1. Unit C Objective 07.01 Agency Law

2. Consider:  You have asked your friend if she could go online to order and item for you. You give her your card to help you. You trust him/her, so theft is not an issue.  You do it several times and he/she is so good at it, he/she has even memorized your credit card information.  One day, he/she sees an item online and orders it for you without asking.  Are you responsible for paying for that item? Write down your reasoning.

3. AGENCY  Relationship in which one person, called an agent, represents another person, called a principal, in some sort of business transaction with a third party. In most cases a binding contractual agreement is formed.  Principal -> Agent -> Third Party –Example: You picked up and paid for a pizza ordered by a family member.

4. TYPES OF AGENTS  General Agent-given authority to perform any act within the scope of a business.  Special Agent-employed to accomplish a specific purpose or to do a particular job.  Subagents-appointed by another agent.  Agent’s Agent-has no power to appoint a subagent but does so anyway.  Coagents-two ore more agents hired by the principal.

5. RELATIONSHIPS ARE CREATED  By agreement (contract)  By law (circumstantial or specific)  By statute (special interest of a state)

6. AGENCY RELATIONSHIPS  Gratuitous Agent: agent works for free (no contract)  Master: has the right to control the conduct of his or her servant  Independent Contractor: agent is hired by the other party, but not controlled

7. AGENCY RELATIONSHIPS, Continued  Partially Disclosed Agent: principal’s existence but not identity is known to the third party.  Fiduciary: relationship is based on trust.  Actual Authority: real power the principal gives to an agent to act on his or her behalf

8. AGENCY RELATIONSHIPS, Continued  Apparent Authority: agency by estoppel  Third Party: must be notified if an agency has been terminated  Consensual: both parties of a principal/agent relationship agree or consent to relationship

9. AGENCY RELATIONSHIPS, Continued  Agent is obligated to act in good faith (within the scope of the principal’s needs and wants). Therefore, a principal is not liable for criminal acts.  When an agency is created by statute (law), the agent is known as a statutory agent.

10. AGENCY RELATIONSHIPS, Continued  If unauthorized agent works on your behalf, you have two options: 1.Charge agent with fraud (agent is liable to the third party) 2.Accept actions of agent (ratify)

11. TYPES OF AUTHORITY  Actual-real power given to agent  Express-all orders, commands, or directions given to agent when relationship created  Implied-understood acts or powers implied from express terms

12. AGENT’S DUTIES TO PRINCIPAL  Obedience-obey reasonable orders  Good faith-deal honestly  Loyalty-faithfulness or acting in best interest  Duty to account-accountable for all money entrusted to him/her

13. PRINCIPAL’S DUTIES TO AGENT  Compensation-payment for services  Reimbursement-repayment for own money spent  Indemnification-repayment for amount lost  Cooperation-working together

14. TERMINATION OF RELATIONSHIP  By operation of law –Death of principal or agent –Bankruptcy –Impossibility of performance –Agent’s objective becomes illegal

15. TERMINATION OF RELATIONSHIP continued  Termination of acts –Performance –Mutual agreement –Agent’s withdrawal –Agent’s discharge

16. TERMINATION OF RELATIONSHIP continued  Notice to third parties –Credit has been given to principal. –Cash business has been done. –No notice when third party never heard of agency relationship.