Corporate & Business Law (ENG)

2 Section D: The formation and constitution of business organisations Designed to give you knowledge and application of: D1. Agency Law D2. Partnerships D3. Corporations & legal personality D4. Company formations

3 Learning Outcomes D1: Agency Law  Define the role of the agent and give examples of such  Relationships paying particular regard to partners and company directors.  Explain how the agency relationship is established.  Define the authority of the agent.  Potential liability of both principal and agent.

4 Agency A person employed to do any act for another or to represent another in dealing with a third person, person for whom such act is done, or who is so represented. The role of the agent (with examples) Essential elements of agency Principal must be competent to contract Any person may become an agent: there is no requirement that agent should have contractual capacity. No consideration is necessary for creation of an agency

5 By consent Creation of agency The agency relationship is established By estoppel it must be made either by principal or by his authority third party must rely on the representation Agency by operation of law there has to be a genuine emergency there must be no practical way of contacting principal to obtain further instructions person seeking to establish agency by necessity must have acted in good faith Continued …

6 By ratification principal must be in existence at the time of agent’s act principal must have the legal capacity to contract contracts must be valid & legal principal must adopt the whole of the contract ratification must be within a reasonable time The authority of the agent Types of authority Actual authority Expressed authorityImplied authority Continued …

7 The potential liability of both principal and agent Duties of an agent To perform the business according to the direction of the principal To apply reasonable skill and care To perform personally To render accounts To avoid conflict of interests Not to make secret profits Continued …

8 Refer to Self Examination Question 3 (page 243) Termination of agency Termination by act of parties By revocation By lapse of time By performance By operation of law By frustration By death or insanity of the principal or the agent By bankruptcy of principal or agent Right to receive Remuneration Rights of an agent Right to claim reimbursement of expenses and indemnity To exercise lien over principal’s property Continued …

9 Recap  Define the role of the agent and give examples of such  Relationships paying particular regard to partners and company directors.  Explain how the agency relationship is established.  Define the authority of the agent.  Potential liability of both principal and agent.