1. PowerPoint Slides to accompany The Legal Environment of Business and Online Commerce 4E, by Henry R. Cheeseman
Chapter 13
Agency Law
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2. Nature of Agency
Agency relationships are formed by the mutual consent of a principal and an agent
Principal
The party who employs another person to act on his or her behalf
Agent
The party who agrees to act on behalf of another
Agency
The principal-agent relationship
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3. Employment Relationships
Employer-employee
A relationship that results when an employer hires an employee to perform some form of physical service
Principal-agent
A relationship that results when an employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf
Principal-independent contractor
A relationship that results when a person or business that
is not an employee is employed by a principal to perform a certain task on his or her behalf
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4. Forming the Agency Relationship
Express agency
An agency that occurs when a principal and an agent expressly agree to enter into an agency agreement with each other
Implied agency
An agency that occurs when a principal and an agent do not expressly create an agency, but it is inferred from the conduct of the parties
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5. Forming the Agency Relationship
Apparent agency
Agency that arises when a principal creates the appearance of an agency that in actuality does not exist
Agency by ratification
Agency that occurs when
A person misrepresents himself or herself as another’s agent when in fact he or she is not
The purported principal ratifies the unauthorized act
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6. Duties of Agents Agent’s duties Duty of performance
Duty of notification
Duty of loyalty
Duty of obedience
Duty of accountability
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7. Duties of Principals Principal’s duties Duty of compensation
Duty of reimbursement and indemnification
Duty of cooperation
Duty to provide safe working conditions
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8. Contract Liability of Principals and Agents to Third Parties
Fully disclosed agency
Principal is liable
Agent is not liable unless the agent acts as a principal or guarantees the performance of the contract
Partially disclosed agency
Agent is liable unless the third party relieves the agent’s liability
Undisclosed agency
Agent is liable
Nonexistent agency
Principal is not liable unless the principal ratifies the contract
Agent is liable for breaching the implied warranty of authority
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9. Tort Liability of Principals and Agents to Third Parties
Misrepresentation by agent
Agent is liable
Principal is liable for the intentional and innocent misrepresentation made by an agent acting within the scope of his or her authority
Negligence by agent
Principal is liable under the doctrine of respondeat superior if the agent’s negligent act was committed within his scope of employment
Intentional tort by agent
Principal is liable under the motivation test and/or work-related test
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10. Frolic and Detour
When an agent does something during the course of his or her employment to further his or her own interests rather than the principal’s
Principal is generally relieved of liability
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11. “Coming and Going” Rule
A principal is generally not liable for injuries caused by its agents and employees while they are on their way to or from work
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12. Dual-Purpose Mission
An errand or other act that a principal requests of an agent while the agent is on his or her own personal business
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13. Liability for Independent Contractor’s Torts
A principal is generally not liable for the torts of its independent contractors, with the following exceptions
Special risks
Negligence in the selection of an independent contractor
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14. Termination of an Agency by Acts of the Parties
Mutual agreement
Lapse of time
Purpose achieved
Occurrence of a specified event
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15. Termination of an Agency by Operation of Law
Death of the principal or agent
Insanity of the principal or agent
Bankruptcy of the principal
Impossibility of performance
Change in circumstances
War between the principal’s and the agent’s countries
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16. Irrevocable Agency
An agency coupled with an interest is a special type of agency relationship that is created by the agent’s benefits
It is irrevocable by the principal
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17. Wrongful Termination of an Agency Contract
Wrongful termination is the termination of an agency contract in violation of the terms of the agency contract
The nonbreaching party may recover damages from the breaching party
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