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Chapter 17

Chapter 17 BU231.docx

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Wilfrid Laurier University
Valerie Irie

BU231 Chapter 17 - Agency Defining Agency -Agent – a person acting for another person in contractual relations with third parties -Principal – the person on whose behalf the agent acts -Dependent agent – an agent who acts exclusively, or mostly, for a single principal -Independent agent – an agent who carries on an independent business and acts for a number of principals -Commission agent – one who sells on behalf of a principal to third parties and received compensation through commissions Creation of an Agency Relationship -Any person who has the capacity to contract may appoint an agent to contract on his behalf -Agency agreement – the agreement between principal and agent whereby the agent undertakes to act on behalf of the principal By Agreement -The easiest way to form an agency relationship is by agreement -An agency agreement may be expressed or implied, oral, written, or in writing under seal -If an agency agreement is to extend beyond one year it must be in writing -Power or attorney – a type of agency agreement authorizing the agent to sign documents on behalf of the principal Duties of an Agent to the Principal Duty to Comply with the Agency Agreement -The duties of an agent are determined by the terms – expressed and implied – of the agreement with the principal -A number of rights and duties, for both agent and principal, are implied by custom as terms of the agency agreement Duty of Care -An agent owes a duty of care to her principal, even when she acts without payment Personal Performance -An agent cannot delegate her duties without the principal’s agreement -An agent’s usual responsibilities include the exercise of her judgment, skill, and discretion on the principal’s behalf -When an agent has implied authority to perform through a sub-agent, there is generally privity of contract between only the principal and the agent Good Faith -The duty of good faith requires that an agent be loyal, at in the best interests of the principal, and keep the principal fully informed -An agent who fails to keep proper accounts may be liable to her principal for any unexplained shortfalls -In most circumstances, an agent will not be acting in good faith when she serves two principals in the same transaction without their knowledge and consent BU231 Chapter 17 - Agency Duties of the Principal to the Agent -A principal does not owe a fiduciary duty to the agent -The only two duties on a principal: -the duty to compensate the agent for his or her effort (by commission of otherwise) -the duty to pay the agent’s expenses and compensate for losses -Listing agreement – an agreement by the client of a real estate agent to pay commission on any sale of a property The Authority of th
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