Principal- Agent Relationship

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Principal- Agent Relationship by Mind Map: Principal- Agent Relationship

1. How Agency Relationships are formed

1.1. Benefits

1.1.1. agent gives consent to fully work to benefit the principal

1.1.2. Allows business to grow and develop more agent relationships

1.2. Risks

1.2.1. Liability to the principal

1.3. They are formed when two people act in consent to act on behalf and subject to control of the principal

2. Agents duties to the principal

2.1. Benefits

2.1.1. Agent allows principal to keep a successful workplace and maintain a profit while the agent follows rules and regulations of the principal

2.2. Risks

2.2.1. Principal risks their business by hiring new agents and trusting in their behavior. They can cause liabilities and problems for the principal if they do not follow rules.

2.3. Performance- implied condition in every agency contract to agree to use reasonable, diligence, and skill in performing to complete the work

2.4. Notification- to notify all principals of concern of the subject matter of the agent

2.5. Loyalty- to act solely for the benefit of the principal

2.6. Obedience- duty to follow all lawful and clearly stated instructions while acting on behalf of the principal

2.7. Accounting- duty to keep and make available all property and funds received and paid out in behalf of the principal

3. Type of Agent Authority (Actual, Apparent)

3.1. Benefits

3.1.1. Apparent authority gets put in place after a pattern of conduct by the principal over time. Established trust.

3.2. Risks

3.2.1. In apparent authority, even if the agent changes his/her mind on the subject, the principal may be prevented for denying that the agent has authority.

3.2.2. Potential misuse of power of the agent

3.3. Actual-

3.3.1. Express- Clear, direct and definite terms given orally or written.

3.3.2. Implied- follow a reasonable standard to do what is necessary to carry out his or her express authority.

3.3.3. can give an agent powers such as: power of attorney or notary public

3.4. Apparent-

3.4.1. The given right to the principal with either words or actions to cause a third party to believe they have authority to act.

4. Ratification of Agency

4.1. Benefits

4.1.1. Before something is ratified, the agent can revoke offer since it is an unaccepted offer.

4.2. Risks

4.2.1. If principal is not fully aware of the agents actions, they can rescind offer to ratify

4.3. Requirements- Agent must have acted on behalf of an identified principal who subsequently ratified the action, the principal must know of all material facts involved in the transaction, and the principal must affirm the agent's act in its entirety. The principal must have the legal capacity to authorize the transaction at the time of agent engages in the act and at the time the principal ratifies. the principal's affirmation must occur before the third party withdraws from the transaction. The principal must observe the same formalities when approving the act done by the agent as would have been required to authorize it initially.

4.4. Makes an agents unauthorized actions, authorized

5. Agency Relationships

5.1. Benefits

5.1.1. Keeps a business functioning

5.1.2. can bind the agent to a contract of work

5.1.3. Relationships is created to act in benefit to the principal

5.2. Risks

5.2.1. Agents can cause liability for the principal

5.2.2. Larger taxes need to be paid for having more agents

5.2.3. Travel time- getting hurt while traveling for work

5.2.4. Negligence of agent during work

5.2.5. Agent misrepresentation can create a loss and can be under the liability of the principal

5.3. Relationship between two parties- the agent and the principal. Principal has the right to control the agents actions when it includes the rights of the agent.

6. Employee Vs. Contractor Relationships

6.1. Benefits

6.1.1. Employee gets paid, set times, benefits and more from employer vs a contractor

6.1.2. contractors come to serve one purpose or objective, they are also not under any liability of the principal

6.1.3. contractors are paid by employer but are not an agent of the employer

6.2. Risks

6.2.1. Employee can get hurt or break standards of the company and can be under the companies liability

6.2.2. Contractor could take business away from the principal based on the people they get to take part in their business

7. Termination of Agency

7.1. Benefits

7.1.1. Notice of termination can be written or orally given to agent from principal

7.2. Risks

7.2.1. Agent can try for wrongful termination- this would result in a breech of contract

7.2.2. Some agents have legal right to interest in the property that is subject to the agency.

7.3. Once the relationship has ended the agent no longer has rights to the principal.