BCOR 320 1nd Edition Final Exam Final consists of chapters 16 17 18 19 20 Chapter 16 Creating Agency Relationship Agency is a relationship in which the agent agrees to perform a task for and under the control of the principal To create an agency there must be Principal Person who has someone else acting on him Agent Person who acts for someone else Who mutually consent that the agent will act on behalf of the principal Be subject to the principal s control Creating a fiduciary relationship Consent Principal must ask the agent to do something Agent must agree Control Principals are liable for the acts of their agents They exercise control over the agents Fiduciary relationship Trustee acts for the benefit of the beneficiary Agents have a fiduciary duty to their principals Elements not required for an agency relationship include A written agreement Equal dignities rule If an agent is empowered to enter into a contract that must be in writing then The appointment of the agent must also be written Formal agreement Compensation Duties of Agents to Principal Duty of loyalty The agent Must act for the benefit of the principal May not receive outside benefits without approval of the principal Can neither disclose nor use for her own benefit any confidential information Is not allowed to compete with his principal within the scope of the agency business Duty of loyalty The agent May not act for two principals whose interests conflict May not become a party to a transaction without the principal s permission May not engage in inappropriate behavior that reflects badly on the principal An agent must obey the principal s instructions unless illegal or unethical Agent must act with reasonable care An agent with special skills is held to a higher standard because he she is expected to use those skills Agent must provide information An agent has a duty to provide the principal with all information in her possession that She has reason to believe the principal wants to know Principal s Remedies when the Agent Breaches a Duty The principal can recover damages caused by the agent s breach The agent must refund any profits made from the agency if he breaches his duty of loyalty The principal may rescind a transaction with a disloyal agent Duties of Principal to Agent Duty to reimburse the agent for reasonable expenses Three categories Principal must indemnify an agent for expenses reasonably incurred in carrying out his agency responsibilities Principal must indemnify an agent for tort claims brought by a third party if Principal authorized the agent s behavior and the agent did not realize he was committing a tort Duty to reimburse the agent for reasonable expenses Three categories Principal must indemnify the agent for any liability she incurs from third parties as a result of Entering into a contract on the principal s behalf including attorney s fees and reasonable settlements Duty to cooperate Principal must furnish the agent with the opportunity to work Principal cannot reasonably interfere with the agent s ability to accomplish his task Principal must perform his her part of the contract Terminating Agency Relationships Termination by agent or principal Three choices in terminating the relationship Term agreement Time Achieving a purpose Mutual agreement Agency at will Wrongful termination Principal or agent can no longer perform required duties Failure to obtain license Bankruptcy Death or incapacity of the principal or agent Disloyalty of agent Change in circumstances Change of law Loss or destruction of subject matter Termination of the agency ends the agent s power to act on behalf of the principal Principal s duty to reimburse expenses of the agent ends with the end of the agency Confidential information remains confidential and unusable even after the end of the agency Principals Liability for Contracts The principal is bound by the acts of an agent if The agent had authority The principal ratifies the acts of the agent Authority A principal is bound by the acts of an agent if the agent has authority There are three types of authority Express Granted by words or conduct that Reasonably interpreted cause the agent to believe the principal desires her to act Implied Authority to conduct a transaction includes Authority to do acts that are reasonably necessary to accomplish it Apparent Principal can be liable for the acts of an agent who is not acting with authority if Principal s conduct causes a third party reasonably to believe that the agent is authorized Ratification and subagents Ratification If a person accepts the benefit of an unauthorized transaction or fails to repudiate it then He is as bound by the act as if he had originally authorized it Subagents Intermediary agent Someone who hires subagents for the principal When an agent is authorized to hire a subagent Principal is as liable for the acts of subagent as he is for the acts of regular agent Agents for liability for contracts Fully disclosed principal An agent is not liable for any contracts Unidentified principal Third party can recover from either the agent or the principal Undisclosed principal Third party can recover from either the agent or the principal Third party is not bound to the contract with an undisclosed principal if Contract provides that the third party is not bound to anyone other than the agent Agent lies about the principal because she knows the third party would refuse to contract with him Unauthorized agent The principal is not liable and the agent is Principals liability for torts Employer is liable for a tort committed by its employee acting within the scope of employment or acting with the authority Two kinds of agents Employees Independent contractors Principal may be liable for the torts of an employee but generally is not liable for the torts of an independent contractor Employee or independent contractor Courts consider whether Principal supervises details of the work Principal supplies the tools and place of work Agents work full time for the principal Agents receive a salary or hourly wages Work is part of regular business of the principal Principal and agents believe they have employer employee relationship Principal is in business Negligent Hiring The principal is liable for the torts of an independent contractor if the principal has been negligent in hiring or supervising her Scope of Employement Principals are liable only for torts that an employee commits An employee is acting within