Management and Organizational Studies 2275A/B Chapter Notes - Chapter 13: Secret Profit, Fiduciary, Apparent Authority

49 views5 pages

For unlimited access to Textbook Notes, a Class+ subscription is required.

Business Law
Ch. 13 Textbook
The Agency Relationship:
The Nature of Agency
Agency is the relationship between two persons that permits one person, the agent, to
affect the legal relationships of another, known in law as the principal.
These legal relationships are as binding on the principal as if that person had directly
entered them herself
Agent
o A person who is authorized to act on behalf of another
Principal
o A person who has permitted another to act on her behalf
In almost every business transaction, at least one of the parties is acting as an agent
The agency relationship which formally recognizes the delegation of authority from
one party to another- is a cornerstone of business activity. It is a relationship that makes
it possible for businesses to conduct a wide array of transactions
Agency Defined
o The fact that parties use agents instead of dealing with each other face to face
can result in complications and questions
o First is the relationship between the agent and the principal
o Second relationship in agency is between the principal and the party with whom
the agent does business The outsider is sometimes called the third party
o The complications resulting from these relationships have necessitated rules of
law to regulate and resolve them.
o Law of Agency
The law governing the relationship where one party, the agent, acts on
behalf of another, the principal.
o This is derived largely from tort and contract law. There is very little legislation
pertaining to agency as such, 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 the parties. The relationship
arises by conduct as well
Agency by Agreement
o An agency relationship created by contract normally involves the principal
authorizing an agent to act on her behalf and the agent agreeing to do so in
return for some fee or other remuneration
o The agency agreement may be express or implied, oral, in writing, or in writing
under seal. If the agent is to issue promissory notes or sign cheques in the name
of the principal, then the agency agreement should be in writing
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in
o Power of Attorney
An agency agreement in writing and under seal
The Concept of Authority
o It determines whether there is a contract between the principal and the
outside. Whe a aget ats ithi the sope of the aget’s authoit ad
negotiates a contract for the principal, the principal is bound by the contract
o The principal will be obligated by the contract when the agent has actual
authority or when the agent has apparent authority
Actual Authority
o A aget’s atual authoit a e oth epess ad iplied. Epess authoit is
the written or oral authority granted by the principal to the agent and is an
authority that the agent actually has. Implied authority is also an authority that
the agent actually has, but it is present by implication only.
o Actual Authority
The power of an agent that derives from either express or implied
agreement
o It is ipotat to eee that these tes ae ot a less eal tha epess
terms
o Apparent Authority
Sometimes call ostensible authority, apparent authority is the authority
that at third party or outsider would reasonably believe the agent has,
given the conduct of the principal.
So long as an agent is acting within his apparent authority, the principal
will be bound by the transaction unless the third party knew or ought
easoal to hae ko of the liitatio o the aget’s authoit
Agency by Estoppel
o An agency relationship created when the principal acts such that third parties
reasonably concludes that an agency relationship exists
o The onus is on the principal to inform outsiders when a person ceases to be their
agent; otherwise the principals otiue to e liale fo the aget’s atios
o The principals have the responsibility to inform outsides of any limitation on
thei aget’s usual authoit
Agency by Ratification
o Age  atifiatio ous he a peso epesets hiself as aothe’s
agent even though he is not, and when the purported principal adopts the acts
of the agent
o In both agencies by estoppel and agency by ratification, the agent has no
authority to do what he does.
o Agency by estoppel forces the principal to be bound by the unauthorized
contract because the principal has represented someone as his agent and must
live with the consequences when that agent purports to act on his behalf. Under
agency by ratification, the agent is perhaps equally out of line but not due to any
fault or misrepresentation by the principal
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in

Get access

Grade+
$10 USD/m
Billed $120 USD annually
Homework Help
Class Notes
Textbook Notes
40 Verified Answers
Study Guides
1 Booster Class
Class+
$8 USD/m
Billed $96 USD annually
Homework Help
Class Notes
Textbook Notes
30 Verified Answers
Study Guides
1 Booster Class