Ch. 08: Agency Formation and Duties – No. 1
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Agency: A fiduciary relationship arising when one person
(the principal) manifests her consent that another person (the
and primarily for the benefit of, another.
Fiduciary Duty: A duty arising from the trust and
confidence placed in a fiduciary by those on whose
behalf and for whose benefit she acts.
Ch. 08: Agency Formation and Duties – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
EMPLOYER-EMPLOYEE RELATIONSHIPS
Employee: A person
(1) who works for, and receives payment from, an
employer,
(2) whose working conditions and methods are controlled
employer,
(2) but whose working conditions and methods are not
controlled by the employer, and
(3) for whose acts and omissions the employer is not liable.
(1) within the scope of her employment and (2) at the
employer’s request.
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
DETERMINING EMPLOYEE STATUS
To determine whether a worker is an employee or an
employer’s direction or supervision;
(4) who supplies tools the worker uses;
(5) how long the worker works for the employer;
(6) how the worker is paid for his work; and
(7) the degree of skill the worker’s work requires.
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
AGENCY FORMATION
Agency relationships are normally consensual and a principal
Agency by Ratification: The principal’s confirmation
of another’s act or contract performed or entered into,
without authority, on the principal’s behalf.
Agency by Operation of Law: Agencies recognized by
courts – e.g., family relationships, emergency situations
– in the absence of any formal agreement, confirmation,
or act or omission by the principal that implied the
Ch. 08: Agency Formation and Duties – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
AGENT’S DUTIES TO THE PRINCIPAL
Performance: An agent implicitly agrees to use reasonable
diligence and skill (except for a specialist, who is held to a
higher degree of skill) in performing the task in its entirety.
party. Moreover, any information or knowledge obtained in
the course of the agency is confidential.
Obedience: When acting on the principal’s behalf, an agent
must follow the principal’s lawful and clearly stated
persons.
Ch. 08: Agency Formation and Duties – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PRINCIPAL’S DUTIES TO THE AGENT
Reimbursement: Whenever an agent disburses sums of
money to fulfill the principal’s request or to pay for necessary
expenses incurred in the reasonable performance of his or her
duties, the principal must reimburse the agent.
assist the agent in performing his or her duties.
Working Conditions: A principal must
(1) provide its agents and employees with safe working
premises, equipment, and conditions, and
AGENT’S REMEDIES
Most principal-agent relationships are governed by some
actual or implied contract; therefore, most of the remedies
withhold further performance, and
demand an accounting.
Ch. 08: Agency Formation and Duties – No. 8
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PRINCIPAL’S REMEDIES
In the event that the agent violates her fiduciary duties, the
principal may, in addition to any remedies provided for in his
contract with the agent, seek:
Constructive Trust: Anything an agent obtains by
virtue of the agency relationship belongs to the
principal; therefore, a principal may sue to recover any
Indemnification: To the extent that the agent’s breach
causes harm to some third party, who then sues the
principal, the principal may seek indemnification from
the agent.
Ch. 08: Agency Formation and Duties – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
EMPLOYER-EMPLOYEE RELATIONSHIPS
Employee: A person
(1) who works for, and receives payment from, an
employer,
(2) whose working conditions and methods are controlled
employer,
(2) but whose working conditions and methods are not
controlled by the employer, and
(3) for whose acts and omissions the employer is not liable.
(1) within the scope of her employment and (2) at the
employer’s request.
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
DETERMINING EMPLOYEE STATUS
To determine whether a worker is an employee or an
employer’s direction or supervision;
(4) who supplies tools the worker uses;
(5) how long the worker works for the employer;
(6) how the worker is paid for his work; and
(7) the degree of skill the worker’s work requires.
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
AGENCY FORMATION
Agency relationships are normally consensual and a principal
Agency by Ratification: The principal’s confirmation
of another’s act or contract performed or entered into,
without authority, on the principal’s behalf.
Agency by Operation of Law: Agencies recognized by
courts – e.g., family relationships, emergency situations
– in the absence of any formal agreement, confirmation,
or act or omission by the principal that implied the
Ch. 08: Agency Formation and Duties – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
AGENT’S DUTIES TO THE PRINCIPAL
Performance: An agent implicitly agrees to use reasonable
diligence and skill (except for a specialist, who is held to a
higher degree of skill) in performing the task in its entirety.
party. Moreover, any information or knowledge obtained in
the course of the agency is confidential.
Obedience: When acting on the principal’s behalf, an agent
must follow the principal’s lawful and clearly stated
persons.
Ch. 08: Agency Formation and Duties – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PRINCIPAL’S DUTIES TO THE AGENT
Reimbursement: Whenever an agent disburses sums of
money to fulfill the principal’s request or to pay for necessary
expenses incurred in the reasonable performance of his or her
duties, the principal must reimburse the agent.
assist the agent in performing his or her duties.
Working Conditions: A principal must
(1) provide its agents and employees with safe working
premises, equipment, and conditions, and
AGENT’S REMEDIES
Most principal-agent relationships are governed by some
actual or implied contract; therefore, most of the remedies
withhold further performance, and
demand an accounting.
Ch. 08: Agency Formation and Duties – No. 8
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PRINCIPAL’S REMEDIES
In the event that the agent violates her fiduciary duties, the
principal may, in addition to any remedies provided for in his
contract with the agent, seek:
Constructive Trust: Anything an agent obtains by
virtue of the agency relationship belongs to the
principal; therefore, a principal may sue to recover any
Indemnification: To the extent that the agent’s breach
causes harm to some third party, who then sues the
principal, the principal may seek indemnification from
the agent.