Bài giảng Business Law (13th edition) - Chapter 35: The Agency Relationship

Agency LawThe Agency RelationshipThird-Party Relations of thePrincipal and the Agent8McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.The Agency RelationshipPAETRHC35“I’ve got an ego and all that, but I know I need help. So I go and hire the very best people.”H. Ross Perot, EDS founder, Inc. (Jan. 1989)Learning ObjectivesCreation of an agency relationshipAgency concepts, definitions, and typesDuties of agent to principalDuties of principal to agentTermination of an agency35 - *Agency is a two-party relationship in which one party (agent) is authorized to act on behalf of, and under control of, another party (principal)Anybody may be an agent or principal, but the agreement is voidable by minors and the mentally incapacitatedAll employees are agents, but not all agents are employeesOverview35 - *Actual authority for an agent’s acts is:Express – created by principal’s written or oral words to agent about agent’s dutiesImplied – principal’s acts and surrounding circumstances give rise to reasonable belief about scope of agent’s dutiesApparent authority arises when principal’s conduct leads third party to believe an agent with no actual authority is authorized to act Agency Authority35 - *If dispute arises, resolution may depend on whether a person who works for a principal is an employee or independent contractorFactors that aid in determination include:Right to control physical details of work, skill required, source of tools, location, schedule control, payment method, benefits, tax treatment of hired partySee Eisenberg v. Advance Relocation & Storage, Inc., Employee v. Independent Contractor35 - *Agency is a fiduciary relationship, so agent has a duty of loyalty to principalAgent must (1) avoid conflicts of interest with the principal, (2) maintain confidentiality of information received from the principalDuty of confidentiality survives agencySee ABKCO Music Inc. v. Harrisongs Music, Ltd.Duties of Agent to Principal35 - *Agents must obey principal’s reasonable instructions for agency business, exercise the degree of care and skill standard for the job, communicate to principal relevant mattersNo duty to obey illegal or unethical ordersPrincipal’s duties are to: compensate agent, reimburse agent for expenses, and indemnify agent for losses suffered in conducting principal’s businessOther Agent & Principal Duties35 - *Termination of agency may be by the act of the parties or operation of lawException: limited right of termination if agent’s power coupled with an interest After agency terminates, agent’s express and implied authority endsEx-agents may retain apparent authority that could bind former principalTermination of Agency35 - *Test Your KnowledgeTrue=A, False = BAgency is a contract in which an agent is authorized to act on behalf of, and under the control of, a principal.All employees are agents, and all agents are employees.Agents may bind a principal on the basis of apparent authority.Agency may be created unintentionally.35 - *Test Your KnowledgeTrue=A, False = BAll duties are delegable.An agent’s duty of confidentiality continues after the agency ends.To be considered actual authority, the authority must be expressed in words orally or in writing. Agency is a fiduciary relationship.35 - *Test Your KnowledgeMultiple ChoicePrincipals have the following duties to agent: (a) Duty to compensate(b) Duty to reimburse for reasonable expenses for doing agency business (c) Duty to indemnify the agent for losses suffered due to agency’s business (d) Both A and B (e) All of the above35 - *Test Your KnowledgeMultiple ChoiceManuel asked his friend Sunil, a good salesman, to sell his car and Sunil agreed. Does an agency relationship exist? (a) Yes, Sunil is an agent for Manuel(b) Yes, but only if there is a written contract describing the agency’s purpose(c) No, since friends cannot engage in an agency relationship (d) No, unless Sunil sells Manuel’s car35 - *Thought QuestionsHave you been an agent or a principal? Do you think the agency rules of liability are fair? What are the ethical issues involved in an agency relationship?35 - *