1. Essentials Of Business Law Chapter 17 Agency McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

2. Essentials of Business LawChapter 17-2 Principal – Agent Relationships A person or firm represented by another in business or personal dealings with third parties Agent  The person who represents another Principal  The person the agent represents or for whom he or she performs duties Contract of agency  An agreement between a principal and an agent by which the agent is vested with authority to represent the principal Many employees act as agents of their employers

3. Essentials of Business LawChapter 17-3 Principal – Agent Relationships Who may appoint an agent  Any competent party who has the legal right to perform an act may delegate performance to another  Certain acts of a personal character may not be delegated to others Voting, serving on juries, rendering professional services, and holding public office Who may be appointed as an agent  Anyone who is legally competent to act for himself or herself may serve as an agent for another

4. Essentials of Business LawChapter 17-4 Classes Of Agents General agent  A person authorized to assume complete charge of his or her principal’s business  A person entrusted with general authority to act for the principal in all business-related matters Special agent  A person delegated to act in a particular transaction, with specific limits on the scope of his or her authority Lawyers who have been given authority to manage the financial affairs of a client Auctioneers who have been given authority to represent a seller

5. Essentials of Business LawChapter 17-5 Creation Of Agency Agency by agreement  Agreement typically states: The rights and duties of the principal and the agent The duration of the agency Any other agreements made between the parties Power of attorney  The legal document that formally creates an agency Attorney in fact  The legal term for the person appointed as agent

6. Essentials of Business LawChapter 17-6 Creation Of Agency Agency by ratification  Results when a principal either: Approves an unauthorized act performed by an agent Approves an act done in the principal’s name by an unauthorized person Agency by necessity  Created when circumstances make such an agency necessary Agency by operation of law  Created when a court finds the need for an agency to achieve a desired social policy

7. Essentials of Business LawChapter 17-7 Authority Of An Agent Express authority  Authority of an agent to perform the duties that are specifically stated in the contract of agency Implied authority  Authority an agent reasonably assumes he or she has Apparent authority  Authority that a third party may reasonably assume an agent possesses

8. Essentials of Business LawChapter 17-8 Duties Of Agent To Principal Must obey all the principal’s reasonable and lawful orders and instructions May not perform any act that would betray the principal’s trust May not act for two parties to a contract without the consent of both May not buy his or her own property for the principal May not sell the principal’s property to himself or herself May not compete with the principal in any way, without the principal’s knowledge and consent

9. Essentials of Business LawChapter 17-9 Duties Of Agent To Principal Must possess the qualifications needed to carry out the work of the agency as agreed Is liable for losses to the principal resulting from the agent’s incompetence Must keep accurate accounts of his or her transactions conducted as part of the agreement Must remit to the principal all profits from contracts according to the agency agreement

10. Essentials of Business LawChapter 17-10 Duties Of Principal To Agent A principal must:  Pay the agent the compensation agreed to in the contract  Reimburse the agent for any money advanced by the agent in carrying out the principal’s instructions  Reimburse the agent for any loss or damage suffered by the agent in the legitimate performance of duties If a person acts as agent for more than one party, the agent is entitled to compensation from each principal The agent has a right to refuse to surrender goods when an agent is owed money by the principal

11. Essentials of Business LawChapter 17-11 Principals Disclosed principal  Agent informs the third party that he or she is acting on behalf of another  The third party is aware of the identity of the principal Partially disclosed principal  Agent informs the third party that he or she is acting on behalf of another  The third party is unaware of the identity of the principal Undisclosed principal  The agent does not inform the third party that he or she is acting on behalf of another person

12. Essentials of Business LawChapter 17-12 Termination Of Agency Agency is a type of contract and may be terminated by:  Agreement, performance, or operation of law An agency contract is terminated by an act of the parties, when:  The principal and the agent have mutually agreed on termination  The principal has dismissed the agent  The agent has given up the position Agency relationship may be terminated by:  Death of either party  Insanity  Illness  Impossibility of performance  Bankruptcy

13. Essentials of Business LawChapter 17-13 Employer – Employee Duties An employer must:  Pay an employee the agreed-upon wage  Protect the employee by providing a safe and sanitary place to work  Warn the employee of any danger that exists in connection with the work An employee must:  Obey his or her employer’s lawful orders concerning the employment  Exercise good faith toward the employer  Do his or her work carefully and conscientiously

14. Essentials of Business LawChapter 17-14 Independent Contractor A person or firm that performs services for another  Freelance writers, photographers, painters, and plumbers Not under the direct control of the person who engages them Can sue the person with whom they made the contract