Chapter 14 Flashcards
Agency Relationship
Created among three parties which are the agent, the principal and the 3rd person.
Agent-
Authorized to act for the principal. Job is to negotiate contracts on behalf of the principal with a 3rd person. (Think of a real estate agent)
Principal
Gives authority to the agent to make contracts on its behalf with the 3rd person . Becomes one of the parties to a contract.
3rd person
Negotiates a contract with the Agent. This becomes one of the parties to the contract with the principal
Classifications of Agents
Universal Agent
General Agent
Special Agent
Universal Agent
Authorized to perform all acts legally granted by the Principal ex.(DPOA)
DPOA
Durable Power of Attorney
General Agent
Authorized to all transactions connected with a certain business (ex. business of a hotel)
Special Agent
Authorized to perform only those acts specified by the Principal (Ex. realtor selling a house)
Creating an Agency
There is no formal procedure is necessary to establish an agency relationship
Types of Agency Authorization
Express
Ratification
Agency by Operation of Law
Express Authorization
May be oral or written, ex) SC health care power of attorney- written authorization of an agent to make health care decisions on behalf of the P
Ratification Authorization
Authority created retroactively. Occurs when initially an agent makes a contact on behalf of a Principal but does not have the express authority to do so. Normally the Principal would not be bound by the agreement. The alleged principal may become bound to the contract by ratifying the agreement.
ex)friend selling your car for 8.5k while you were away , but you could ratify that and sell it for that price if you wanted to…
Example of Ratification Authorization
Selling a car for 9k. A buyer looks at it while she was away , which her husband accepts. Because the husband is not an agent I am not obligated to go though the deal. I could ratify the deal by agreeing to go through the sale
Conditions for Ratification
- Agent must have purported to act on behalf of or as an agent for the Principal
- Principal must have been capable of authorizing the act
- Principal must have full knowledge of all material facts
- Ex: Paul v Tom (paul is okay with this arrangement because by cashing the rent checks he is ratifying the agreement)
Agency by Operation of Law
An agency relationship that comes to fruition in an emergency. (Employee buying wood for the business)
Acts for the Principal
An agent’s ability to transact business on behalf of a principal depends on the scope of his authority.
The scope of the authority is: Actual authority and Apparent Authority
Actual Authority
Express- P tells A (via words or in writing) to perform a certain act (apartment complex owner hires a leasing agent to rent apartments at a certain price or Ford dealer sales manager)
Implied- Often, when P receives express authority he is also given implied authority to do what is reasonable to carry on the agency purpose (a real estate agent hired to sell land, the agent would have implied authority to post a for sale sign, offer tours and advertise the property even if all the details were not laid out on how to sell it unless directed)
Apparent Authority
A person cloaks the agency with the appearance of having authority that leads a 3rdd person to reasonably believe that the agent has the authority to act on behalf of the principal.
Cove Management VS AFLAC
What are the duties of the agency parties?
Duty to Cooperate
Duty to Compensate Agent
Duty to Reimburse
Duty to Indemnify
Duty to Cooperate
Must perform as directed under the K
Duty to Compensate Agent
Unless A agrees to work for free
Duty to Reimburse
For any authorized payment A made on behalf of the P
Duty to Indemnify
Pay for any damages incurred by agent while acting under the authority of the P (Generally entails some kind of law suit against the A)
Ex) A principal has goods that belong to someone else and directs the agent to sell them. The agent sells the goods believing they are property of the principal. If the legal owner of the goods sues the agent, the principal must pay the agent for costs incurred in the lawsuit.
