ADMN 3250H Chapter Notes - Chapter 15, 16: Limited Liability, Sole Proprietorship, Limited Liability Partnership

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Chapter 15
What is agency?
Law of agency is concerned with the relationship that arises when one
individual (a principle) either expressly or impliedly uses the services of
another (an agent) to carry out a specific task on his or her behalf
How is agency created?
May arise through express agreement, conduct, or necessity
Principal, agent, and third party
Agency by express agreement – an agency relationship established by an
express oral or written agreement
Agency by conduct – an agency relationship inferred from the actions of a
principal
Agency by operation of law – agency that may arise in certain
circumstances out of necessity where it is not possible to obtain the authority
of the principal to act
What are the duties of an agent and a principal?
Principal – a person on whose behalf an agent acts
oPay agent fixed fee or reasonable fee for services
oIndemnify agent for any reasonable expenses that the agent properly
incurs in carrying out the agreement
Agency – a person appointed to act for another, usually in contract matters
oMust obey all lawful instructions of principal and keep confidential
information
oMust keep in constant contact with principal and inform principal of
any important developments
oMust maintain standard skill required for his or her duties
oMay not delegate duties to subagent
oIf agent is authorized to receive funds/goods on behalf of principal,
has duty to account for goods/money
oObliged to always place principal’s interest above his or her own
How is agency terminated?
If agreement specifies that either party may terminate the agency
relationship by giving the other party a particular period of notice and, if
such notice is given, the agency will then terminate on the expiry of the
notice period
If no specific time for termination is fixed, the right to terminate may be
implied, and either party may give notice to end relationship
Incapacity of principal or agent (death or insanity) can terminate
relationship
Bankruptcy of principal terminates agreement
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