What Youll Learn Define agency and explain the

What You’ll Learn Define agency and explain the nature of an agency relationship Explain the difference between an agent and a principal Distinguish between an agent and an independent contractor List the ways agency relationships are created You need to know your rights and responsibilities as an agent if you are ever hired to represent someone

Key Terms Agency Principal Agent Third party Independent contractor Agency by estoppel Academic Vocabulary Genuine Conduct gratuitous

Section 13. 1 The Agency Relationship

Section 13. 1 The Agency Relationship Agency is a type of work relationship in which one person represents or acts for another person in doing business with another party.

Section 13. 1 The Agency Relationship An agent can make deals, sign contracts, collect money, find jobs, or conduct other types of business for someone else.

Types of Work Relationships Principal-Agent Relationship – Genuine agency relationship such as a real estate broker who is an agent, not an employee

Proprietor-Independent Contractor Relationship – Independent contractor works for a proprietor to perform a particular task using his or her own tools and deciding the best way to do the job – Plumbers, gardeners, electricians, accountants, lawyers, designers, architects, and personal trainers are often independent contractors

Master-Servant Relationship – Master is a person who has the right to control the conduct of another person – The person who is performing the task for the master is a servant

Bailees and Trustees – Bailee is a person who holds a personal property of another for certain purpose – A trustee is an individual who manages a trust

Section 13. 1 The Agency Relationship the agent An agency relationship involves three parties: the principal a third party

Section 13. 1 The Agency Relationship The agent is the person who has been authorized to represent someone else.

Section 13. 1 The Agency Relationship The principal is the person who has authorized an agent to represent him or her.

Section 13. 1 The Agency Relationship The third party is the person the agent does business with on behalf of the principal.

Section 13. 1 The Agency Relationship

Section 13. 1 The Agency Relationship The most familiar type of agent is the talent agent, who represents an actor, writer, or athlete in business transactions.

Section 13. 1 The Agency Relationship Most agency relationships are consensual, which means the agent and principal agreed to the relationship in advance. An agency relationship, however, may also be created automatically by law.

Agreements requiring licensed Agents – Gratuitous agent – Consensual arrangement is not contract and the agent can terminate at any time – The following must pass an exam to be licensed in their state as an agent: • • • Lawyers stock brokers insurance agents Auctioneers real estate brokers

Agreements involving minors Problems can arise: – A minor principal who has an adult agent • an agent can be liable for injury, error, or breach of contract is agent does notify the third party that the principal is a minor – A minor agent representing an adult principal • a principal must uphold a contract made by a minor unless proven did not have capacity to understand transaction

Section 13. 1 The Agency Relationship There are three ways an agency relationship is created by operation of law: agency by estoppel agency by ratification agency by statute

Section 13. 1 The Agency Relationship Agency by estoppel is created when a principal leads a third party to believe that a person is working as an agent for the principal.

Section 13. 1 The Agency Relationship Agency by ratification is created when a person acts as an agent for a principal without the principal’s authority, but the principal approves or accepts the act. • Principal must meet certain conditions: • Capacity to ratify and know all the facts • Must be legal and done on behalf of principal • Must apply to the entire act of the agent

Section 13. 1 The Agency Relationship Agency by statute is created when the government requires a principal to hire an agent. For example, the law might require a corporation to appoint an agent to represent it. • Corporations to appoint an agent within the state who can be served with a complaint and summons in case the corporation is sued.

1. In an agency relationship, the person represented is the: A. B. C. D. agent principal third party none of the above

2. Most agency relationships are created by law. True or False

3. When a principal accepts the unauthorized act of an agent, it is called: A. B. C. D. agency by estoppel agency by approval agency by statute agency by ratification

4. What is agency and who are the parties in an agency relationship? 5. What is the difference between an agent and an independent contractor? 6. What is agency by ratification?

Warm Up The federal government has passed a numbers of laws to protect employees. What kinds of protection are workers guaranteed?