The Agency Relationship

The Agency Relationship

• Agency is a service an agent performs on behalf of the principal
• An agent is authorized to act for a principal when dealing with a third party
• A principal authorizes an agent to act on their behalf
• A real estate agent is not an agent in legal definition
• Most employees are not agents, but some are such as customer service reps at Rogers, who make binding offers on Rogers' behalf
• In Partnerships, every partner is an agent for the other

Creation of the Agency Relationship

• An Agency Agreement (formation by contract) is a legal agreement creating an agency relationship between the principal and agent
• All elements of a contract must be present: consensus, consideration, legality, intention to be bound, and capacity
• Actual Authority given to an agent is either express or implied
• Express Authority: the authority, as actually stated by the principal
• Implied Authority: the authority, as implied from surrounding circumstances
• A written agency agreement should expressly state the agent's authority as specifically as possible to limit implied authority
• Enduring Power of Attorney is an agreement when the principal has full mental capacity, allowing a trustee to manage affairs if the principal loses sanity
• Formation by Estoppel occurs when a principal's conduct/words lead a third party to believe an agent has authority, and the principal is bound regardless of actual authority
• Estoppel: an equitable remedy that stops a party from taking back their actions or words in the argument of fairness
• Apparent Authority is authority suggested to a third party by the conduct of the principal
• Reasonable person test is applied and depends on the conduct of the principle not the agent; the principal has to cause the misleading
• Formation by Ratification occurs when a principal confirms an agreement entered into by an agent, even if the agent had no authority when the agreement was made.
• The elements needed include Time Limit (third party sets a reasonable time for ratification), Specific Principal (agent acts on behalf of a specific principal), Capacity (Principal must be fully capable), and Performability (Parties can still perform the contract object)
• Ratification by Conduct: Ratification can also occur if the principal benefits from the agreement, or acts as if the agent had the authority to agree.
• Formation by Necessity is the authority to act as an agent when there is an urgent need
• Due to instantaneous communication, it is rare that agency by necessity is used

Agent's and Principal's Duties, and Liabilities

• When an agency agreement exists, an agent must act within their actual authority, if violated, the principal can sue for breach of contract and any losses

• An agent must have the skills/expertise claimed, and exercise it reasonably

• An agent must follow the explicit instructions of the principal, even if doing so harms the principal

• An agent generally cannot delegate responsibilities to another person

• Fiduciary Duty: a duty to act in the best interest of the principal

• Elements of Fiduciary Duty include: keeping communications confidential and disclosing them to the principal, acting in the best interest of the principle even with personal loss, plus not taking advantage of opportunities

• An agent must perform in good faith towards their principal

• An agent must fully disclose all communications and reveal any personal benefits from an agreement

• Lawyers, accountants, doctors, and trustees have a fiduciary duty towards their clients

• Principal's duties include honoring the contract, honoring the terms of the contract with their agent, and payment to the agent.

• Agent's Liabilities:

• Warranty of Authority: when an agent knowingly misleads a third-party of their authority, the agent is liable and may be sued by the third party for the tort of deceit or negligence

• Principal's Liabilities:

• Vicarious Liability: an employer is held liable for acts of an employee during the course of employment

• Agent is an Employee: When an agent is an employee, the principal is always vicariously liable for their acts

• Agent is NOT an Employee: A principal can be held vicariously liable for the acts of an agent if the acts were in the process of serving the agency function.

• Estoppel: If the principal leads a 3rd party to believe that agent is employee, vicarious liability holds

• Direct Liability for Tortious Conduct can arise if a principal provides false information to their agent which was then relied upon to make a deal with a third party

• Undisclosed Principals: conceal the principal’s identity from the third party.

• Aware Third-Party: Agent holds no liability if a third party is aware, & only principal can enforce the agreement

• Unaware Third-Party: Agent is liable if they enter an agreement pretending to be the principle & third party is unaware of the real principle's existence. Can't be changed once third party discovers third party exists, they can stop pursuing agent and sue principal instead.

• Situations in Which the Principal Must be Disclosed:

• When the identity of the person is important.

