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[Management and Organizational Studies 2275A/B] - Final Exam Guide - Comprehensive Notes for the exam (168 pages long!)


Department
Management and Organizational Studies
Course Code
MOS 2275A/B
Professor
Philip King
Study Guide
Final

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Western
Management and Organizational Studies
2275A/B
FINAL EXAM
STUDY GUIDE

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Chapter 13: The Agency Relationship
Nature of Agency
Agency: a relationship that exists when one party (the agent) represents another
party in the formation of legal relations (the principal)
Agent: person who is authorized to act on behalf of another
Principal: person who has permitted another to act on her behalf
These legal relationships are as binding on the principal as if that person had
directly entered it themselves
Kind of relationship is essential to the success of the principal, who may not
necessarily have the expertise to handle the given matter
It is a relationship that makes it possible for businesses to conduct a wide array of
transactions
Agency Defined
Agents simply represent principals in transactions with others
Two key relationships at play in an agency situation
o1) relationship between agent and principal
How does A become an agent? When is one considered to be an
agent? What is the authority of an agent? What types of
transactions can A enter on behalf of P? What are A’s duties?
What are A’s obligations?
o2) outsider-principal relationship
outsider: party with whom the agent does business on behalf of the
principal (sometimes called 3rd party)
when is the principal liable to the outsider? When is the agent
himself liable to the outsider?
Law of agency: the law governing the relationship where one party, the agent,
acts on behalf of another, the principal
oThe complications resulting from these relationships have necessitated
rules of law to regulate and resolve them = law of agency
Little legislation pertaining to agency, other than special statutes that govern the
duties and responsibilities of specific kinds of agents
Creation of Agency
Most often the relationship arises by contract between parties, other times by
conduct
oDon’t specifically agree to an agency relationship, but by words or
actions, outsiders are led to believe the relationship is one of agency
Agency by Agreement
Agency relationship created by contract normally involves principal authorizing
agent to act on their behalf, and agent agreeing to do so in return for some fee or
other remuneration
Concept of Authority
The authority of the agent is a key aspect of the agency relationship
Determines whether there is a contract between the principal and the outsider
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When an agent a) acts within the scope of the agent’s authority and b) negotiates a
contract for the principal, the principal is bound by the contract
oEven when agent has acted outside scope of authority, by exceeding
powers given, contract may still bind the principal
Principal will be obligated by the contract when the agent has actual authority or
when the agent has apparent authority
Actual Authority
The power of an agent that derives from either express or implied agreement
Express authority: written or oral authority granted by the principal to agent and is
authority that the agent ACTUALLY has
Implied authority: authority that the agent actually has, but is present by
IMPLICATION only
Will have implied authority when that authority
oIs inferred from the position the agent occupies
oReasonably necessary to carry out or otherwise implement the agent’s
express authority
oArises by virtue of a well-recognized custom in a particular trade,
industry, or profession
Agency contract like other contracts can contain implied terms concerning nature
and extent of agent’s authority
Ex: Dong acted outside his actual authority to contracts up to $25,000 and agreed to a
$100,000 contract
Sonny will be bound by Dong (Dong is his agent) if Dong has the apparent
authority to enter into contracts over that monetary limit
Power of Attorney
Is a written document in which one person gives authority to another person to act
on her behalf
Person receiving power is most often referred to as the “attorney”, “agent”,
“donee”
General power of attorney: agent has full authority to exercise all the principal’s
rights in relation to her property and financial affairs (eg: cash or deposit cheques,
pay bills, withdraw money from bank accounts, etc..)
Specific power of authority: agent has the authority to act for the principal only in
relation to certain matters or in certain specified circumstances (ex: sell a car, cash
a pension cheque, or accept an offer for the purchase of property)
Personal care power of attorney: agency has authority to act for the principal in
relation to personal matters such as housing and health
Power of attorney may be non-continuing: meaning its automatically revoked if
principal becomes incapacitated (death, mental or bankruptcy), or enduring
A variation of the enduring power of attorney available in some provinces, is the
“springing power of attorney”, which “springs” to life when an event specified in
the power of attorney has taken place
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