Business Law - Chapter 17
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Define Principal-agent relationship
An agent acts on behalf of and instead of the principal in dealing with third parties.
How to form an agency relationship
- Agreement: Express consent or implied
- Ratification: The principal either by act or by agreement ratifies the conduct of a person who is not in act an agent.
- Estoppel: The principal caused a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on that belief.
- Operation of law: agency relationship is based on a social duty or fomed in emergency situations.
What are the duties of an agent to a principal
What are the duties of the principal to the agent
- Reimbursement and indemnification
- Safe working conditions
What are some agent's authority
- Express Authority
- Implied Authority
- Apparent Authoirty
Define Express Authority
- Oral or in writing
- Must be in writing if the contract must be in writing
Define implied authority
Authority customarily associated with the position of the agent or authoirty that is deemed necessary for the agent to carry out expressly authorized tasks
Define apparent authority
Exists when the principal, by word or action, causes a third party reasonably to believe that an agent has authority to act, even though the agent has no express or implied authority
Affirmation by the principal of an agent's unauthorized action or promise. For the ratification to be effective, the principal must be ware of all material facts.
Liability for contracts
- Principal if identity is disclosed or partially disclosed at the time of the agent forms a contract with a third party
- Agent if the principal's identity is undisclosed. If the agent acted within the scope of his/her authority, the principal is also bound by the contract
Liability for agents negligence
Principal is liable if the agent was acting within the scope of his/her authority, the principal is also bound by the contract
When is the principal liable for an agent's intentional torts?
- The acts are committed within the scope of employment
- The employer knew or should have known that the employee has a propensity for committing tortious acts
- The employer allowed the employee to engage in reckless acts that caused injury to another
- The agent's misrepresentation causes a third party to sustain damage, and the agent had either actual or apparent authority act
When is the principal not liable for harm caused by independent contractor's negligence
Hazardous activities are involved
When is the principal liable for an agent's crimes
The principal participated by conspiracy or other action or if the agent violated certain government regulations in the course of employment
Termination of an agency relationship
- Lapse of time
- Purpose achieved
- Occurrence of a specific event
- Mutual agreement
- Termination by one party
Termination by operation of law
- Death or insanity
- Changed circumstances
When to notify third parties of an agency termination
- By act of the parties - notice to third party is required. Direct notice for those who have previously dealt with the agency, but constructive notice will suffice for all other third parties.
- By operation of law - notice to third parties is not required
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