Management 4540 Chapter 31 - Agency Formation And Duties

Front 1

Define agency

Back 1

A consensual fiduciary relationship in which one party, an agent, agrees to act on behalf of, and subject to the control of the other party, the principal

Front 2

Three elements present in creating an agency

Back 2

Appointment of the agent by the principal

Acceptance of appointment by agent

Understanding that A is subject to P's control

Front 3

describe mutual manifestation of assent in the creation of an agency

Back 3

a.) Offer: specific promise and specific demand

b.) Acceptance
1.) Must mirror terms of offer

Offer and acceptance together creates mutual manifestation of assent

Front 4

Describe valid consideration in the creation of an agency

Back 4

Defined: Value given or detriment suffered in exchange for a promise

Past performance does not equal consideration for a present promise.

Promise to make gift is not enforceable - no consideration on the receiving side.

Front 5

Describe invalid consideration in the creation of an agency

Back 5

No remedy for illegal acts - you cannot recover in court.

Front 6

Describe Capacity in the creation of an agency

Back 6

Minors, mentally incompetent people and extremely drunk people have a defense to a valid contract

Front 7

Four requirements to create an agency:

Back 7

1. Mutual Manifestation of assent
a. appointment by the principal
b. Acceptance by the agent
2. Consideration
a. a gratuitous agency is enforcable
3. Capacity
a. needed for the principal, but not for the agent
4. Legality is required - you can't hire someone to do something that is illegal for you to do.

Front 8

List some formalities of agency creation:

Back 8

1. The agency must follow the equal dignity rule. It must meet the same level of formality as that required for the authorized act

Front 9

Three ways to create an agency:

Back 9

1. Agreement - appointment, acceptance, understanding of control

2. Ratification - the principal's confirmation of an agent's unauthorized act after the fact.
a. Express to ratify- specific language
b. Implied - P accepts benefits of agent's contract without telling third party

3. Estoppel - A person who misleads a third party to rely on an agency relationship can not later deny that relationship.

Front 10

Employee defined:

Back 10

A person hired by another whose physical conduct is subject to control by the hiring party

May or may not be agent for th purpose of contracting.

Front 11

Independent contractor defined:

Back 11

Hired by another, not subject to detailed physical control

May or may not be subject to physical control

Front 12

How do you tell the difference between an employee and an independent contractor?

Back 12

Primary issue is right of control

Front 13

List the five duties of agents:

Back 13

1. Performance: Duty to use reasonable care
2. Loyalty: Duty to put Principal's interest first.
3. Accounting: Duty to provide principal with records of the proper use of all money or property that came into the agent's control
4. Notification: duty to inform principal of all relevant information the agent receives
5. Obedience: Duty to fulfill lawful requests of the principal.

Front 14

Four remedies of principal for breach of duty:

Back 14

1. Constructive trust: All property of the principal or improper profits of the agent, and the income obtained, are held as if in trust for the principal.

2. Contract avoidance: principal may cancel all contracts with the agent relevant to the agency.

3. Indemnification: The agent owes the principal the amount of any damages paid to a third party as a result of the agent's breach of duty.

4. Accounting: the right to sue for all money and property entrusted to the agent but not accounted for.

Front 15

List the four duties of principal's to agents

Back 15

1. Compensation: duty to reasonably pay an agent for services rendered.

2. Reimbursement: must repay agent for funds spent while carrying out agency.

3. Cooperation: Must do what is necessary to help agent complete the agency.

4. Safe workplace: must notify someone of dangerous conditions.