Business Organizations I Law of Agency, Sole Proprietorship

1
Business Organizations I Law of Agency, Sole
Proprietorship Partnership

• Canadian Business Law I
• Lecture 8
• November 1, 2007

2
Law of Agency

• The role of an agent
• The nature of the relationship
• Ratification of contracts by a principal
• Third parties and the agency relationship
• Tort liabilities of principal and agent
• Termination of agent-principal relationship

3
The Nature of the Relationship

• Agency by express agreement
• Agency by conduct or estoppel
• Adoption of contract
• Reid and Keast v. McKenzie (1921)
• Spouse, director of a company
• Agency by operation of law e.g. railway company
  Campbell v. Newbolt (1914)

4
Duties of Agent

• Act within the terms of appointment
• Make complete and prompt disclosure
• Maintain the skills required for the job
• Duty of care
• Fiduciary duty utmost good faith

5
Third Parties and the Agency Relationship

• Disclosed agency
• Undisclosed agency
• Fictitious agency e.g. non-existent principal
  agent liable for fraud
• Undisclosed principal Campbelville v. Cook
  Paving Co. (1968)

6
Ratification Liability in Tort

• Ratification by principal
• Principal must be in existence
• Within a reasonable time
• Relates back to the date of the contract
• Liability in tort
• Scope of agents employment decisive
• Campbell Motors v. Watson (1949)

7
Termination

• Must be according to contract Yamaha Canada v.
  MacDonald (1990)
• Notify third parties Consolidated Motors v.
  Wagner (1967)

8
Sole Proprietorship

• Single owner
• Complete authority
• Complete responsibility
• Unlimited liability
• Flexibility, speed, suited for small enterprises

9
Partnerships Essential Characteristics

• Persons coming together for joint business
  activity Johannes Estates v. Thomas Sheaves
  (1996)
• Legal term and business usage Rogers and Bell
  Canada
• Governing statute Partnership Act in Ontario
• Personal relationship, not freely transferable
• Implied agency relationship among partners
• Common ownership of business and assets
• Good faith relationship
• Partnership by estoppel

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The Question of Liability

• Liability of partners joint and several
• Liability of the firm for the acts of partners
  including torts
• New partners not automatically liable for
  existing debts
• Liability for the acts of employees

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Rights and Duties of Partners

• In the absence of contract
• Equal share in profits
• Partners entitled to indemnification
• Interest on excess capital
• Participate in the management
• No remuneration
• Consent of all partners required for admission of
  new partners
• Every partner will have access to books of
  accounts
• No majority rule

12
Dissolution of a Partnership

• In accordance with the terms of partnership
• Fixed period
• Specific venture
• At will
• Death or insolvency of a partner
• Liquidation of assets and discharge of
  liabilities
• Notification of dissolution

13
Other Features

• Limited partnerships
• Limited liability partnerships
• Registration of partnerships