CHAPTER 21
Agency Law
21-1 Creation and Operation
of Agencies
21-2 Agency Duties
LAW for Business and Personal Use
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21-1
Creation and Operation
of Agencies
 GOALS
 Understand the agency concept
 Appreciate the scope of agency authority
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 2
WHAT IS AN AGENCY?
 Principals
 Agents
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 3
CHECKPOINT

 Define agency.
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 4
SCOPE OF AN AGENT’S
AUTHORITY
 Creation of authority




Express grant of authority
Implied grant of authority
Apparent authority
Ratification
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 5
CHECKPOINT

 List the ways in which agency authority can
be created.
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 6
21-2
Agency Duties
 GOALS
 List the duties of an agent
 List the duties of a principal
 Identify when an agency is terminated
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 7
WHAT ARE AN AGENT’S DUTIES?
 Duties owed the principal




Loyalty and obedience
Reasonable care and skill
Confidentiality
Accounting
 Duties owed to third parties
 Exceeding the scope of authority
 Principal’s lack of capacity
 Liability due to an undisclosed principal
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 8
CHECKPOINT

 What are the duties of an agent to the
principal?
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 9
WHAT ARE THE PRINCIPAL’S
DUTIES?
 Duties owed the agent
 Duties owed third parties
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 10
CHECKPOINT

 What is a principal’s main duty to an agent?
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 11
HOW IS AN AGENCY
TERMINATED?
 By unilateral action of a party
 By agreement
 By operation of law
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 12
CHECKPOINT

 Name the three general ways in which an
agency may be terminated.
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 13
PREVENT
LEGAL
DIFFICULTIES
 If you are a third person dealing with an
agent you should verify the extent of the
agent’s authority directly from the principal. If
you are uncertain about the authority or
honesty of the agent, make payment by a
check payable to the principal.
Continued on the next slide
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 14
PREVENT
LEGAL
DIFFICULTIES
 If you are an agent, when you sign anything
for your principal, make it unmistakably clear
that you are signing as an agent. Always
write the name of the principal first, and then
add “by” and your signature followed by the
word “agent.” If you exceed the scope of
your authority and that injures the third party,
you may be liable for that injury.
Continued on the next slide
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 15
PREVENT
LEGAL
DIFFICULTIES
 If you are a principal, remember that your
agent’s acts become your acts. Use care in
selecting agents. If you discharge your
agent, protect yourself against apparent
authority by notifying those the agent dealt
with in your name and publicizing the
discharge in newspapers of general
circulation in the area.
Continued on the next slide
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 16
PREVENT
LEGAL
DIFFICULTIES
 As an agent, you must be loyal to your
principal, maintain confidentiality, exercise
reasonable care and skill in obeying all
proper instructions, and provide accountings
as required.
 If you handle your principal’s money or other
assets, you should keep them separate from
your own.
LAW for Business and Personal Use
Chapter 21
© 2012 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SLIDE 17