Chapter 10

Question 1

Agency & Partnership

Answer 1

Agents represent and act on behalf of a principal in dealings with third parties

Question 2

Creation of Agency

Answer 2

Agency relationship is created by the granting of authority by:
1. Contract - express or implied
2. Estoppel
3. Ratification
4. Necessity

Question 3

Agency Contract

Answer 3

Agency relationship is usually created through contract (agency
agreement)

General principles of contract apply should set out:
* Extent of the agent’s authority
* Duties to be performed
* Nature of payment to be received

Question 4

Actual Authority

Answer 4

authority specifically given by the principal to the agent

Can be express or implied
* Express authority - when clearly stated
* Implied authority - conveyed by actions of principal

Question 5

Formation by estoppel

Answer 5

A principal who does something by conduct or words to make a third
party believe that an agent has authority to act will be bound by the
agent’s acts

Question 6

Apparent Authority

Answer 6

authority as suggested to a third party by conduct of a principal –
may exist even if there is no actual authority

Question 7

Formation by Ratification

Answer 7

A principal can ratify a contract even if the agent acted beyond both actual and apparent authority

Question 8

Formation by Necessity

Answer 8

consent to act as an agent that is implied when there is an
urgent reason

Question 9

Agents Duties

Answer 9

Agent must comply with the terms of the
agency agreement

• Agent may be liable for acting beyond authority
• May be sued for breach of contract by principal
• Must perform functions set out in agreement
• Owes duty of reasonable care to the principal
• Must not go against specific instructions
• Even if it would benefit the principal
• Cannot delegate responsibility without consent

Question 10

Fiduciary Duty

Answer 10

Agent obligated to act only in the best interests of the
principal

Question 11

Principal’s Duties

Answer 11

Principal must honour terms of contract

• Pay a reasonable amount for services
• Reimburse for reasonable work-related expenses

Question 12

Agents Liabilities

Answer 12

Third party can sue the agent when agents go beyond their authority

Question 13

Principal’s Liabilities

Answer 13

Employer is vicariously liable for the acts an employee commits during the course of employment

Question 14

Termination of an Agency relationship

Answer 14

Termination occurs:
* As set out in the agency contract or by agreement
* When the agent is notified
* When employment ends

Question 15

Sole Proprietorship

Answer 15

an individual carrying on business alone

Question 16

Partnership

Answer 16

two or more people carrying on business together for the
purpose of making a profit

Question 17

Corporation

Answer 17

a legal entity, separate from the people who own and
control it

Question 18

Creation of partnership

Answer 18

1. Creation by Inadvertence
2. Creation by Contract
3. Creation by Estoppel

Question 19

Dissolution of a partnership

Answer 19

• Notice of intention to dissolve can bring partnerships to an end or:
• The death, bankruptcy or insolvency of a partner
• Fixed-term expiry of partnership

Question 20

Limited Partnerships

Answer 20

• Limited partners are liable only to the extent of their investment