Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 13-1 CANADIAN BUSINESS AND THE LAW Second Edition by Dorothy Duplessis Steven Enman Shannon

13-1Copyright © 2004 by Nelson, a division of Thomson Canada Limited.

CANADIAN BUSINESS CANADIAN BUSINESS

AND THE LAWAND THE LAWSecond EditionSecond Edition

byby

Dorothy Duplessis

Steven Enman

Shannon O’Byrne

Sally Gunz

Presentation prepared by Presentation prepared by

Allan Elliott, Southern Alberta Institute of TechnologyAllan Elliott, Southern Alberta Institute of Technology


CHAPTER THIRTEENCHAPTER THIRTEENTHE AGENCY RELATIONSHIPTHE AGENCY RELATIONSHIP

OBJECTIVES: The agency relationship and its relevance to

business How an agency relationship comes into

being Agency duties and liabilities How the agency relationship ends


THE AGENCY RELATIONSHIPTHE AGENCY RELATIONSHIP

THE NATURE OF AGENCY agency – a relationship that exists when one

party represents another in the formation of legal relations

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


AGENCY DEFINEDAGENCY DEFINED

THE AGENT – PRINCIPAL

RELATIONSHIP

P A

(Principal) (Agent)

Figure 13.1


AGENCY DEFINEDAGENCY DEFINED

THE OUTSIDER – PRINCIPAL

RELATIONSHIP

P

OS

A

(Outsider or Third Party)

Figure 13.2


THE CONCEPT OF AUTHORITYTHE CONCEPT OF AUTHORITY

AUTHORITY 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 conduc or statement of the principal

express authority – written or oral authority granted by a principal to an agent

implied authority – agent’s authority that is implicit only


CREATION OF AGENCYCREATION OF AGENCY

AGENCY BY ESTOPPEL an agency relationship created when the

principal acts such that third parties reasonably conclude that an agency relationship exists


CREATION OF AGENCYCREATION OF AGENCY

AGENCY BY RATIFICATION an agency relationship created when one party

adopts a contract entered into on his or her behalf by another who at the time acted without authority


DUTIES IN THE AGENCY DUTIES IN THE AGENCY RELATIONSHIPRELATIONSHIP

DUTIES OF THE AGENT must perform in accordance with the

principal’s instructions, or failing instructions, then performance must meet the standards of the industry

fiduciary duty – a duty imposed on a person who has a special relationship of trust with another


DUTIES IN THE AGENCY DUTIES IN THE AGENCY RELATIONSHIPRELATIONSHIP

DUTIES OF THE PRINCIPAL pay the agent a fee or percentage for

services rendered assist the agent in the manner described in

the contract reimburse the agent for reasonable

expenses indemnify against losses incurred in

carrying out the agency business


LIABILITY IN THE AGENCY LIABILITY IN THE AGENCY RELATIONSHIPRELATIONSHIP

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 THE AGENT TO THE

OUTSIDER an agent will be personally liable on a

contract with an outsider when he exceeds his actual or apparent authority



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 her authority



LIABILITY OF THE AGENT TO THE

PRINCIPAL when an agent exceeds her authority, the

principal can sue the agent for breach of contract or for negligence

a breach of fiduciary duty is also actionable


SUMMARY OF LIABILITY IN AGENCYSUMMARY OF LIABILITY IN AGENCY

1. P

OS

AACTUAL AUTHORITY

A acts within actual authorityP is liable to outsider

Figure 13.4 (1)



2. P

OS

A

P A

ACTUAL AUTHORITY

APPARENT AUTHORITY

A exceeds actual authority but acts within apparent authority

P is liable to OS unless knew or ought to have known of any

limitation of A’s authority A is liable to P for breaching

authorityFigure 13.4 (2)



3. P

OS

A

P A A

ACTUAL AUTHORITY

APPARENT AUTHORITY

A exceeds both actual and apparentauthorityA is liable to OS for breach of warranty

of authority Figure 13.4 (3)



4. P

OS

A

(undisclosed)

A acts without P’s authority P is liable to OS if P adopts the

contract

Figure 13.4 (4)


TECHNOLOGY AND THE LAWTECHNOLOGY AND THE LAW

ELECTRONIC AGENTS: computer programs, or other electronic

means, used to independently initiate an action or to respond to electronic messages without review by an individual

Legislation – Electronic Commerce Act (Ontario)


TERMINATION OF AGENCY TERMINATION OF AGENCY AGREEMENTSAGREEMENTS

AN AGENCY AGREEMENT CAN COME

TO AN END IF: the parties agree to bring their relationship

to an end one party gives notice of termination to the

other the agency relationship ceases by operation

of the law. This most commonly occurs due to the death, dissolution, insanity or bankruptcy of one of the parties.

Documents

Copyright © 2004 by Nelson, a division of Thomson Canada Limited. 13-1 CANADIAN BUSINESS AND THE LAW Second Edition by Dorothy Duplessis Steven Enman Shannon