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Chapter 18 - Principle and agent. At the end of this chapter you should understand: the definition of an agency relationship; why contract law is relevant to the law of agency; the methods by which agency can be created including estoppel, necessity or ratification; the different types of agent, their roles and function;...
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Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning Copyright © 2000 McGraw-Hill Australia Principal and agent Chapter 18 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning Agency • An agency is a relationship that exists between one person, the principal, and another person, the agent, where the agent undertakes to certain acts on the principal’s behalf, the purpose being to bring a third party into a contractual relationship with the principal Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-3Australia Copyright © 2000 McGraw-Hill Creation of an agency • Expressly created agency (written or verbal) • Impliedly created agency - Agency of Necessity - Cohabitation - Agency by Estoppel - Agency by Status - Agency by Ratification Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-4Australia Copyright © 2000 McGraw-Hill Agency of Necessity A person must be entrusted with the property of another person An immediate expense is required to preserve the property The owner of the property is virtually impossible to contact The person entrusted with the property (agent) must act in the best interests of the owner (principal) Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-5Australia Copyright © 2000 McGraw-Hill Agency by Ratification Required when: No authority to act as agent Agent exceeds authority given by principal Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-6Australia Copyright © 2000 McGraw-Hill Working relationships • Agent - Fiduciary relationship i.e exercising rights and powers, in good faith, for the benefit of another • Employee - Under control and supervision of employer • Independent contractor - Decides how their work is carried out • Trustee - Holds property on behalf of another person Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-7Australia Copyright © 2000 McGraw-Hill Categories of agents • Special - i.e appointed for a particular task • General - i.e appointed for all normal matters Universal - i.e appointed for all acts principal can do, e.g Power of Attorney Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-8Australia Copyright © 2000 McGraw-Hill Authority of an agent • Actual Authority - Express (written/spoken) - Implied (by action) • Apparent Authority (Ostensible Authority) - Authority agent has from the viewpoint of the third party, with whom the agent is dealing Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-9Australia Copyright â 2000 McGraw-Hill Duties of an agent ã To follow the principal’s instructions • To act personally • To exercise reasonable skill and diligence • To act in principal’s best interest • Not to make a secret profit • Not to divulge confidential information • To keep proper accounts Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-10 Copyright © 2000 McGraw-Hill Australia Rights of an agent • To receive remuneration for work performed • To be indemnified against all losses and expenses incurred while carrying out principal’s lawful instructions • To a lien (i.e a right to retain possession of principal’s property) until liabilities satisfied • To stoppage in transit (before received by principal) Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-11 Copyright © 2000 McGraw-Hill Australia Liability of an agent to principal If agent - fails to follow instructions - acts in a negligent matter If a loss is incurred Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-12 Copyright © 2000 McGraw-Hill Australia Liability of agent to third party • Name & existence or existence of principal disclosed - Act outside authority (i.e breach of warranty) Acts on behalf of someone who has not given authority (unless ratified), or Exceeds authority (unless ratified) - Non existent /unascertainable principal - Agent agrees to be liable - Usage/custom make agent liable • Existence of principal not disclosed - Agent bound • Torts committed while acting within actual or apparent authority Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-13 Copyright © 2000 McGraw-Hill Australia Liability of agent to third party • Tort committed by an agent acting within the actual or apparent authority Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-14 Copyright © 2000 McGraw-Hill Australia Doctrine of undisclosed principal • If the agent acts as if he/she is the owner by not disclosing agency then the principal can later reveal agency agreement and can sue and enforce the contract • If third party discovers there was an agency agreement, he can then sue the principal (as well as the agent) for breaches of the contract Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-15 Copyright © 2000 McGraw-Hill Australia Termination of agency • By the acts of the parties - By performance of the agency - With frustration of the agency agreement - By mutual agreement - By revoking the authority of the agent (ineffective to third parties until advised) • By the operation of Law - By death of either party - By bankruptcy of principal - By bankruptcy of agent - By insanity of either party Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-16 Copyright © 2000 McGraw-Hill Australia Types of agents (Statute Law) • Factors/mercantile agent - Goods in agent’s possession to sell or use for borrowing • Del Credere agent - Guarantees payment for goods sold (therefore higher commission) • Partners - Principals/agents for each other • Broker - Buys/sells goods without possession • Real estate agent - Sells/leases vendor’s land; finds property for sale/lease • Travel agent - Sells principal’s products; receives commission based on sales; organises principal’s travel arrangements • Company director - Agent of company Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 18-17 Copyright © 2000 McGraw-Hill Australia ... operation of Law - By death of either party - By bankruptcy of principal - By bankruptcy of agent - By insanity of either party Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business. .. agency - Agency of Necessity - Cohabitation - Agency by Estoppel - Agency by Status - Agency by Ratification Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e... McGraw-Hill Australia Pty Ltd PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher Slides prepared by Kay Fanning 1 8- 6Australia Copyright © 2000 McGraw-Hill Working relationships • Agent -