© 2006 prentice hall ch. 15-1 the legal environment of business a critical thinking approach fourth...

1 © 2006 Prentice Hall© 2006 Prentice Hall Ch. 15-Ch. 15-11

THETHE LEGALLEGAL ENVIRONMENTENVIRONMENT OFOF BUSINESSBUSINESS

A Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachFourth EditionFourth Edition

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne

© 2006 Prentice Hall© 2006 Prentice Hall Ch. 15-Ch. 15-22

CHAPTER 15CHAPTER 15

Agency LawAgency Law

THE LEGAL ENVIRONMENT OF BUSINESS

© 2006 Prentice Hall© 2006 Prentice Hall


Ch. 15-Ch. 15-33

Agency RelationshipsAgency Relationships

Agency:Agency: A fiduciary relationship A fiduciary relationship between two persons in which between two persons in which one acts on behalf of the otherone acts on behalf of the other

Principal:Principal: (P) is bound by acts of agent(P) is bound by acts of agent

Agent:Agent: (A) acts on behalf of principal, (A) acts on behalf of principal, subject to P’s control subject to P’s control



Ch. 15-Ch. 15-44

Types of AgencyTypes of Agency

Employer-EmployeeEmployer-Employee

Employer-Employer-Independent Independent ContractorContractor

Corporation-Officer/ Corporation-Officer/ Director/EmployeeDirector/Employee



Ch. 15-Ch. 15-55

AuthorityAuthority

Express Authority:Express Authority: arises from statements arises from statements

Actual Authority:Actual Authority: includes implied authority includes implied authority

P gives authority to A to act for PP gives authority to A to act for P



Ch. 15-Ch. 15-66

Creating an AgencyCreating an Agency

Expressed agencyExpressed agency

Implied authorityImplied authority

Ratification of A’s previous actsRatification of A’s previous acts

Apparent agency (estoppel)Apparent agency (estoppel)



Ch. 15-Ch. 15-77

Expressed AgencyExpressed Agency

Example: Power of Attorney

A written expression of the grant of authority by P and the acceptance of authority by A

Example: Power of Attorney

A written expression of the grant of authority by P and the acceptance of authority by A

ApplicationApplication:: Health care (durable power of attorney) Health care (durable power of attorney)

ApplicationApplication:: Business (brokerage agreements) Business (brokerage agreements)



Ch. 15-Ch. 15-88

Agency by Implied AuthorityAgency by Implied Authority

Agency created by:Agency created by:

CustomsCustoms

CircumstancesCircumstances

FactsFacts

In the absence of an In the absence of an express agreementexpress agreement



Ch. 15-Ch. 15-99

Agency by RatificationAgency by Ratification

Unauthorized person misrepresents self as Unauthorized person misrepresents self as agent, Aagent, A

A performs act in favor of PA performs act in favor of P

P later accepts the benefits of the actP later accepts the benefits of the act

Result:Result: P has ratified A’s actions and P has ratified A’s actions and created agency relationshipcreated agency relationship



Ch. 15-Ch. 15-1010

Agency by Estoppel, or Apparent AuthorityAgency by Estoppel, or Apparent Authority

P leads Third Party, T to believe, by words or P leads Third Party, T to believe, by words or acts, thatacts, that

A is his agentA is his agent

P is bound by acts of A, with P is bound by acts of A, with regard to Tregard to T

P is estopped to deny agency P is estopped to deny agency

Result:Result: “Apparent” authority “Apparent” authority is establishedis established



Ch. 15-Ch. 15-1111

Duties of Agents and PrincipalsDuties of Agents and Principals

P’s Duties to A:P’s Duties to A:

CompensationCompensation

Reimbursement and IndemnificationReimbursement and Indemnification

CooperationCooperation

Safe Working conditions Safe Working conditions



Ch. 15-Ch. 15-1212

Duties of Agents and PrincipalsDuties of Agents and Principals

A’s Duties to P:A’s Duties to P:

LoyaltyLoyalty

ObedienceObedience

AccountingAccounting

PerformancePerformance



Ch. 15-Ch. 15-1313

Liability to Third PartiesLiability to Third Parties P is liable for acts of A when performed within scope of dutiesP is liable for acts of A when performed within scope of duties

Contractual LiabilityContractual Liability

Tort LiabilityTort Liability

Criminal LiabilityCriminal Liability



Ch. 15-Ch. 15-1414





Disclosed Principal:Disclosed Principal:

P is liable, A is notP is liable, A is not

Partially Disclosed Principal:Partially Disclosed Principal:

P is liable, A is notP is liable, A is not

Undisclosed Principal:Undisclosed Principal:

Both A and P are liableBoth A and P are liable



Ch. 15-Ch. 15-1515

Issues: Did A act in the scope of employment? Acting for P? During work hours? On regular business?





Context:Context: Cases arise in the Cases arise in the area of employment relationshiparea of employment relationship

Respondeat superiorRespondeat superior = vicarious liability= vicarious liability



Ch. 15-Ch. 15-1616





General Rule:General Rule: P not liable for P not liable for criminal acts of Acriminal acts of A

Exceptions:Exceptions:

When P participates in When P participates in crimecrime

When P knows crime is When P knows crime is taking placetaking place



Ch. 15-Ch. 15-1717

TerminationTermination

By AgreementBy Agreement

By Operation of LawBy Operation of Law



Ch. 15-Ch. 15-1818

Termination by AgreementTermination by Agreement

Agency may terminate by its own termsAgency may terminate by its own terms

Duty to notify third parties via actual or Duty to notify third parties via actual or constructive noticeconstructive notice

Lapse of time may cause terminationLapse of time may cause termination



Ch. 15-Ch. 15-1919

Termination by LawTermination by Law

Death of P or ADeath of P or A

InsanityInsanity

Bankruptcy of PBankruptcy of P

Impossibility of performance by AImpossibility of performance by A

WarWar



Ch. 15-Ch. 15-2020

Global DimensionsGlobal Dimensions

Agency laws of other jurisdictions differ:Agency laws of other jurisdictions differ:

Japan:Japan: express authority and more disclosure express authority and more disclosure

EU:EU: good faith, and rights of A are favored good faith, and rights of A are favored

Agency frequently used in international businessAgency frequently used in international business

FCPA applies to all U.S. P’s and A’s operating FCPA applies to all U.S. P’s and A’s operating overseasoverseas

© 2006 prentice hall ch. 15-1 the legal environment of business a critical thinking approach fourth...

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