Chapter 18: Creation of Agency

TERM What you think it means? Actual Definition Agency   Agent Prinicpal Master Servant Independent Contractor Respondeat Superior General Agent Special Agent Agency By Estoppel Ratification

Agency Relationship Lets us act through other people to accomplish tasks that might be difficult or impossible to do on our own.

3 Types Principal-Agent Master-Servant Proprietorship-Independent Contractor

Agency Allows us to act through other people to accomplish tasks that might be difficult or impossible to do on our own

Agency Relationships Principal-Agent Relationship PRINCIPAL THE PARTY WHO NEEDS A REPRESENTATIVE PERSON FOR WHOM THE AGENT ACTS AGENT PERSON WHO ACTS FOR PRINCIPAL IN BUSINESS TRANSACTIONS WITH THIRD PARTIES THIRD PARTY PERSON THE AGENT DEALS WITH ON BEHALF OF THE PRINCIPAL Principal-Agent Relationship

PRINCIPAL-AGENT RELATIONSHIP Consensual – Both Parties Agree Not Always Contractual Gratuitous Agent – Does Not Receive Consideration (aka $) Relationship is FIDUCIARY – Based On Trust Between Agent and Principal Some Agents Are Considered Employees

Principal-Agent Relationship Let’s find some… Example: Jay Z has a manager for his finances. Principal is Jay Z Agent is John Meneilly

Master-Servant Relationship Master: The Person Who Has The Right To Control The Conduct Of Another Who Is Performing A Task For The Benefit Of the Master Servant: A Person Whose Conduct In The Performance Of A Task Is Subject To The Control Of Another A Servant May Also Be An Agent

Master-Servant Relationship Example: Sally tends house for Mary, an elderly woman who lives alone. Mary is very particular about her house, so Sally cleans exactly as directed. Sally knows Mary doesn’t have the money to pay her, so she never asks. Sally is only a SERVANT.

Master-Servant Relationship Example 2: Oprah has a personal assistant, Judy, who is paid weekly. Judy is responsible for taking care of Oprah’s daily meeting schedule. Oprah demands that her schedule be maintained in a particular way. Judy is a servant, but also an agent.

Master-Servant Master CONTROLS Conduct of Servant

You Find Master-Servants… Using the Internet, Research 3 Famous Master-Servant Relationships Explain who was the master, who was the servant…. Was the servant also an agent? What did the servant do for the master?

Proprietor-Independent Contractor Relationship Independent Contractor: Works For But Is Not Under The Control Of The Proprietor Proprietor: Chooses To Have Someone Perform A Task On His Or Her Behalf, But Has NO CONTROL Over The Activity Of The Independent Contractor

Proprietor-Independent Contractor Relationship Suzy purchased a home with a 3 acre lot of land. Due to her demanding job, she is unable to care for the lawns and shrubbery. Suzy hired Mike to take care of her lawn. Suzy’s only order to Mike was that he make her lawn the best-looking in town. Mike works as he wishes, with the tools he wa

Proprietor-Independent Contractor Examples:

Servant or Independent Contractor Does the hiring person supply the tools for the worker? Is the worker paid by the hour? Does the hiring person set the worker’s hours? Is the worker employed only be the person responsible for hiring? Is the business of the worker the same as the business of the hiring person? Does the worker lack authority to hire or fire other workers? Does the worker perform his or her tasks in a highly supervised environment? Is very little skill required to perform the worker’s job?

Let’s Compare…

Why are relationships important? Contractual Liability Principal Is Bound To Terms Of Agent Unless Agent Has No Authority To Enter Contract Servant Does Not Have Authority To Negotiate Contracts For Master Unless Also An Agent Independent Contractor Has No Right To Bind Proprietor To A Contract Unless Expressly Permitted

Tort Liability Tort: A wrongful act from which injury occurs to another Respondeat Superior: Latin Phrase for if the servant has wronged someone, let the master respond

Was servant acting within scope of authority or course of employment? commits tort against third party. YES NO RESPONDEAT SUPERIOR

Types of Agents Distinguish between: The extent of the agents’ authority How the agents relate to one another

General Agent A person who has been given authority to perform any act within the scope of a business AKA Discretionary Agents May hire or fire Ex: Dr. R Ex: Manager

Special Agent A person who is employed to accomplish a specific purpose or to do a particular job Ex: Sales representatives sell and pass titles to specific goods sold, but that is the extent of their authority Cannot make purchases for principal Cannot collect $ unless they actually deliver

How Agents Relate to One Another Subagent: Agent lawfully appointed by another agent Occurs when: Principal gives agent power to appoint subagents. Agents can appoint subagents for routine or simple clerical tasks. An agent in an emergency can appoint subagent Agent’s authority to appoint subagent is often recognized as part of power that goes with being an agent

How Agents Relate to One Another Subagent: Agent lawfully appointed by another agent Occurs when: Principal gives agent power to appoint subagents. Agents can appoint subagents for routine or simple clerical tasks. An agent in an emergency can appoint subagent Agent’s authority to appoint subagent is often recognized as part of power that goes with being an agent

Subagent Example: Andy is the manager of a Pat-Med Hotel. The P-M Hotel workers go on strike. Andy can’t get a in touch with the general manager because he is on safari in Africa. Andy hires Fred Mars as an attorney to negotiate with the union. Fred is a Subagent

Agent’s Agent When an agent has no power to appoint a subagent, but does so anyway Example: PM Hotel Suppose in previous example, no strike. Andy hired Fred even though owner expressly forbid him from hiring. Fred is an Agent’s Agent. Owner does not have to honor any contracts Fred negotiates.

Coagents Principal hires two or more agents Both subject to authority of the principal, but not one another unless principal so authorizes Authority flows from principal to agents

Scenarios… Create Subagent, Agent’s Agent, and Coagent Scenarios

How Agency Relationships Are Created By Agreement By Operation of Law By Ratification

Agency By Agreement Most Often Usually Contracts Must Include Consideration to be a contract May be oral or written If NOT a contract, Gratuitous Agency

Example: Matron of Honor

Express Agreements One that involves clearly stated terms of agreement Example: Chauffeur

Agency By Operation of Law May be created automatically, by circumstance, or through enactment of specific laws. Agency by Estoppel: AKA Apparent Authority When the law creates an agency relationship. Ex: Phony Salesperson

By Statute When a state legislature decides that certain situations justify automatic creation of agency relationships by statute

Agency By Ratification When a person acts as an agent without authority and the principal, with full knowledge of the facts, accepts the benefits of the unauthorized act. If principal does not accept, the would-be agent is liable to the third party.

You Create Examples…