© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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

© 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