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Business Organizations

This chapter explores the principal-agency relationship, crucial in business contexts where one person acts on behalf of another. We discuss the necessity of agency relationships, especially when the principal prefers anonymity or when the agent possesses superior skills. We delve into the fundamentals of agency law, highlighting that an agent's authority stems from the principal's rights. Agency relationships can arise from agreements, contracts, or by operation of law, allowing for diverse business interactions and ensuring effective representation.

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Business Organizations

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  1. Business Organizations Chapter 2

  2. I. Introduction to Principal and Agency Law • In this chapter, we will explain the principal-agency relationship. This relationship is based on a simple premise: that one person represents the interests of another.

  3. Why is an Agency Relationship Necessary? • Agency relationships are necessary where the principal wishes to remain unknown, or where the agent has skill, education and training that exceeds that of the principal.

  4. The Basics of the Agency Relationship • An agent’s authority to act derives from the principal’s rights. If the principal lacks capacity, so does the agent.

  5. As far as the law is concerned, an agent is merely a substitute for the principal. • Agency relationships are usually created by the express, intentional actions of the parties.

  6. The Basics of the Agency Relationship • Agency can be created by: • Agreement of the parties • Contract • Operation of law

  7. Agency relationships can encompass an enormous variety of business relationships.

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