Business Law Quiz #6

Agent

-Person appointed to contract on behalf of another. -Delegated by business owners to handle important details of business transactions -Used to bring one person into a business contractual relationship with other people -Agents have all the powers of the person who appointed them -Courts will not permit certain acts of a personal nature to be delegated to agents -Cannot be authorized to act against the law

Principal's Duties/Liabilities to Third Parties

-Principal is liable to third parties for contracts made within the actual or apparent scope of an agent's authority -An agent entering into a contract not within the apparent scope of authority will not bind the principle unless contract is ratified

Termination by Operation of Law

-Subsequent illegality -Death or incapacity -Destruction -Bankruptcy -Dissolution -War

Appointment

-Usual way to create an agency; principal makes a statement to the agent -Contract may be written or oral, formal or informal -Power of attorney: writing appointing an agent

Estoppel

Agency arising when one person leads another to believe third party is an agent. The principal is bound to the extent of the representations made.

General Agents

Agent authorized to carry out particular kind of business or all business at a place.

Special Agents

Agent authorized to transact specific act or acts.

Apparent authority

Authority an agent is believed to have because of principal's behavior

Customary authority

Authority an agent possesses by custom

Employer/Employee

Employee works for an employer; employer controls what work employee is to do and in what manner.

Factors del credere

Factors who sell on credit and guarantee price will be paid

Attorneys in fact

General agents appointed by written authorization

Independent Contractor

One who contracts to do jobs and is controlled only by contract as to how it is performed.

Factors

One who receives possession of another's property for the purpose of sale or commission. Aka commission merchants

Principal

Person who appoints another to contract with third parties.

Necessity

Relationship of agency may be created by necessity; agency by necessity may arise from an unforeseen emergency.

Brokers

Special agents whose task is to bring two contracting parties

Notice

When principals terminate agencies, ___________ must be given to third parties who have transacted business with the agents. The method does not matter, as long as the third parties learn of termination.

Who May Act As an Agent

-Any person with sufficient intelligence to carry out the principal's order may act as an agent -Corporations and partnerships may act as agents -An agent must meet certain requirements for some types of transactions -Failure to meet these requirements disqualifies an agent to perform the duties of those transactions

Ratification

-Approval by one person of the unauthorized act of another done in the former's name

Principal's Duties to Agent

-Compensation -Reimbursement -Indemnification -Abidance by the terms of the contract

Agent's Duties to Principal

-Loyalty and good faith -Obedience -Reasonable skill and diligence -Accounting -Information

Termination of an Agency by Acts of the Parties

-Original agreement -Subsequent agreement -Revocation -Renunciation by the agent

Agent's Liabilities to Third Parties

1. Agents who contract in their own names and do not disclose the names of the principals become liable to some extent as though they were the principal. Therefore, agents who sign contracts in their own names will be held liable. 2. Agents may make themselves personally liable to third parties by express agreement to be responsible. This express agreement may be demonstrated if it is the only logical or legal interpretation of the contract. 3. People who presume to act for others, without actual authority, or who exceed or materially depart from the authority they are given, incur personal liability to those with whom they do business. 4. An agent incurs personal liability for fraud or any other wrongdoing, whether caused by disobedience, carelessness, or malice, or even if committed on the order of the principal.

Who Can Create An Agency

1. Appointment 2. Ratification 3. Estoppel 4. Necessity

Requirements for Ratification

1. The one who assumed the authority of an agent must have made it known to the third party that he or she was acting on behalf of the party who attempts to ratify the act 2. The one attempting to ratify must have been capable of authorizing the act at the time the act was done. Some jurisdictions apply this rule to corporations so that a corporation formed subsequent to the time of the act cannot ratify an act of a promoter. Other states have ignored this requirement in regard to ratification of the acts of corporate promoters. 3. The one attempting to ratify must be capable of authorizing the act at the time the approval of the act is given. 4. The one attempting to ratify must have knowledge of all material facts. 5. The one attempting to ratify must approve the entire act. 6. The ratified act must be legal, although the person whose name was forged may ratify forgery on commercial paper. 7. The ratification must be made before the third party has withdrawn from the transaction.

Minor

A contract between a __________ and an agent is normally voidable. Some states find this contract void.

Agency

A contract of ______________ is formed when one party, known as a principal, appoints another party, known as an agent, to enter into contracts with a third party on behalf of the Principal and subject to the Principal's oversight.