Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts Essentials of Business Law and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Topics Covered Chapter 29: Relationship of Principal and Agent A.Nature of Agency B.Creation of Agency C.Duties of Agent to Principal D.Duties of Principal to Agent E.Termination of Agency

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Nature of Agency n Definition of Agency – relationship authorizing one party (the agent) to act for and on behalf of the other party (the principal). n Scope of Agency Purposes – generally, whatever business activity a person may accomplish personally he may do through an agent.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Other Legal Relationships n Employment Relationship – one in which the employer has the right to control the physical conduct of the employee. n Independent Contractor – a person who contracts with another to do a particular job and who is not subject to the control of the other.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Creation of Agency n Formalities – agency is a consensual relationship that may be formed by contract or agreement; agency may exist without consideration. n Requirements – no particular formality usually is required in a contract of agency, although appointments of agents for a period of more than one year must be in writing.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duties of Agent to Principal n Duty of Obedience –agent must act in principal's affairs only as authorized by the principal and must obey all reasonable instructions and directions. n 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. n Duty of Diligence –agent must act with reasonable care and skill in performing his work. n Duty to Inform –agent must use reasonable efforts to give the principal information relevant to the affairs entrusted to her.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duties of Agent to Principal n 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. n Fiduciary Duty – agent owes a duty of utmost loyalty and good faith to the principal.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duties of Principal to Agent n 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. n Reimbursement – the principal must pay back to the agent authorized payments the agent has made on the principal's behalf.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duties of Principal to Agent n Indemnification – the principal must pay the agent for losses incurred while acting as directed by the principal. n 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.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Duties of Principal and Agent Duties of P to A Compensation Reimbursement Indemnification Good Faith Duties of A to P Obedience Diligence Good Conduct Loyalty Account P authorizes agent to act A agrees to act

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Termination of Agency n Lapse of Time n Mutual Agreement of the Parties n Revocation of Authority n Renunciation by the Agent n Operation of Law n Death – of either the principal or the agent n Incapacity – of either the principal or the agent (except with durable power of attorney) n Change in Circumstances

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Termination of Agency n 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.