Chapter 13: The Agency Relationship
AGENT
- A person who is authorized to act on behalf of another
PRINCIPAL
A person who has permitted another to act on her or his behalf
Creation of Agency Relationship
A principal can only ratify a contract if he or she does so within a reasonable time the principal had the capacity to create the contract at the time the agent entered into it and at the time of ratification, and the agent identified the principal at the time of entering the contract
Liability of an Undisclosed Principal
A principal whose identity is unknown to a third party, who has no knowledge that the agent is acting in an agency capacity The general rule is that the principal is still liable on the contract so long as the agent is acting within his or her authority.
What Is "Agency" at Law?
A relationship that exists when one party represents another in the formation of legal relations
Authority of Agent: ACtual vs. Apparent Express v. Implied
ACTUAL AUTHORITY - The power of an agent that derives from either express or implied agreement APPARENT AUTHORITY - The power that an agent appears to have to an outsider because of conduct or statements of the principal EXPRESS AUTHORITY - Written or oral authority granted by a principal to an agent IMPLIED AUTHORITY - Agent's authority that is present by implication only
The Termination of the Agency Relationship
An agency agreement can come to an end if: the agency relationship ceases by operation of the law; most commonly occurs due to the death, dissolution, insanity, or bankruptcy of one of the parties
AGENCY BY RATIFICATION
An agency relationship created when one party adopts a contract entered into on his behalf by another who at the time acted without authority
AGENCY BY ESTOPPEL
An agency relationship created when the principal acts such that third parties reasonably conclude that an agency relationship exists
Liability of the Agent to the Outsider
An agent will be personally liable on a contract with an outsider when he or she (the agent) exceeds his or her actual or apparent authority. WARRANTY OF AUTHORITY - A representation of authority by a person who purports to be an agent
Liability for Torts of the Agent
As a general rule, an agent is personally liable for any torts that he or she commits. Principal is vicariously liable for the agent's actions so long as the agent is acting within express, implied, or apparent authority
Electronic Agents
Electronic agents are computer programs, or other electronic means, used to independently initiate an action or to respond to electronic messages without review by an individual. ELECTRONIC COMMERCE ACT (ONTARIO) - Provides that a contract may be formed by the interaction of an electronic agent and an individual
Agents are Fidiciaries
FIDUCIARY DUTY - Duty imposed on a person who has a special relationship of trust with another FIDUCIARY - Person who has a duty of good faith toward another due to a relationship
Duties of an Agent
Must perform in accordance with the principal's instructions, or failing instructions, then performance must meet the standards of the particular trade or industry
Duties of the Principal
Pay the agent a specified fee or percentage for services rendered Assist the agent in the manner described in the contract Reimburse the agent for reasonable expenses associated with carrying out the agency duties Indemnify against losses incurred in carrying out the agency business
Liability of the Principal to the Outsider
When an agent enters into a contract on behalf of a principal with a third party, it is the principal, not the agent, who ordinarily is liable on the contract.
Liability of Agent to Principal
When an agent exceeds his or her authority, the principal can sue the agent for breach of contract.
Who are the three participants involved in the relationship of agency?
the agent, the principal, and the outsider
How are agency relationships create
y agreement, by estoppels, and by ratification