Business law of Attraction is very important to everyone in the world.Law of Attraction. Law of firms and business. Before you open business you have to read law. There are many laws in Cambodia . If you have done any wrong from the laws, you will be fine or punish by the level of you against the laws. Laws is laws. However, you have to obey the laws. As human, we live in society in order to help each other to obey the law. Laws is created by human. Human have to follow what it say in it. Communication is about Laws too. PUC have one subject called Laws. Laws can learn in every school in Cambodia. Because it is Laws.

1. 1
Introduction toIntroduction to
AgencyAgency
Instructor: Samnang Sun, LL.M
January, 2014

2. 2
What is Agency?
• What is your understanding or background
knowledge of the term “AGENCY”?
• Is the term AGENCY here different from
the term AGENCY used to refer the
government institutions?

3. 3
What about someone’s acting
on someone else behalf?
Third Party
Principal
Agent

4. 4
Then, it would be a triparty relationship in
which someone known as agent acts on
behalf of someone else known as principal
in order to deal with the third party.
Usually agent is under CONTROL of
Principal and carries out at the instruction of
the principal.

5. 5
“Agency is defined as a relationship wherein
a representative enter into a contract with
another party by stating that he is acting on
behalf of principle within the scope of the
agency authorization, the effects of the
contract are imputed directly to the principal”
CIVIL CODE, Art. 364

6. 6
Nature of the Agency
Relationship
• Who is Agent?
Someone who acts on someone else
behalf to enter into contract or undertake
Certain business transactions?
• Who is Principal?
Someone who authorizes someone else to carry
out business activities on his behalf?

7. 7
How are these people different from agent?
• Independent Contractor?
• Employee?
• Broker
Nature of the Agency
Relationship

8. 8
What is Independent
Contractor?
• Someone who agrees to provide one
complete service without having to really
represent you further. You usually don’t
control the person except that you
discuss about the outcome you desire of
that work.
Focus is on result, but not the process

9. 9
Employee?
• Is employee always or sometimes or never an
AGENT?
• Insurance agent? Is he employee and agent at the
same time?
• What about janitor in an organization?
• What about lawyer?
• How do you know when someone is agent and
employee at the same time?
• What about doctor employed in private hospital?

10. 10
Capacity of Agent and Principal
Is there any requirement for someone to
become principal?
Can a minor authorize you to buy a
house?

11. 11
Anyone who may enter into contract or act
for himself may act through an agent
Can a minor enter into a contract?
If a minor can’t enter into a contract, can he
authorizes others to enter into contract on
his behalf? Why or why not?

12. 12
contract
authority
parties to the
contract
Agency Relationship
Principal
Agent Third
Party

13. 13
Is there any requirement
for someone to become agent?
Can a minor act for an adult?
Ex. A minor son collects money/rent
for his parents?

14. 14
Why does AGENCY exist?
• Are principles of Agency Law essential for
the conduct of business? How?
• Would your business run more effectively
if you have someone acts on your behalf?
• Why it is more efficient to have someone
else conducting business for you?

15. 15
• In business world, the large corporation
could perform its business activities more
effectively if it authorizes multiple people
who usually have different expertise to do
different activities at the same time.
• Principal can just oversee the whole
operation without having to be physically
there conducting the business

16. 16
• Corporation or multi million company might
have a lot of transaction going on at the
same time, it is not possible for principal
alone to manage to do all those tasks.
• Sometimes, a person does not possess
certain skill or knowledge, and it is
imperative that they employ someone else
as agent to do the work on their behalf

17. 17
• Agency also exists to ensure a proper
identification of a party to the contract who
should be liable for any breach of contract or
tort damages
• It is not fair to a person who just acts on
someone else behalf while he does not earn
benefit from that contract.
• It also minimize risks for the principal who
authorizes someone else to perform his
business activities; bad agent should be
liable.

18. 18
How does AGENCY exist?
• How can someone become an agent?
• By agreement or contract?
• Can it be just by shaking hand? Or
oral? Does it have to be in writing?

19. 19
• As a general rule, there is no
need of formality
• Agency may be created by
express or implied.
How does AGENCY exist?

20. 20
• It is in writing when the agency requires
formality, ex. Lawyer
• When formally written agency exists, a
person is known to have Power of
Attorney, and he is called Attorney in
Fact
How does AGENCY exist?

