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MGMT 455 Chapter 37 Quiz
Terms in this set (39)
relationship that exists between a person identified as a principal and another by virtue of which the latter may make contracts with third persons on behalf of the principal (Parties-- principal, agent, third person)
person or firm who is authorized by the principal or by operation of law to make contracts with third persons on behalf of the principal
person or firm who employs an agent; person who, with respect to a surety, is primarily liable to the third person or creditor; property held in trust
Employees and Independent Contractors
control and authority are characteristics that distinguish ordinary employees and independent contractors from agents
An agent is distinguished from an ordinary employee who is not hired to represent the employer in making contracts with third persons. It is possible, however, for the same person to be both an agent and an employee.
contractor who undertakes to perform a specified task according to the terms of a contract but over whom the other contracting party has no control except as provided for by the contract
agent authorized to transact a specific transaction or to do a specific act
agent authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place
agent authorized by the principal to do all acts that can lawfully be delegated to a representative
Interest in the Authority
form of agency in which an agent has been given or paid for the right to exercise authority
Interest in the Subject Matter
form of agency in which an agent is given an interest in the property with which that agent is dealing
An agency may arise by...
appointment, conduct, ratification, or operation of law
Authorization by Appointment
The usual method of creating an agency is by express authorization; a majority of states, by statute, require the appointment of an agent to be in writing when the agency is created to acquire or dispose of any interest in land
authorization of an agent to perform a certain act
Power of Attorney
written authorization to an agent by the principal
Attorney in Fact
agent authorized to act for another under a power of attorney
Authorization by Conduct
conduct consistent with the existence of an agency relationship may be sufficient to show authorization (ex: owner of store places another in charge third persons assume that person in charge is agent)
Agency by Ratification
an agent may attempt, on behalf of the principal, to do an act that was not authorized, or a person who is not the agent of another may attempt to act as such an agent; very generally, notification may be express, where the principal explicitly approves the contract, or implied, where the principal does not object to the contract and accepts the contract's benefits
Intention to Ratify
The intention to ratify may be expressed in words, or it may be found in conduct indicating an intention to ratify
Conditions for Ratification
Following conditions must be satisfied for the intention to take effect as a ratification:
1. The agent must have purported to act on behalf of or as agent for the identified principal.
2. The principal must have been capable of authorizing the act both at the time of the act and at the time it was ratified.
3. The principal must have full knowledge of all material facts.
Effect of Ratification
when an authorized act is ratified, the effect is the same as though the act had been originally authorized
Scope of Agent's Authority
the scope of an agent's authority may be determined from the express words of the principal to the agent or it may be implied from the principal's words or conduct or from the customs of the trade or business
if the principal tells the agent to perform a certain act, the agent has express authority to do so
authority of an agent that is reasonably necessary to execute express authority
authority of an agent to do any act that, according to the custom of the community, usually accompanies the transaction for which the agent is authorized to act
appearance of authority created by the principal's words or conduct
Duty to Ascertain Extent of Agent's Authority
A third person who deals with a person claiming to be an agent cannot rely on the statements made by the agent concerning the extent of authority. If the agent is not authorized to perform the act or is not even the agent of the principal, the transaction between the alleged agent and the third person will have no legal effect between the principal and the third person.
Limitations on Agent's Authority
A person who has knowledge of a limitation on the agent's authority cannot ignore that limitation. When the third person knows that the authority of the agent depends on whether financing has been obtained, the principal is not bound but the act of the agent if the financing in fact was not obtained.
The creation of the principal-agent relationship gives rise to...
duties and liabilities
Duties and Liabilities of Agent During Agency: Loyalty
an agent must be loyal or faithful to the principal; the agent must not obtain any secret benefit from the agency; if the principal is seeking to buy or rent property, the agent cannot secretly obtain the property and then sell or lease it to the principal at a profit
Duties and Liabilities of Agent During Agency: Obedience and Performance
an agent is under a duty to obey all lawful instructions; the agent is required to perform the services specified for the period and in the way specified
Duties and Liabilities of Agent During Agency: Reasonable Care
it is the duty of an agent to act with the care that a reasonable person would exercise under the circumstances; in addition, if the agent possesses a special skill (broker/attorney), the agent must exercise that skill
Duties and Liabilities of Agent During Agency: Accounting
an agent must account to the principal for all property or money belonging to the principal that comes into the agent's possession
Duties and Liabilities of Agent During Agency: Information
it is the duty of an agent to keep the principal informed of all facts relating to the agency that are relevant to protecting the principal's interests
Duties and Liabilities of Agent after Termination of Agency
When the agency relationship ends, the duties of the agent continue only to the extent necessary to perform prior obligations
Duties and Liabilities of Principal to Agent: Employment According to Terms of Contract
When the contract is for a specified time, the principal is obligated to permit the agent to act as agent for the term of the contract.
Duties and Liabilities of Principal to Agent: Compensation
The principal must pay the agent the agreed compensation.
Termination of Agency
An agency may be terminated by the act of one or both of the parties to the agency agreement or by operation of law. When the authority of an agent is terminated, the agent loses all right to act for the principal.
Disability of the Principal Under the UDPAA
The Uniform Durable Power of Attorney Act permits the creation of an agency by specifying that "this power of attorney shall not be affected by the subsequent disability or incapacity of the principal"
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