Presentation on theme: "Agency Law Objective 3.02 Understand agency law. What is agency law? Area of law dealing relationships created between two parties in which the principal."— Presentation transcript:
What is agency law? Area of law dealing relationships created between two parties in which the principal gives authority to an agent to act of the principal’s behalf in business transactions with a third party.
Agency Definitions Principal – Individual who gives authority to the agent. Agent – Individual employed by principal to work with the third party. Third party – The person or company whom the agent deals with on behalf of the Principal.
Types of Work Relationships Principal-Agent Relationship – “Genuine” agency relationship – Agent conduct business on behalf of the principal (it is as if the principal has acted)
Types of Work Relationships Proprietor-Independent Contractor – Proprietor is an individual or business that hires someone to perform a task – Independent contractor (plumber, electrician, lawyer, etc.) works for the proprietor – Independent contractor cannot act on behalf of proprietor without expressed permission
Types of Work Relationships Master-Servant Relationships – A master is a person who has the right to control the actions of another person – Actions include where to work, what time to arrive at work and tasks to complete at work. – The person performing the actions is the servant – At times, the interactions between employer- employee are considered to be master-servant
Actual Authority If the principal intentionally gives express and implied powers to the agent to act for him/her, the agent possesses actual authority. Express Powers – Responsibilities of the agent are written or spoken. Implied Powers – Responsibilities created by the principal’s actions.
Apparent Authority – Also called, agency by estoppel. – Created by law or circumstance. – Occurs when a principal, intentionally or negligently, causes or allows a third person to believe that an agency relationship exists, when there is no express agency. – Principal remains liable for the agent’s actions.
Types of Agents General Agent – Given authority by principal to perform a VARIETY of tasks. Special Agent – Authority restricted to certain, specific tasks. Subagent – An agent appointed by another agent with the knowledge and consent of the principal.
Types of Agents Agent’s Agent – An agent appointed by another agent without the knowledge and consent of the principal. Co-agents – Two or more agents working together. Partially Disclosed Agent – Given authority to work with a third party but forbidden to reveal identity of the principal.
Types of Agents Gratuitous agent – Agent that works for free – No contract exists between agent and principal – Agent can terminate relationship at any time
Duties of Agent to the Principal An agency relationship is fiduciary in nature; a good faith relationship based on trust Agent must protect the interests of the principal
Duties of Agent to Principal Loyalty Confidentiality Abide by all lawful instructions Act with reasonable care Account for funds
Duties of Principal to the Agent Compensation – Payment for services rendered Reimbursement – Payment for expenses incurred by the agent on behalf of the principal Indemnification – Payment for losses incurred by the agent on behalf of the principal
Duties of Principal to the Agent Cooperation – Principal must allow agent to perform his/her tasks – Principal must not make agent’s job difficult or impossible to perform
Termination of Agency By operation of law: – Death of principal or agent – Either party becomes insane – Bankruptcy of principal – Destruction of subject matter – Agent’s objective becomes illegal
Termination of Agency Fulfillment of the agency purpose – The agent completes his/her task Mutual consent – Both agent and principal agree to end relationship Expiration of time – Only applies if the agent is contracted to perform duties within a certain period of time