21. 21
Agency by Operation of Law
• An agency exists can arise even if the
parties do not intend to be agent and
principle to each other

22. 22
How long does Agency
last?
• A made a valid contract with B under
which A was to sell B's goods
on commission from January 1 to June 30. A
made satisfactory sales up to May 15 and was
then about to close an unusually large order when
B suddenly revoked A's authority to
sell. Can A continue to sell B's goods
during the unexpired term of her contract?

23. 23
• Tom had a number of paintings. He
contracted Kate to sell them and would then
deduct a specified percentage as
commissions and send the balance of the
purchase price to Tom. Tom died.
Mary, Tom’s widow, as the representative of
his estate, sued Kate to get paintings back.
• Is Mary entitled to recover the paintings?

24. 24
• Agency last for a duration stated
by the contract or agreed by both
parties
• Agency lasts without any specific
duration but ends when a
transaction as mentioned in the
contract is complete.

25. 25
When is agency
terminated?
• It ends according to how the contract states
it
• Both parties choose to end it
• If the contract or both parties are flexible
enough, one party may choose to leave
• Principal chooses to end it unilaterally
(depending on agent’s misconduct)

26. 26
Can a law dictate how
an agency is terminated?
• Does agency still continue if one party dies?
• What if either of them is insane?
• Bankrupt?
• Impossibility to carry out agency act, and
other external factors (war, force
majeure..etc)

27. 27
An agency authorization conferred by
a principal via contract is extinguished by any of
the following:
(a) the death, bankruptcy or dissolution of the
principal;
(b) the death or bankruptcy of the agent, or a
restriction on the agent’s capacity to act; or
(c) the termination of the trust, employment or
other legal relationship that gave rise to the
agency authorization.

28. 28
• Authorization by appointment
• Authorization by conduct
• Agency by ratification
How does Principal give his
Authority?

29. 29
What is Authority?
Authority can be express. It is easy for both
principal and agent to know what they
expect from each other. They know their
rights and limits of their duties. Authority is
given before the act happens

30. 30
What is Authority?
Authority can be express, power of
attorney, but most is implied-on basis of
custom, usage, or past actions, nature of
the business, relations of the parties,
nature of the task

31. 31
contract
authority
parties to the
contract
Agency Relationship
Principal
Agent Third
Party

32. 32
What is Agency by ratification?
• What does the term RATIFICATION
mean? Approving something that already
happened or is carried out by someone
else?
• Principal did not authorize agent to carry
out certain conduct in the first place;
however, he chooses to agree AFTER the
agent did it.

33. 33
Scope of Authority
• How do you know whether you have an
authority?
• It is easy to have someone tell you that
you can carry out certain activities
(Actual Authority); what if he does do
so and leaves for you to guess?

34. 34
• What if someone does not tell you that you have
authority? Is it possible that Agency could exist?
Apparent Authority:
is authority that the principal acts as though
the agent has, but in reality he may or may not
have it.
Principle acts in such a manner as to
convey impression to a third party that an
agent has certain power which he may or may
not actually possess

35. 35
Whether agency relationship exists or not is
NOT dependent on the intent of the parties
involved.
An agency exists can arise even if the
parties do not intend to be agent and
principle to each other as long as certain
factual elements are met: Agreement
between the parties that agent will undertake
some act on behalf of the principle, with
understanding that the principle is to remain
in control of the undertaking.
How do you prove existence of agency?

36. 36
No
authority
parties to the
contract
Agency Relationship
Parties to the
Contract and
Liability
Third
Party
Principal
Agent

37. 37
Effect of Proper Exercise of Authority
• If Agent acts precisely what he is instructed
to do, does he have to face any liability as a
result of a breach of the contract?
• If properly exercising his authority, an agent
is not part of the contract and not liable for
any problems.

38. 38
• Sometimes, he carries out
Unauthorized Action, he could be still
not liable if that act was ratified later on
• However, if acting beyond his given
authority (without knowledge of third
party), an agent assumes the risk his
own, becomes a party to the contract,
and will be contractually liable to the
third party

39. 39
What happens if you don’t know
about existence of Agency?
• If A deals with B without disclosing that he
actually is an agent of C, who could B treat as
a party to the contract?
B has the election of treating the contract as
executed between such party and the
principal or as executed between such party
and the agent.

40. 40
However, where B knew [when
the contract was executed] that the agent
was acting on behalf of the principal, the
B can treat the contract as executed only
between such party and the principal.

41. 41
Liability of Person
Acting Without Agency Authorization
Civil Code: Art. 371
Where a person who executes a contract as
agent for another cannot establish the
existence of an agency authorization or
obtain ratification from the putative
principal, such person is responsible for
either performing under the contract or
paying damages, at the election of the other
party.

