Introduction

Read the overview below and complete the activities that follow.

Before beginning this activity, review LO 20-8 in your text. Notice that the parties in an agency relationship may choose to terminate an agency relationship, or it may terminate automatically by the lapse of time, fulfillment of purpose, or operation of law.

CONCEPT REVIEW:

Agency relationships do not always last forever. If an agency relationship has ended, the agent no longer has authority to make agreements on behalf of the principal. However, the agent's apparent authority continues until the principal notifies third parties that the relationship has ended.

Case:

Read the case and answer the questions that follow.

Suppose John receives an excellent job offer with an advertising agency, and he accepts immediately. He is offered a position as the head of accounts, which means he is primarily responsible for bringing in new products and firms to the agency. After bringing in a new product, he is the person responsible for handling the entire account. As such, he becomes an agent of the company within the scope of his employment as the head of accounts, and he often works as a liaison between the agency and third parties. As the liaison, he works and makes business deals on behalf of his boss, and he is trusted with making these decisions without explicit approval from his boss for every business transaction

Suppose indeed that the agency relationship is terminated and John no longer works for the advertising agency. Instead, he works at a competing firm. How should the parties give notice of the termination to one of John's clients that he conducted business with?