Business Consumer Law Study Guide

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Law Midterm

Chapter 13- The Agency Relationship (Pg. 297)

• Agency: a relationship that exists when one party represents another party in the formation of legal relations Pg. 298 • Agent: a person who is authorized to act on behalf of another • Principle: a person who has permitted another to act on her behalf • Agency is a common relationship as is shown in the following examples: o A sports agent negotiates a multimillion-dollar deal on behalf of a hockey player o An insurance agent sells fire and theft insurance on behalf of several insurance companies o A travel agent sells tickets, cruises, and vacation packages on behalf of carriers and hotels o A booking agent negotiates fees and dates on behalf of entertainers ▪ In each case, the agent is acting for someone else (the principle) and is doing business on that persons behalf. ▪ This kind of relationship is essential to the success of the principal, who may not necessarily have the expertise to handle the given matter Agency Defined:

o The fact that parties use agents instead of dealing with each other face to face can result in complications and questions. o There are two key relationships at play in an agency situation o The first is the relationship between the agent and the principal. o This aspect of agency raises numerous questions, such as the following: ▪ How does A become an agent? When is one person considered to be an agent for another? ▪ What is the authority of A? What types of transactions can A enter on behalf of P? ▪ What are A’s Duties?

▪ What are P’s obligations?

o The second relationship in agency is between the principal and the party with whom the agent does business. o Such business are known as outsiders because they are “outside” the agency relationship between principal and agent. The outsider is also sometimes called the third party. o Outsider: the party with whom the agent does business on behalf of the principal This relationship raises questions, including:

o When is the principal liable to the outsider?
o When is the agent himself liable to the outsider?

The complications resulting from these relationships have neccessiated rules of law to regulate and resolve them. These rules are known as the law of agency, which is derived form tort and contract law.

Law of Agency: the law governing the relationship where one party the agent, acts on behalf of another, the principal.

Creation of Agency:

Agency by Agreement:
o An agency relationship created by contract normally involves the principal authorizing an agent to act on her behalf and the agent agreeing to do so in return for some fee or other remuneration Pg. 300 o This often occurs through a contract created expressly and only for that single purpose For example: o A retired public figure may engage an agent to contact organizations, negotiate fees, and book engagements on his behalf. In return, the public figure will pay the agent a certain sum, perhaps a percentage of his fee. In other situations, the agency relationship may arise as part of another, broader contract: o An employment contract may provide for a person to be paid a salary in return for carrying out certain duties including entering into contracts on behalf of the employer. For example, a sales clerk, besides greeting and assisting customers and stocking shelves, would have the authority to enter into sales transactions at least at the sticker price on behalf of his employer. o Not all employees are agents, a clerk is typically not an agent, but if asked to purchase a gift for a departing employee, the clerk is the agent for the employer. The Concept of...
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