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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HAPTER 28: R ELATIONSHIP OF P RINCIPAL AND A GENT
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A.Nature of Agency. B.Creation of Agency. C.Duties of Agent to Principal. D.Duties of Principal to Agent. E.Termination of Agency. T OPICS C OVERED C HAPTER 28: R ELATIONSHIP OF P RINCIPAL AND A GENT 2
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. N ATURE OF A GENCY Definition Relationship authorizing one party (the agent) to act for and on behalf of the other party (the principal). Scope of Agency Purposes. Generally, whatever business activity a person may accomplish personally he may do through an agent. 3
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. N ATURE OF A GENCY Other Legal Relationships. Employment Relationship – one in which the employer has the right to control the physical conduct of the employee. 4
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. N ATURE OF A GENCY Other Legal Relationships. Independent Contractor – a person who contracts with another to do a particular job and who is not subject to the control of the other. D EL P ILAR V DHL G LOBAL C USTOMER S OLUTIONS (USA), I NC. (2008). D EL P ILAR V DHL G LOBAL C USTOMER S OLUTIONS (USA), I NC. (2008). 5
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C REATION OF A GENCY Consensual relationship between one person (principal) and another (agent). Consists of three basic elements: Assent. Control by the Principal. Agent’s Acting on Behalf of the Principal. 6
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C REATION OF A GENCY Gratuitous Agency. Agency created without compensation to agent. Agency by Estoppel. Agency created when principal intentionally or negligently gives a third person a reasonable basis to believe agency is created. 7
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C REATION OF A GENCY Agency by Estoppel. Elements include: (1) a person (‘‘principal’’) intentionally or carelessly causes a third party to believe that another person (the ‘‘agent’’) has authority to act on the principal’s behalf; (2) the principal has notice of the third party’s belief and does not take reasonable steps to notify the third party; 8
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C REATION OF A GENCY Agency by Estoppel. Elements include: (3) the third party reasonably and in good faith relies on the appearances created by the principal; and (4) the third party justifiably and detrimentally changes her position in reliance on the agent’s apparent authority. M ILLER V. M C D ONALD ’ S C ORPORATION (1997). M ILLER V. M C D ONALD ’ S C ORPORATION (1997). 9
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C REATION OF A GENCY Formalities. Consensual relationship formed by contract or agreement; agency may exist without consideration. Power of Attorney. Capacity. Durable Power of Attorney. Agent’s Capacity. 10
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF A GENT TO P RINCIPAL Duty of Obedience. Agent must act in principal's affairs only as authorized by the principal and must obey all reasonable instructions and directions. 11
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF A GENT TO P RINCIPAL Duty of Good Conduct. An agent has a duty to act reasonably and to avoid conduct that is likely to damage the principal’s interests or reputation. A breach makes the agent liable to the principal and subject to rightful discharge or termination. 12
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF A GENT TO P RINCIPAL Duty of Diligence. Agent must act with reasonable care and skill in performing his work. Duty to Inform. Agent must use reasonable efforts to give the principal information relevant to the affairs entrusted to her. 13
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF A GENT TO P RINCIPAL Duty to Account. Agent must maintain and provide the principal with a true and complete account of money or other property that the agent has received or expended on behalf of the principal. 14
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF A GENT TO P RINCIPAL Fiduciary Duty. Agent owes a duty of utmost loyalty and good faith to the principal. Conflicts of Interest. Self-Dealing. Duty Not to Compete. Misappropriation. Confidential Information. 15
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF A GENT TO P RINCIPAL Fiduciary Duty. Duty to Account for Financial Benefits. D ETROIT L IONS, I NC. V. A RGOVITZ (1984). D ETROIT L IONS, I NC. V. A RGOVITZ (1984). 16
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF P RINCIPAL TO A GENT Contractual Duties. Compensation: a principal must compensate the agent as specified in the contract, or for the reasonable value of the services provided, if no amount is specified. 17
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF P RINCIPAL TO A GENT Contractual Duties. Compensation: a principal must compensate the agent as specified in the contract, or for the reasonable value of the services provided, if no amount is specified. 18
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF P RINCIPAL TO A GENT Indemnification. The principal must pay the agent for losses incurred while acting as directed by the principal. Reimbursement. The principal must pay back to the agent authorized payments the agent has made on the principal's behalf. 19
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D UTIES OF P RINCIPAL TO A GENT Tort Duties – include the duty to provide an employee with reasonably safe conditions of employment and to warn employees of any unreasonable risk involved in the employment. 20
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Duties of P to A Compensation Reimbursement Indemnification Good Faith Duties of P to A Compensation Reimbursement Indemnification Good Faith Duties of A to P Obedience Diligence Good Conduct Loyalty Account Duties of A to P Obedience Diligence Good Conduct Loyalty Account D UTIES OF P RINCIPAL AND A GENT
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T ERMINATION OF A GENCY Acts of the Parties. Lapse of Time. Mutual Agreement of the Parties. Revocation of Authority. Renunciation by the Agent. 22
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T ERMINATION OF A GENCY Operation of Law. Death – of either the principal or the agent. Incapacity – of either the principal or the agent (except with durable power of attorney). Change in Circumstances 23
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T ERMINATION OF A GENCY Operation of Law. Change in Circumstances. G ADDY V. D OUGLASS (2004). G ADDY V. D OUGLASS (2004). 24
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© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T ERMINATION OF A GENCY Irrevocable Powers – an agency coupled with an interest is irrevocable and occurs where the agent has a security interest in the subject matter of the agency. 25
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