AGENCY

Question 1

Agent

Answer 1

a person acting for another person in forming contractual relations with third parties

Question 2

2 contracts in agency

Answer 2

principal and agent: agency contract
principal and third parties: contract for G/S

Question 3

agency contract

Answer 3

= an agreement between a principal and an agent, where the agent performs tasks for the principal in exchange for payment

The agent acts on behalf of the principal to bring third parties into a contractual relationship with the principal

Should set out limits of agent’s authority.

Question 4

Privity of contract

Answer 4

The legal relationship is typically between the principal and the third party, assuming everything proceeds correctly.

Question 5

Ratification

Answer 5

the process by which a principal confirms or adopts a contract entered into by an agent who acted beyond their authority or without authority.
- makes the unauthorized actions of the agent binding on the principal as if the principal had initially authorized the contract.

Question 6

Key Elements of Ratification (6)

Answer 6

1. Subsequent Adoption: Ratification involves the principal agreeing, after the fact, to adopt the contract made by the agent acting without proper authority.
2. Timeliness
3. The principal must ratify the entire contract, not just parts of it.
4. Conduct-Based Ratification: Ratification can occur explicitly (e.g., a formal agreement) or implicitly through conduct, such as accepting benefits under the contract.
5. Principal’s Capacity
6. Ascertainable Principal

Question 7

Principal’s Option

Answer 7

Ratification means that even though the agent didn’t have authority when they made the contract, the principal can choose to accept it and take it over.

Example:
* An employee is close to closing a deal but gets fired before finalizing it. The employee proceeds to close the deal, hoping to win their job back. The company, despite the employee being fired and having no authority to make the deal, chooses to accept the contract and ratify it, making it binding for the principal.

Question 8

2 Potential Outcomes of Ratification:

Answer 8

1. Principal Has a Contract with the Third Party:
   This can happen if there’s either real or actual authority or apparent or ostensible authority. In this case, the contract is valid between the principal and the third party.
2. Agent Has a Contract with the Third Party (or No Contract):
   If the agent lacked actual authority and also lacked apparent authority, the contract is only binding on the agent, not the principal. The third party may feel like the contract should have been with the principal, but since the agent didn’t have the proper authority, the contract is not enforceable against the principal.

Question 9

Duty of Good Faith of the Agent

Answer 9

The agent has a fiduciary duty to act in the principal’s best interest, which includes being honest, loyal, and prioritizing the principal’s goals above their own.

Question 10

The Rule Against Delegation:

Answer 10

The agent is expected to perform their duties personally and cannot delegate their responsibilities to someone else without the principal’s prior approval.

If a sub-agent is used without proper authority and breaches the agreement, the principal can hold the agent responsible. The agent can then seek compensation from the sub-agent.

Question 11

Duties of an Agent to a Principal:

Answer 11

o If the agent acts outside the authority granted by the principal, the principal can sue the agent for breach of contract.
o The agent also has a duty to keep the principal informed. In legal terms, the principal is considered to know whatever the agent knows.

Question 12

Remuneration

Answer 12

obligation to pay as per K or as per reasonable fees of industry

Question 13

Expenses

Answer 13

• Implied term that principal will cover the reasonable expenses of the agent when acting in his/her real authority
• No obligation to pay for unauthorized acts unless ratified

Question 14

Principal alone is liable when

Answer 14

• Agent acting with real or apparent authority
• Agent must make clear to 3rd Party that s/he is acting for a principal – even if an undisclosed principal
• Where principal alone is liable, payment or delivery must be made to the 3rd party and not the agent – if agent absconds with money/goods, principal remains liable to 3rd party

Question 15

Apparent or Ostensible Authority

Answer 15

The agent doesn’t have actual authority, but it is reasonable for the third party to believe they do. In this case, a contract exists between the principal and the third party.

Question 16

Test for Apparent Authority

Answer 16

Should the 3rd Party have been aware of the agent’s lack of authority or at least been suspicious? Or is it reasonable to assume that the agent had the authority in question from the type of business the agent is engaged in?

Question 17

Agent alone is liable

Answer 17

• where agent represents him/herself to be the principal
• under these circumstances the principal has no rights or liabilities under the K

Question 18

Either the Principal or the Agent is liable

Answer 18

• where agent did not disclose status as an agent – third party can sue either the agent or the principal but not both
• if agent is sued successfully by 3rd party then principal has no liability
• if existence of principal becomes apparent during court proceedings, 3rd party can have the action discontinued against the agent and brought against principal instead

Question 19

Undisclosed principle

Answer 19

You have an agent act on your behalf and have them not disclose who they’re acting for

Question 20

Undisclosed Principal: Right to enforce the contract against 3rd party where

Answer 20

• s/he can show that the K was made with his authority
• the authority must be real and not apparent

EXCEPTION: the undisclosed principal cannot enforce a K that is essentially personal

Question 21

Third party cannot hold the undisclosed principal liable if

Answer 21

the agent acted without real authority

Question 22

Liability for Torts

Answer 22

Principal is jointly and severally liable for torts committed by agent within real or apparent authority

Question 23

Fraudulent Misrepresentation (Deceit) – 3rd party has right to

Answer 23

Sue both agent and principal for the tort of deceit
-principal will have right against agent for the deceit
- agent can also be held liable for negligent misrepresentation

Question 24

What happens if an agent commits a tort?

Answer 24

Principle can sue the agent for breach of contract, negligence, breach of duty of care, breach of fiduciary duty (duty of good faith)

Question 25

What does Arthur Wishart Act (Franchise Disclosure) talk about?

Answer 25

governs franchise relationships, ensuring fairness and transparency between franchisors and franchisees.
Disclosure / Fair Dealing / Right to Associate

Question 26

Disclosure Obligations

Answer 26

• Franchisors must provide prospective franchisees with a Disclosure Document at least 14 days before signing the franchise agreement or receiving payment.

The Disclosure Document should include:
o Financial statements
o Litigation history
o Costs and obligations
o Termination and renewal terms

• Failure to disclose appropriately may allow the franchisee to rescind the agreement within 2 years of signing.

Question 27

Duty of Fair Dealing

Answer 27

• Both franchisors and franchisees owe each other a statutory duty of fair dealing, which includes acting in good faith and ensuring open and honest communications.
• This duty prevents deceptive practices and ensures the integrity of the franchising relationship.

Question 28

Right to Associate

Answer 28

• Franchisees have the right to associate with other franchisees, such as joining franchisee organizations or unions, without fear of retaliation or penalty from the franchisor.
• This right is protected by law to encourage collective action and mutual support among franchisees.