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PART SIX
AGENCY AND EMPLOYMENT
Teaching Suggestions
1. After the students have listed the employment relationships they have had, discuss whether they
were covered by union contracts or not.
Group Projects
1. Divide the class into groups of about 5 students each and assign each group to “search the web” to
find out why one of the laws protecting employees rights discussed in chapter 29 was enacted.
CHAPTER 26
NATURE AND CREATION OF AN AGENCY
Answers to Learning Objectives
1. An agency is the appointment of one person to make contracts on behalf of another. The person
who makes the appointment is the principal. The person who is appointed is the agent.
2. A general agent is one who has the authority to carry out all business of a particular kind or such
Lesson Outline
1. When one party, known as a principal, appoints another party, known as an agent, to enter into
contracts with third parties in the name of the principal, a contract of agency is formed.
Chapter 26 Nature and Creation of an Agency
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3. Generally, a person may have an agent do all the things a person can do. Some acts that are
considered personal and may not be performed by an agent are voting in a public election, executing
a will, and serving on a jury.
9. There are several different types of agents whose powers, because of the nature of their duties, may
exceed those of the ordinary special agent.
a. A factor is one who receives possession of another’s property for sale on commission.
b. A factor del credere is a commission merchant who sells on credit and guarantees to the
principal that these accounts are good.
c. A broker is a special agent whose task is to bring the two contracting parties together.
d. An attorney in fact is a general agent who has been appointed by a written authorization.
11. There are two types of employment relationships other than agency relationships:
a. Independent contractor
b. Employer and employee
12. The main difference between an employee and an agent is the degree of control the employer or
principal exercises over the employee or agent. The main difference between an employee and an
independent contractor is that the employer has constant power to control the doing of work by the
employee.
Comments on Cases
(p. 307) This case simply demonstrates that the rule “what one may not do cannot be done by an agent”
applies regardless of the reason why one may not do the act. Miner v. New York State Dept. of
Correctional Servs., 479 N.Y.S.2d 703 (N.Y. Sup. Ct.)
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he simply did not want Madzima to file a fraudulent return. Ballantyne v. C.I.R., 99 T.C.
Memo. 2010-125 (T.C.)
(p. 311) The court pointed out that Coleman was the only person who negotiated with insurance
companies and selected the insurance policies. He believed he had the authority and his
supervisor said he had such authority. Fincher v. St. Paul Fire & Marine Ins. Co., 595 F.3d 820
(8th Cir.)
Answers to Questions
(Page 315)
1. The making of contracts with third persons on behalf of the principal distinguishes an agency from
other employment relationships.
2. The courts will not permit certain acts of a personal nature to be delegated to others so not all acts
may be delegated to an agent.
customarily has.
6. A general agent normally has authority to transact acts: (1) clearly within the scope of the express
authority, (2) customarily within such an agent’s authority, and (3) outside of express authority but
that appear to third parties to be within the scope of the agent’s authority.
7. The contract appointing an agent must be in writing if the agency is created to transfer title to real
estate, is to last for more than one year, or is created to execute a formal contract.
8. Ratification of an unauthorized act done in someone else’s name puts the assumed agent in the
Answers to Case Problems
(Page 315)
1. No. The court said that to find an agency relationship, Eads would have to have had a reasonable
belief, based on WSC’s conduct or representations, that Borman was WSC’s employee or subject to
WSC’s control in providing medical services. The fact of Freeman’s referral did not establish any
control by WSC or Freeman of Borman’s practice. Eads v Borman, 351 Ore. 729 (Or.)
Chapter 26 Nature and Creation of an Agency
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Employers Reinsurance Corp., 857 So.2d 606 (La. Ct. App.)
5. Yes. The court found that Castegnaro was acting within the scope of his employment even though
he was doing something Associated did not know about or would not condone. He had the
authority to handle the notices and checks although here he mishandled them. Travelers Cas. &
Sur. Co. v. Castegnaro, 772 A.2d 456 (Pa.)
6. No. Since neither AECC nor SJP accepted the benefits of the transaction between Broussard and
Hamilton Pools, the court stated that as a matter of law, implied ratification did not apply.
Broussard v. San Juan Products, Inc., 273 S.W.3d 400 (Tex. Ct. App.)