1. © 2006 Prentice Hall Ch. 15-1 THE LEGAL ENVIRONMENT OF BUSINESS A Critical Thinking Approach Fourth Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne Nancy K. Kubasek Bartley A. Brennan M. Neil Browne 1

2. © 2006 Prentice Hall Ch. 15-2 CHAPTER 15 Agency Law THE LEGAL ENVIRONMENT OF BUSINESS

3. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-3 Agency Relationships Agency: A fiduciary relationship between two persons in which one acts on behalf of the other Principal: (P) is bound by acts of agent Agent: (A) acts on behalf of principal, subject to P’s control

4. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-4 Types of Agency Employer-Employee Employer- Independent Contractor Corporation-Officer/ Director/Employee

5. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-5 Authority Express Authority: arises from statements Actual Authority: includes implied authority P gives authority to A to act for P

6. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-6 Creating an Agency Expressed agency Implied authority Ratification of A’s previous acts Apparent agency (estoppel)

7. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-7 Expressed Agency Example: Power of Attorney A written expression of the grant of authority by P and the acceptance of authority by A Example: Power of Attorney A written expression of the grant of authority by P and the acceptance of authority by A Application: Health care (durable power of attorney) Application: Business (brokerage agreements)

8. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-8 Agency by Implied Authority Agency created by: CustomsCircumstancesFacts In the absence of an express agreement

9. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-9 Agency by Ratification Unauthorized person misrepresents self as agent, A A performs act in favor of P P later accepts the benefits of the act Result:P has ratified A’s actions and created agency relationship

10. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-10 Agency by Estoppel, or Apparent Authority Agency by Estoppel, or Apparent Authority P leads Third Party, T to believe, by words or acts, that A is his agent P is bound by acts of A, with regard to T P is estopped to deny agency Result:“Apparent” authority is established

11. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-11 Duties of Agents and Principals P’s Duties to A: Compensation Reimbursement and Indemnification Cooperation Safe Working conditions

12. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-12 Duties of Agents and Principals A’s Duties to P: Loyalty Obedience Accounting Performance

13. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-13 Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability

14. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-14 Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability Disclosed Principal: P is liable, A is not Partially Disclosed Principal: P is liable, A is not Undisclosed Principal: Both A and P are liable

15. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-15 Issues: Did A act in the scope of employment? Acting for P? During work hours? On regular business? Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability Context: Cases arise in the area of employment relationship Respondeat superior = vicarious liability

16. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-16 Liability to Third Parties P is liable for acts of A when performed within scope of duties P is liable for acts of A when performed within scope of duties Contractual Liability Tort Liability Criminal Liability General Rule: P not liable for criminal acts of A Exceptions: When P participates in crime When P knows crime is taking place

17. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-17 Termination By Agreement By Operation of Law

18. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-18 Termination by Agreement Agency may terminate by its own terms Duty to notify third parties via actual or constructive notice Lapse of time may cause termination

19. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-19 Termination by Law Death of P or A Insanity Bankruptcy of P Impossibility of performance by A War

20. © 2006 Prentice Hall THE LEGAL ENVIRONMENT OF BUSINESS Ch. 15-20 Global Dimensions Agency laws of other jurisdictions differ: Japan: express authority and more disclosure EU: good faith, and rights of A are favored Agency frequently used in international business FCPA applies to all U.S. P’s and A’s operating overseas