1. This is the prescribed textbook for your course.
Available NOW at your campus bookstore!
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

2. Principal and agent Chapter 18

3. Agency
A relationship that exists between one person (the principal) and another person (the agent)
The agent undertakes to do certain acts on the principal’s behalf
The purpose is to bring a third party into a contractual relationship with the principal
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

4. Creation of an agency Expressly created agency (written or verbal)
Impliedly created agency
Agency of necessity
Co-habitation
Agency by estoppel
Agency by status
Agency by ratification
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

5. Agency of necessity
A person must be entrusted with the property of another person.
An immediate expense is required to preserve the property.
The owner of the property is virtually impossible to contact.
The person entrusted with the property (agent) must act in the best interests of the owner (principal).
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

6. Agency by ratification
Required when:
No authority to act as agent
Agent exceeds authority given by principal
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

7. Agency distinguished from other relationships
Agency is a fiduciary relationship—exercising rights and powers, in good faith, for the benefit of another.
Employee is under control and supervision of employer.
Independent contractor decides how their work is carried out.
Trustee holds property on behalf of another person.
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

8. Categories of agents Special—appointed for a particular task.
General—appointed for all normal matters.
Universal—appointed for all acts principal can do, e.g. Power of Attorney.
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

9. Authority of an agent Actual authority
Express (written/spoken)
Implied (by action)
Apparent authority (ostensible authority)
Authority agent has from the viewpoint of the third party, with whom the agent is dealing
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

10. Duties of an agent To follow the principal’s instructions
To act personally
To exercise reasonable skill and diligence
To act in principal’s best interest
Not to make a secret profit
Not to divulge confidential information
To keep proper accounts
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

11. Rights of an agent To receive remuneration for work performed
To be indemnified against all losses and expenses incurred while carrying out principal’s lawful instructions
To a lien (i.e. a right to retain possession of principal’s property) until liabilities satisfied
To stoppage in transit (before received by principal)
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

12. Liability of agent to principal
If agent
fails to follow instructions
acts in a negligent matter
If a loss is incurred
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

13. Liability of agent to third party
Name &/or existence of principal disclosed
Acts outside authority (i.e. breach of warranty)
Acts on behalf of someone who has not given authority (unless ratified), or
Exceeds authority (unless ratified)
Non-existent/unascertainable principal
Agent agrees to be liable
Usage/custom make agent liable
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

14. Liability of agent to third party (cont.)
Existence of principal not disclosed
Agent bound
Torts committed while acting within actual or apparent authority
Tort committed by an agent acting outside the actual or apparent authority
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

15. Doctrine of undisclosed principal
If the agent acts as if he or she is the owner (by not disclosing agency) then the principal can later reveal the agency agreement and sue to enforce the contract.
If third party discovers there was an agency agreement, he or she can then sue the principal (as well as the agent) for breaches of the contract.
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

16. Termination of agency By the acts of the parties
By performance of the agency
With frustration of the agency agreement
By mutual agreement
By revoking the authority of the agent (ineffective to third parties until advised)
By the operation of law
By death of either party
By bankruptcy of principal
By bankruptcy of agent
By insanity of either party
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham

17. Types of agents (statute law)
Factors/mercantile agents—goods in agent’s possession to sell or use for borrowing
Del Credere agent—guarantees payment for goods sold (therefore higher commission)
Partners—principals/agents for each other
Broker—buys/sells goods without possession
Real estate agent—sells/leases vendor’s land; finds property for sale/lease
Travel agent—sells principal’s products; receives commission based on sales; organises principal’s travel arrangements
Company director—agent of company
Copyright  2006 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 5e by Margaret Barron
Slides prepared by Simone Bingham