BU 231 - Lecture 17 Franchise, Agency, and Employment Law

BU 231 Lecture 17 - Franchise, Agency, and Employment Law Franchine, Agency, and Employment Law ● Agency law: ○ Creating an agency relationship ○ Apparent authority ○ Duties to agent to principal ○ Duties of principal to agent ○ Rights and liabilities of principal and agent to third parties ○ Breach of warranty of authority ○ Terminating agency relationship ● Franchise law ● Employement law: ● Applicable laws ● Employee vs. independent contractor ● Duties/liabilites of employee/employer ● Termination of employment K ● Employee welfare legislation Agency Law ● Agent - a person acting for another person in contractual relations with third parties ● Terminology: the agent acts on behalf of the principal to bring third parties into a contractual relationship with the principal Agency vs. Employee ● Employees are agents of their employer, but nto all agents are employees ● An employee’s work is often under direction and supervision of employer ● An employee often has a very limited ability to bind their employer to a contract ● Rights and responsibilities between employer/employee differs from principal/agent Creating an Agency Relationship ● There are three parties: ○ Agent ○ Principal ○ Third-party ● Two contracts: ○ Principal and agent: agency contract ○ Principal and third-party: contract for goods/services, etc. ● Relationship between the three:

Agency Agreement ● Agency agreement - the K between principal and agent whereby the agent undertakes to act on behalf of the principal ○ Normal rules on contract formation apply ○ Statute of frauds : if greater than 1 year, then must be in writing to comply with Statute of Frauds ○ Should set out limit’s of agent’s authority Types of Agency Contracts ● Power of attorney - a type of agency agreement authorizing the agent to sign documents on behalf of the principal ○ Commonly used when unable to enter contracts on your own (out of country/city, health issues, etc.) Apparent or Ostensible ● Authority that is not real, but is acquired from a past manner of transacting business of from trade custom ○ Ex. when one reasonably infers that another is acting on behalf of another person ● Test for Apparent Authority: ○ Should the 3rd party have been aware of the agent’s lack of authority or at least be suspicious? Or is it reasonable to assume from the type of business that the agent is engaged in, that the agent had the authority in question? ● If the agent had apparent or ostensible authority, then the principal is bound by the contract even if the agent exceeded his/her authority or did not have authority ○ Otherwise you would always need to do due diligence on an agent’s authority before entering a business transaction with them ● Mercentile Credit Co. Ltd. v. Garrod, [1962] 3 All E.R. 1103 Apparent Authority ● Holding out - representing by words or conduct that a person is one’s agent or has a particular authority ● Pickering v. Busk (1812), 104 E.R. 758 Concept of Ratification

○ No obligation to pay for unauthorized acts unless ratified Rights and Liabilities of Principal and Agent ● Principal along is liable when: ○ Agent acting with real or apparent authority ○ Agent must make clear to 3 rd party that she/he is acting for a principal - even if an undisclosed principal ○ When principal alone is liable, payment or delivery must be made to the 3 rd party and not the agent - if agent absconds with money/goods, principal remains liable to 3 rd party ● Agent alone is liable: ○ Where agent represents himself/herself to be the principal ○ Under these circumstances the principal has no rights or liabilities under the K ● Either the principal or the agent is liable: ○ Where agent did not disclose status as an agent - third party can sue either the agent or the principal but not both ○ If agent is sued successfully by 3 rd party then principal has no liability ○ If existence of principal becomes apparent during court proceedings, 3 rd party can have the action discontinued against the agent and brought against principal instead Rights of Undisclosed Principal ● Right to enforce the contract against 3 rd party where, ○ She/he can show that the K was made with his authority ○ The authority must be real and not apparent ○ Exception: the undisclosed principal cannot enforce a K that is essentially personal in nature ● Third party cannot hold undisclosed principal liable in a situation where the agent acted without real authority; ○ Sign-O-Lite Plastics Ltd. v. Metropolitan Life Insurance Co. [1990], 49 B.C.L.R. (2d) 183 Liability for Torts ● Principal is jointly and severally liable for torts committed by agent within real or apparent authority ○ Example: fraudulent misrepresentation (deceit) - 3 rd party has right to: ■ Rescind K ■ Sue both agent and principal for tort of deceit ○ Principal will have right against agent for the deceit ○ Agent can also be held liable for negligent misrepresentation Breach of Warranty of Authority ● Warranty of authority - where a person purports to act as agent represents that she has authority to contract on behalf of a principal

● Purpose - put parties back in the position they would have been had the misrepresentation not occurred ● Third party has the right to sue for Breach of Warranty of Authority where: ○ Agent has no real or apparent authority (and no ratification by principal) - there is no contract ● Third party will have an action in deceit against a fraudulent agent - there is no contract ● Third party will have an action in negligent misrepresentation where agent negligently misrepresents his/her authority - there is not contract ● If agent innocently exceeds authority - i.e. contracts without knowing that principal has died, become insane or bankrupt - there is no contract Terminating the Agency Relationship ● Agents authority is terminated when: ○ At the end of a time specified in the agency K ○ At completion of the particular project ○ Upon notice by either party ○ Upon death or insanity of either principal or agent ○ Upon bankruptcy of principal ○ Upon an event the make performance of the agency agreement impossible Franchise Law ● Relationship: ○ Franchisor (ex. McDonalds) and Franchisee (ex. Person who owns McDonalds franchise and runs the store) ○ Relationship is contractual in nature ○ This is not a fiduciary relationship, but there is a duty of good faith between the parties (ie. must be open, honest, and not misleading) Franchising ● Franchisor - grants a licence to Franchisee ● Franchisee - pays for the licence, but operates the business as an independent The Franchise Agreement ● Usually includes: ○ Consideration of the parties - ie. franchise opening fees/royalty payments in exchange for using trademarks/business practices ○ Conduct of the business - restrictions on how stores/restaurants must look, where it can be located, what you can sell, etc. ○ Termination of the agreement - how franchise agreements can be terminated by either party ○ Restrictive covenants - limits on what you can do ○ Intellectual property rights - using trademarks and business processes