• Where the agent has no actual authority, the principal must be acting on actual authority

Termination of the Agency Relationship

• Termination occurs due to:
• Death of Principal
• Bankruptcy of Principal
• Dissolution of Corporation
• Insanity of Principal (apparent authority continues until third party notified)
• Mutual Agreement (apparent authority continues until third party notified)

Types of Business Organizations

• Sole Proprietorship: one person carrying on business as a sole owner. No separate legal entity. Unlimited personal liability. Income subject to personal tax rate. Proprietor may obtain insurance to offset liability.
• Partnership: ownership and responsibilities of a business shared by two or more partners, with a view towards profit. No separate legal entity or limited liability.
• Creation of a Partnership:
• Creation by Inadvertence: joint contribution of capital, implication to share profits/losses, and joint participation in management
• Creation by Contract: includes duties, timing, profit sharing, limitations and resolutions
• Creation by Estoppel: one party tells a third party they are a partner of another, and that information is acted upon
• Other Business Structures include:
• Non-Profit Society: separate legal entity with different incorporation process and liability of its members
• Holding Corporation: corporation that holds shares of other corporations
• Joint Venture: collaboration to complete a major project
• Limited Partnerships: agreement involving 1+ general partners (unlimited liability) and 1+ limited partners (limited liability)
• liability is capped for limited partners
• Partners must not partake in management activities

Rights and Duties of Partners and Provisions of the Partnership Act

• Partners will share profits/losses equally
• Partners are entitled to reimbursement for any expenses they incur
• All partners can take part in management
• A partner is not an employee and is not entitled to wages, only to the profits of a business
• No major changes without unanimous agreement
• Partners cannot assign their partnership status to another person without approval of all partners
• Business records must be kept at partnership office, where all partners can review them.
• Fiduciary Duty: Each partner has the fiduciary duty to act in the best interest of their partner(s)
• Information learnt through one's position as partner, must be shared with partnership, and cannot be used for personal benefit, and a partner cannot operate a similar business without consent
• Use of Partnership Property: Property used for personal use, any profits derived must be split with the partnership, and reimbursements must be made for deterioration of the property
• Bringing Personal Property into a Partnership: if personal property is brought into a partnership for business use, it becomes the property of the partnership.
• Liability of Partners:
• Liability through Agency, Vicarious Liability, and Unlimited Liability
• Jointly Liable: all partners must be sued together
• Severally Liable: each partner can be sued separately
• Dissolution of a Partnership:
• Dissolution by Notice: a partnership can be dissolved by notifying the partners of one's desire to exit
• Dissolution by Death or Bankruptcy: The partnership is automatically dissolved if it is not stated otherwise in the partnership agreement
• Dissolution by Expiration of Term: the partnership is dissolved at the end of the term
• Dissolution upon Completion of Venture: when a partnership was created for a specific venture.
• Dissolution by Illegality of the Business: if the nature of the business a partnership is involved in becomes illegal.
• Dissolution by Court Mandate: one partner can apply to the court to dissolve a partnership
• Distribution of Assets and Liabilities
  • Debts to creditors paid out from profits
• Any assets remaining are used to pay back the partners for original capital investments
• If any funds remain, they are split among the partners

Separate Legal Entity

• A corporation exits separately from the person who created it

• Distinction also notes that the assets of a corporation do not belong to its shareholders; liabilities of a corporation also do not belong to its shareholders.

• Corporations rely on directors/shareholders to enter contracts on its behalf.

• Pros of Incorporation:

  • Limited Liability: shareholders have limited liability towards corporation obligations.
  • Taxes: corporations provide multiple tax advantages in handled correctly

• Succession: entity is not dissolved automatically if a major shareholder dies; shares are simply transferred.

• Transferability: shares can be easily/quickly transferred without approval

• Obligations of Participants: unlike members of partnership, shareholders are free of obligations

• Management: owners of a corporation don't need to be involved in its management, but shareholders appoint board of directors and board of directors hire managers

• Cons of Incorporation include: Loss of Control, expensive to incorporate, and formal record keeping Requirements

The Process of Incorporation

• Incorporation Methods:
  • Registration: involves registering a memorandum and articles of association
  • Memorandum of Association: The constitution, setting out key information like name, shares, and objectives
  • Articles of Association: Internal regulations setting out the process for governing a corporation, like share issue and voting
• Letters Patent: monarch granting charter
• Articles of Incorporation: corporation granted certificate of incorporation by filing articles of incorporation and paying the fee
• Share Classes
  • Common Shares: have no preference and give general rights, like voting and dividends
  • Preferred Shares: have preference, like receiving dividends first, but do not have voting rights
• Borrowing: can borrow funds, issuing bonds
• Bond: share interest in the indebtedness of a corporation, typically secured against some asset, but does not give the holder ownership
• Debenture: an unsecured method of borrowing funds
• Closely Held Corporation: restrictions on sale of shares
• Broadly Held Corporation: More stringent regulations

Corporate Directors, Officers, Shareholders

• A director is a manager within the corporation, elected at the annual meeting
• Once elected, shareholders have limited say
• To serve, a person must be adult of sound mind, cannot be bankrupt, and cannot have been convicted of fraud
• Duties include: duty to exercise care, diligence, and skill, and fiduciary duty to act in the best interest of the corporation,
• Issue: Directors owe fiduciary duty to corporation, not shareholders thus corporation have to vote to take legal action against other directors.
• Derivative:even a minority shareholder can take civil action against a director
• Duty of Care, and against Insider Information
• Directors prohibited from using their knowledge
• Obligations for:
• external: Personal Liability in Unpaid Wages, Personal Liability for Unpaid Taxes, Personal Liability for Environmental Regulation
• Officers and Senior Executives: Courts usually put the same responsibilities of both

