an agent lawfully appointed by another agent. Subagents

15. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency If an agent has no power to appoint a subagent but does so anyway, he or she has appointed an agent’s agent. Agent’s Agent

16. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency If the principal hires two or more agents, he or she has created a coagent situation. Coagents

17. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Pre-Learning Question How do you think agency relationships are created?

18. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Generally, any business you can transact personally can also be transacted through an agent. How Agency Relationships Are Created

19. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency A principal-agent relationship can be developed How Agency Relationships Are Created by agreement by operation of law by ratification

20. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Most agency relationships are created by agreements, which are usually, but not always, contracts. By Agreement

21. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency No contract exists if an agreement does not involve consideration. An agency agreement that does not involve a contract is called a gratuitous agency. By Agreement

22. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Agency relationships may be created automatically by operation of law. By Operation of Law Sometimes the law creates an agency relationship by circumstance. Agency relationships can also arise through enactment of specific laws.

23. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency When the law creates an agency relationship by circumstance, it is called agency by estoppel, also known as apparent authority. Agency by Estoppel

24. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Sometimes a state legislature decides that certain situations justify automatic creation of agency relationships by statute. Agency By Statute

25. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency What do you call an agency that does not involve a contract?

26. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency ANSWER A gratuitous agency.

27. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency What is an agency by estoppel?

28. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency ANSWER When the law creates an agency relationship by circumstance.

29. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency At times a person may act as an agent without the authority, or an agent who has the authority to negotiate one type of contract oversteps that authority and negotiates another type of contract. By Ratification

30. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Ratification occurs if the principal, with full knowledge of the facts, accepts the benefits of the unauthorized acts. The act is thereby approved or ratified. By Ratification

31. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Describe what occurs when an agency is created by ratification.

32. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency ANSWER When the principal, with full knowledge of the facts, accepts the benefits of an unauthorized act.

33. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned 1. 1.How are most agency relationships created? Section 18.2 Assessment

34. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned By agreement. Section 18.2 Assessment Answer

35. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned 2. 2.How are agency relationships created by operation of law? Section 18.2 Assessment

36. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned By estoppel and by statute. Section 18.2 Assessment Answer

37. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned 3. 3.What is the difference between a general agent and a special agent? Section 18.2 Assessment

38. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned General agent: authority to carry out any act within the scope of a business. Special agent: employed to accomplish a specific purpose or to do a particular job. Section 18.2 Assessment Answer

39. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned 4. 4.What are the differences among a subagent, a coagent, and an agent’s agent? Section 18.2 Assessment

40. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned A subagent is lawfully appointed by another agent, and a coagent is created when a principal hires two or more agents. Section 18.2 Assessment Answer

41. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Reviewing What You Learned If an agent has no power to appoint a subagent but does so anyway, he or she has appointed an agent’s agent. Section 18.2 Assessment Answer

42. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Section 18.2 Assessment Critical Thinking Activity Types of Agents Why is it important to be able to distinguish between a general agent and a special agent?

43. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Section 18.2 Assessment Critical Thinking Activity Answer Types of Agents Answers will vary but could recognize that by knowing the difference between the two types of agents, you will understand the authority of an agent you may be dealing with.

44. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Section 18.2 Assessment Legal Skills in Action Apparent Authority Tony believes that Sara is a salesperson working in the appliance department at the Alomar Brothers Department Store. It turns out that she is actually a disgruntled former employee who is now impersonating a salesperson.

45. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Section 18.2 Assessment Legal Skills in Action Apparent Authority Tony gives Sara $100 as a down payment for a new DVD player, and she runs off with the money.

46. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Section 18.2 Assessment Legal Skills in Action Apparent Authority Write a paragraph that explains whether the Alomar Brothers Department Store will be compelled to return the $100 to Tony.

47. Understanding Business and Personal Law Creation and Types of Agents Section 18.2 Creation of an Agency Section 18.2 Assessment Legal Skills in Action Answer Apparent Authority Answers should recognize that Alomar Brothers Department Store would be liable for any loss incurred by Tony because the law would assume this to be an agency by estoppel.

48. Creation and Types of Agents End of Section 18.2