Agency and Employment Exam
Darla Thompson
Business Law 107
Agency and Employment Exam
1. This fact pattern revolves around the termination of an agency. The duration of an agency is usually stated in the parties’ agreement. In general, either party may terminate an agency at any time for any reason; however if the terminating party is in violation of the contract terms, they may be liable for damages. In this case, Barnes was designated as a special agent, authorized to make decisions in the management of one specific subdivision of residential housing. As such he was not authorized to use project funds towards his own venture, essentially committing embezzlement and giving Morgan grounds to terminate the agency. Unauthorized actions taken by an agent may be ratified by the principal, however in this situation Barnes was not acting on behalf of Morgan when he misused the funds, nor was Morgan accepting of the action. Termination is effective upon notice to the agent therefore Barnes is incorrect and the termination was carried out properly. He will appear to have binding power against Morgan, however until all third parties are notified of his termination. It is also likely Barnes would be brought up on criminal charges for his personal use of business funds.
2. The described scenario deals with agency by ratification. Unauthorized actions by an agent do not bind the principal to a contract. If an agent attempts an unauthorized act on behalf of the principal, the principal may either ignore or ratify the act. Ratification may be expressed in words or conduct and requires three conditions—that the agent purported to act on behalf of the identified principal, that the principal must have been capable of authorizing the act when it occurred and when it was ratified, and that the principal have full awareness of all material facts. Once an act is ratified, it is in effect as if originally authorized. While Ames was not initially authorized to purchase such merchandise at the price he
Business Law 107
Agency and Employment Exam
1. This fact pattern revolves around the termination of an agency. The duration of an agency is usually stated in the parties’ agreement. In general, either party may terminate an agency at any time for any reason; however if the terminating party is in violation of the contract terms, they may be liable for damages. In this case, Barnes was designated as a special agent, authorized to make decisions in the management of one specific subdivision of residential housing. As such he was not authorized to use project funds towards his own venture, essentially committing embezzlement and giving Morgan grounds to terminate the agency. Unauthorized actions taken by an agent may be ratified by the principal, however in this situation Barnes was not acting on behalf of Morgan when he misused the funds, nor was Morgan accepting of the action. Termination is effective upon notice to the agent therefore Barnes is incorrect and the termination was carried out properly. He will appear to have binding power against Morgan, however until all third parties are notified of his termination. It is also likely Barnes would be brought up on criminal charges for his personal use of business funds.
2. The described scenario deals with agency by ratification. Unauthorized actions by an agent do not bind the principal to a contract. If an agent attempts an unauthorized act on behalf of the principal, the principal may either ignore or ratify the act. Ratification may be expressed in words or conduct and requires three conditions—that the agent purported to act on behalf of the identified principal, that the principal must have been capable of authorizing the act when it occurred and when it was ratified, and that the principal have full awareness of all material facts. Once an act is ratified, it is in effect as if originally authorized. While Ames was not initially authorized to purchase such merchandise at the price he