Shareholders' Rights

• Have rights; and are protected -Right to View Documents, Right to view financial statements and auditors report, Annual General Meeting; shareholders have the right to attend, Right to appoint a Proxy; shareholders can appoint a proxy vote
• Rights:
  • Right to not have their shares diluted
• Protections:
• Derivative, and Oppression Action
• Rights during Dissent and appraisal, dividends, and according to Shareholder's Agreements
• Termination can be Voluntarily or Involuntarily, and Internally, or Externally through Outside Parties
• CHAPTER 12- EMPLOYMENT
• Employee vs Independent Contractor: distinction can be determined via a control test, organization test, a risk test, and a tools test
• Termination can be Voluntarily or Involuntarily, and Internally, or Externally through Outside Parties, can be a constructive dismissal if there is harassment

Employment Law

• Employment Contracts: employment contracts outline responsibilities and obligations for:
• Employers, like payments, and ensuring safe workplaces & hiring competence,
• Employee, like following orders and being loyal
• Restrictive Covenants are commitments to not work in certain geographical regions,
• Termination can occur on Time-Period discharges by mutual agreement or reasonable notices
• In situations that employees are discharged there has to be proportional justice ,with reasons from Incompetence, Dishonesty, Illness or Disability, plus there has to be reasonable opportunity to improve, although layoffs and dismissal does not mean the employee isnt entitled to a re-negotiation
• Constructive dismissal can occur if there are material changes, or sexual harrassment

Employment Remedies

• Wrongful Dismissal Remedies are that employee is entitled to be rewarded what they have missed during employment period + Punitive damages
• Employees are require to provide reasonable intent and notice to their departure
• Federal vs. Provincial (Canada Labour Code vs Employment Standards Act) each sets minimum wage, minimum overtime ,minimum work hours and more
• Complaints , must seek advice
• Human Rights has been a constant battle that has set up tribunals, to investigate, levy fines and re-instate employee
• Affirmative action is to correct inequality
• reverse racism and discrimination has occured

Workplace Safety

• All parties share their obligation to maintaining workplace safety
• Worker rights entail the right to refuse labor,to know of dangers and to be engage
• Remedies of safety violations are to have them be corrected with shut downs and fines
• Employees that take worker comp, can not pursue civil action on their employers
• Governed through unemployment, and other aid programs

INTELLECTUAL PROPERTY

• Intellectual property is personal property in the form of ideas and creative work. Governed under laws and Federal Government
• Copyright Law, is to protect the actual expression of the idea not the idea its self, its protected for the calendar year of death until 70 years later where it goes to the public domain
• You can have literary, and music work, under fair deals in canadas copy write law

Copyright and Patents

• Creations, will engage you in copy write, but you need to register as if you do not its hard to enforce
• Remedies for infringement occurs if there a in the way of injunctions, and must act through a court of law to have activity ceased and awards provided
• Patents , provide a government monopoly and covers ideas alone, it had to be original.
• CANNOT be scientifical principles
• You can Register patents every 20 years
• You need to Trademark product to have it secure to your brand, as well to be on the trademark act
• You can be in danger if you mislead the public and the design is too similar.

Real vs. Personal Property

• Property, is what you have and own
• Real Property, is more set and not moveable
• Personal Property, can be chossin of action , or chattel
• Interests and Estates can come in land and fees
• Rights, leases also go along
• Joint Tennancy or ownership can also occur
• It must have an agreement to be sold, while having the condition to be the same, can be registered with system, when it is a land title, also can be rented with landlord tennancy acts and the process.

Lease Holds and Commercials

• Leases can have rights and be periodic
• There is a residential tennancies acts, that requires certain process and sheriffs to pass eviction
• Commercial can also have terms but most ensure land lord has the right of vacant possession
• Default to payments can result a lien or stopage or deposit

Final Property

• Chattel can be parts of real property when they are attached
• 2 person can have the same property on different circumstances
• Chattets are to be bailment, where its left.
• You can find items in public space but the owner has the final rights

The Sales and Consumer Protection

• In which vendors always often lack certain information in the form of payments and date the act applies to Goods.
• No Money is exchanged via bartner rings, or by other gift.
• Title and REsult , can mean the transfer is for furture
• Cash on Delivery means they have to hold until final receipt.
• One is allowed To convey title, by matching the sellers to have it clear, merchants must fit their purpose.
• Payment defaults are usually that of liens
• Then it can be re instated.