42. 42
However, where the other party knew
of the lack of an agency authorization
[when the contract was executed], the
person acting without agency
authorization shall be exempted from
such liability.

43. 43
Undisclosed Principal
A sold grocery store to B but continued to
act as a manager. A was supposed to
have the power only to buy vegetable and
meat for the business, as allowed by B,
but bought other goods and drink as well.
B refused to pay C, the supplier, saying
that A did not have authority to buy those
items. C sued B as the principal.

44. 44
Who is Disclosed Principal?
• If the third party knows identity of
principal and the fact that agent is acting
on behalf of that principal, does that
make the principal a party to that
contract?

45. 45
Partially Disclosed and
Undisclosed Principal?
• Partially disclosed principal: usually agent
indicates that he acts on behalf of a
principal but chooses not to reveal his
identity.
• Undisclosed principal: third party is not
aware that the agent is acting on behalf of
someone else and assumes that agent is
the party.

46. 46
Who should find out the
extent of agent’s authority?
• Third party has duty to find out the truth,
failing to ascertain the extent of agent’s
authority, he or she assumes the risk

47. 47
Apparent Limitation
• If third party would reasonably be able to
see the limitation, yet chooses to enter
into the contract, would he be liable?

48. 48
What’s about the secret limitation?
• With secret instruction given by the
Principal, the third party would not know,
should the third party be held liable for not
knowing

49. 49
Sub-Agent
• If someone assigns you to be his agent,
would you be able to appoint someone
else to carry out the work even it means
for the best interest of the principal?
• What is the reason that you are NOT
supposed to appoint someone else as
your sub-agent?

50. 50
Why are you selected for a particular
transaction? What do you possess
that is important to the principal or
that business transaction?

51. 51
• An agent is selected because of specific
quality, skill, or knowledge that allows that
principal to rest assured that his authorized
agent will be able to perform that assigned
task, someone else might not be that
capable as he expects.
• The relationship is built with trust, principal
should be able to rely someone who he
originally chooses; appointing someone
else potentially affects interest of principal

52. 52
• It is fair for principal to deserve someone
he expects in the first place, not from
someone he does not know that might
offer a lower work quality.

53. 53
A person authorized as an agent
pursuant to a contract with a principal may
not appoint a sub-agent. However, this shall
not apply where the principal consents.
Where an agent appoints a sub-agent, the
agent is responsible to the principal in
connection with the appointment and
supervision of the sub-agent.

54. 54
Where an agent appoints a sub-agent
on the instructions of the principal, the
agent is not responsible for the
conduct of the sub-agent unless the
agent knew that the sub-agent was
unfit or untrustworthy and the agent
failed to either notify the principal of
such fact or remove the sub-agent

55. 55
What duties should agent
have towards his principal?
• What is Fiduciary Relationship?
• Both principal and agent should have
Fiduciary Duties to each other? What is
the rationale behind requiring those
fiduciary duties in this kind of relationship?

56. 56
Agent’s duties?
• Duty of loyalty
• Duty of care
• Obedience
• Information

57. 57
What is duty of Loyalty?
• No self dealing? Never?
• Duties to adhere to instruction? What
happens if the agent makes decision that
departs from the instruction but it is for the
best interest of his principal?

58. 58
Principal’s Duties?
• Duty to compensate
• Duty to reimburse and indemnify

59. 59
Liability
• Vicarious liability
–If agent causes harm or injury to third
party during his act of agency, should
principal be held liable?
–Should business pay for harm caused in
the doing of business?

60. 60
Person injured by
agent or
employee
Lawsuit options
Tort action
against Agent or
Employee
Respondeat
Superior
Against Principal or
Employee
Both Principal and
Agent
Agent or employee
liable for torts
committed while
acting as or agent or
employee
Principal/employer
liable if agent acting
within scope of
authority
Person injured by
agent or
employee
Lawsuit options
Tort action
against Agent or
Employee
Respondeat
Superior
Against Principal or
Employee
Person injured by
agent or
employee
Lawsuit options
Tort action
against Agent or
Employee
Both Principal and
Agent
Respondeat
Superior
Against Principal or
Employee
Person injured by
agent or
employee
Lawsuit options
Tort action
against Agent or
Employee
Agent or employee
liable for torts
committed while
acting as or agent or
employee
Principal/employer
liable if agent acting
within scope of
authority
Both Principal and
Agent
Respondeat
Superior
Against Principal or
Employee
Person injured by
agent or
employee
Lawsuit options
Tort action
against Agent or
Employee