Agency and Franchising Flashcards
Agency
person acting on behalf of another person to make contractional relations with third parties
- Agent acts on behalf of principal to bring third parties into contractual relations with the principal
- Dependent Agent: acts exclusively for 1 principal
- Independent Agent: lawyers act for several principals - commission agents get a commission
Difference btw agent and employees
- employee works under employer, employee cannot bind employer to K
Forming an Agency Steps
Power of Attorney
- Agency and principal create relationship called an agency agreement
- Principal and 3rd party create relationship
- can be written or oral
- statute of frauds applies if K extends more than a year
- must be clear how much control agent has
- must have authorization to issue cheques on behalf of principal
Power of Attorney: type of agency agreement authorizing agent to sign documents on behalf of principal
Ratification
where an agent exceeds their authority, principal can ratify K
- must be timely, be of entire K and be by conduct
- principal must be able to enter K at time of formation
- principal must be ascertainable at time of formation
- principal still has to perform whatever agent signed, but can claim the loss
Apparent Authority
- not real authority, but is acquired from past manner
2 ways:
1. Usual Authority - if 3rd party thinks the agent is not sus and is usually an agent for the principal - if 3rd party is aware, it is not apparent authority
2. Holding Out - when principal is acting in a way that suggests they are an agency
Duties of Agent to Principal
- Comply with Agency Agreement
- agent must inform principal with everything
- principal can sue agent for breach of K - Duty of Care
- act reasonably
- standard of care depends on who agent is - Duty of Good Faith
- fiduciary duty, highest duty of good faith
Remuneration
- obligation to pay as per K
- often commission, paid when able to or K is closed
Expenses
- principal covers all agents costs
Rights and Liabilities of Principals and Agents
Principal is liable:
- agent is acting with real or apparent authority
- agent must make clear to 3rd party they are an agent
- payment made to 3rd party
Agent is liable:
- no rights/liabilities
Either one:
- where agent doesn’t disclose they are an agent, 3rd party can sue either one
Rights of Undisclosed Principal
Right to enforce K against 3rd party where:
- can show K was made with his authority
- authority is real and not apparent
- 3rd party cant sue the principal unless they had actual authority
Liability for Torts
- fraudulent misrep. - 3rd party can 1. rescind K and 2. sue both agent and principal for tort of deceit
- principal is also held liable
Breach of Warranty of Authority
- 3rd party can sue for this when:
1. Agent has no real or apparent authority
2. Deceit
3. Neg. misrep.
4. If agent innocently exceeds authority
Warranty of Authority: where a person claims to be an agent falsely
Terminating Agency Relationship
- end of K
- project completion
- upon notice of 1 party
- upon death or insanity of either
- bankruptcy of principal
- event where agency is impossible
Franchising
- contractual
- NOT fiduciary duty but duty of utmost good faith is due
Parties:
- Franchisor: grants license to franchisee
- Franchisee: pays for license, operates independent business
The Franchise Agreement
- Consideration of Franchisor - give right, trademarks
- Consideration of Franchisee - initial capital
- Conduct of Business - franchisor has to inspect business
- Termination - franchisee can be terminated when breach happens
- Restrictive Covenants - area where you put the franchise
- Intellectual Property Rights
