1. Unit C Objective 07.01
Agency Law

2. AGENCY
Relationship in which one person, called an agent, represents another person, called a principal, in some sort of business transaction with a third party. In most cases a binding contractual agreement is formed.
Principal -> Agent -> Third Party
Example: You picked up and paid for a pizza ordered by a family member.

3. TYPES OF AGENTS
General Agent-given authority to perform any act within the scope of a business.
Special Agent-employed to accomplish a specific purpose or to do a particular job.
Subagents-appointed by another agent.
Agent’s Agent-has no power to appoint a subagent but does so anyway.
Coagents-two ore more agents hired by the principal.

4. RELATIONSHIPS ARE CREATED
By agreement (contract)
By law (circumstantial or specific)
By statute (special interest of a state)

5. AGENCY RELATIONSHIPS
Gratuitous Agent: agent works for free (no contract)
Master: has the right to control the conduct of his or her servant
Independent Contractor: agent is hired by the other party, but not controlled

6. AGENCY RELATIONSHIPS, Continued
Partially Disclosed Agent: principal’s existence but not identity is known to the third party.
Fiduciary: relationship is based on trust.
Actual Authority: real power the principal gives to an agent to act on his or her behalf

7. AGENCY RELATIONSHIPS, Continued
Apparent Authority: agency by estoppel
Third Party: must be notified if an agency has been terminated
Consensual: both parties of a principal/agent relationship agree or consent to relationship

8. AGENCY RELATIONSHIPS, Continued
Agent is obligated to act in good faith (within the scope of the principal’s needs and wants). Therefore, a principal is not liable for criminal acts.
When an agency is created by statute (law), the agent is known as a statutory agent.

9. AGENCY RELATIONSHIPS, Continued
If unauthorized agent works on your behalf, you have two options:
Charge agent with fraud (agent is liable to the third party)
Accept actions of agent (ratify)

10. TYPES OF AUTHORITY Actual-real power given to agent
Express-all orders, commands, or directions given to agent when relationship created
Implied-understood acts or powers implied from express terms

11. AGENT’S DUTIES TO PRINCIPAL
Obedience-obey reasonable orders
Good faith-deal honestly
Loyalty-faithfulness or acting in best interest
Duty to account-accountable for all money entrusted to him/her

12. PRINCIPAL’S DUTIES TO AGENT
Compensation-payment for services
Reimbursement-repayment for own money spent
Indemnification-repayment for amount lost
Cooperation-working together

13. TERMINATION OF RELATIONSHIP
By operation of law
Death of principal or agent
Bankruptcy
Impossibility of performance
Agent’s objective becomes illegal

14. TERMINATION OF RELATIONSHIP continued
Termination of acts
Performance
Mutual agreement
Agent’s withdrawal
Agent’s discharge

15. TERMINATION OF RELATIONSHIP continued
Notice to third parties
Credit has been given to principal.
Cash business has been done.
No notice when third party never heard of agency relationship.