Chpt 17: Agency/Franchise Flashcards
What is an agent?
Someone who acts on behalf of a principal in contractual relations with third parties
What is a common example of an agent
Employees can be agents, some employment contracts give employees authority to make contracts for the company (e.g. insurance agents)
What is the difference between a dependent and an independent agent?
Dependent agents only have one principals (e.g. insurance agents only work for one insurance firm)
Independent agents can have many principals (e.g. stock brokers can have many client)
What is a commission agent?
Someone who sells goods or services on behalf of a principal and receives commissions from the principal for those sales
Why isn’t a real estate agent a real agent?
Can’t sell a property on behalf of a client
Who can have an agent?
Anyone who has capacity to form a contract may employ an agent
What is the main way of forming agency relationships?
An agency agreement between the agent and the principal.
Rules of a contract apply to an agency agreement
What form can an agency agreement take?
It can explicit, implicit, oral, written or written under seal
T/F: Any agency agreement can extend beyond a year
F: Any agency agreement extending beyond a year must be written
I let Mison make contracts with third parties on behalf of me. Is he considered my agent?
Yes, this is agency by estoppel
What duties are owed by an agent to the principal?
1) Duty to comply with the agreement (both explicit and implicit terms)
2) Duty of Care to keep principal informed of all important developments
3) Do all the work him/herself unless permission is given by the principal
4) Fiduciary duty to the principal (act in the best interest of the principal, obedience/diligence, competence, good faith)
What duties are owed by a principal to his/her agent?
1) Any duty listed in the agency agreement
2) Duty to compensate
3) Duty to pay expenses/account for losses
What is the difference between actual and apparent authority?
Actual authority is the authority that the principal has either explicitly or implicitly given an agent
Apparent authority is the authority that a third party is entitled to assume an agent has
Kyle wants to make a contract with Austin. Mitch says he is an agent of Austin and arranges a contract on behalf of him.
As it turns out, Mitch isn’t his agent!
Is this contract binding?
Yes, the contract is binding since Kyle has the right to assume Mitch’s apparent authority, even if Mitch’s actual authority is non-existent.
However, because Mitch was never implicitly or explicitly given authority, he is now liable for any losses Austin incurs.
What are the two ways apparent authority can arise?
1) Commercial Usage/Usual Authority - A third party can assume an agent has the authority usually granted to agent in that industry
2) Holding out/Estoppel - When the principal acts in a way that suggests an agent has a certain authority (or doesn’t deny it)
