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Objective 3.02 Understand agency law

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1 Objective 3.02 Understand agency law

2 What is agency law? Area of law dealing relationships created between two parties in which the principal gives authority to an agent to act of the principal’s behalf in business transactions with a third party.

3 Agency Definitions Principal Agent Third party
Individual who gives authority to the agent. Agent Individual employed by principal to work with the third party. Third party The person or company whom the agent deals with on behalf of the Principal.

4 Types of Work Relationships
Principal-Agent Relationship “Genuine” agency relationship Agent has conducts business on behalf of the principal (it is as if the principal has acted)

5 Types of Work Relationships
Proprietor-Independent Contractor Proprietor is an individual or business that hires someone to perform a task Independent contractor (plumber, electrician, lawyer, etc.) works for the proprietor Independent contractor cannot act on behalf of proprietor without expressed permission

6 Types of Work Relationships
Master-Servant Relationships A master is a person who has the right to control the actions of another person Actions include where to work, what time to arrive at work and tasks to complete at work. The person performing the actions is the servant At times, the interactions between employer-employee are considered to be master- servant

7 Actual Authority Express Powers Implied Powers
If the principal intentionally gives express and implied powers to the agent to act for him/her, the agent possesses actual authority. Express Powers Responsibilities of the agent are written or spoken. Implied Powers Responsibilities created by the agent’s actions.

8 Apparent Authority Apparent Authority Also called, agency by estoppel.
Created by law or circumstance. Occurs when a principal, intentionally or negligently, causes or allows a third person to believe that an agency relationship exists, when there is no express agency. Principal remains liable for the agent’s actions.

9 Types of Agents General Agent Special Agent Subagent
Given authority by principal to perform a VARIETY of tasks. Special Agent Authority restricted to certain, specific tasks. Subagent An agent appointed by another agent with the knowledge and consent of the principal.

10 Types of Agents Agent’s Agent Co-agents Partially Disclosed Agent
An agent appointed by another agent without the knowledge and consent of the principal. Co-agents Two or more agents working together. Partially Disclosed Agent Given authority to work with a third party but forbidden to reveal identity of the principal.

11 Types of Agents Gratuitous agent Agent that works for free
No contract exists between agent and principal Agent can terminate relationship at any time

12 Duties of Agent to the Principal
An agency relationship is fiduciary in nature; a good faith relationship based on trust Agent must protect the interests of the principal

13 Duties of Agent to Principal
Duty of loyalty Duty of confidentiality Duty to abide by all lawful instructions Duty to act with reasonable care Duty to account for funds

14 Duties of Principal to the Agent
Compensation Payment for services rendered Reimbursement Payment for expenses incurred by the agent on behalf of the principal Indemnification Payment for losses incurred by the agent on behalf of the principal

15 Duties of Principal to the Agent
Cooperation Principal must allow agent to perform his/her tasks Principal must not make agent’s job difficult or impossible to perform

16 Termination of Agency By operation of law: Death of principal or agent
Either party becomes insane Bankruptcy of principal Destruction of subject matter Agent’s objective becomes illegal

17 Termination of Agency Fulfillment of the agency purpose Mutual content
The agent completes his/her task Mutual content Both agent and principal agree to end relationship Expiration of time Only applies if the agent is contracted to perform duties within a certain period of time

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