1. Agency Law
Objective 3.02
Understand agency law

2. What is agency law?
Area of law dealing relationships created between two parties in which the principal gives authority to an agent to act of the principal’s behalf in business transactions with a third party.
Principal -> Agent -> Third Party
Example: You picked up and paid for a pizza ordered by a family member

3. Agency Definitions Principal Agent Third party
Individual who gives authority to the agent.
Agent
Individual employed by principal to work with the third party.
Third party
The person or company whom the agent deals with on behalf of the Principal.
Relationship Triangle & Liability

4. Types of Work Relationships
Principal-Agent Relationship
“Genuine” agency relationship
Agent has conducts business on behalf of the principal (it is as if the principal has acted)
Examples: Employer-Employee, Officers of a Corporation, Partners in a Partnership, Franchisees

5. Types of Work Relationships
Proprietor-Independent Contractor
Proprietor is an individual or business that hires someone to perform a task
Independent contractor (plumber, electrician, lawyer, etc.) works for the proprietor
Independent contractor cannot act on behalf of proprietor without expressed permission

6. Types of Work Relationships
Master-Servant Relationships
A master is a person who has the right to control the actions of another person
Actions include where to work, what time to arrive at work and tasks to complete at work.
The person performing the actions is the servant
At times, the interactions between employer-employee are considered to be master-servant
Liability….

7. Actual Authority
If the principal intentionally gives express and implied powers to the agent to act for him/her, the agent possesses actual authority.
Express Powers
Responsibilities of the agent are written or spoken.
Implied Powers
Responsibilities created by the agent’s actions.

8. Bailee & Trustee Relationship
A bailee is a person who holds personal property of another for a certain purpose.
Laundry, auto repair shop, movie rental
A trustee manages a trust
A trust is a legal device by which property is held by one person for the benefit of another.

9. Apparent Authority Apparent Authority Also called, agency by estoppel.
Created by law or circumstance.
Occurs when a principal, intentionally or negligently, causes or allows a third person to believe that an agency relationship exists, when there is no express agency.
Principal remains liable for the agent’s actions.

10. Types of Agents General Agent Special Agent Subagent
Given authority by principal to perform a VARIETY of tasks.
Special Agent
Authority restricted to certain, specific tasks.
Subagent
An agent appointed by another agent with the knowledge and consent of the principal.

11. Types of Agents Agent’s Agent Co-agents Partially Disclosed Agent
An agent appointed by another agent without the knowledge and consent of the principal.
Co-agents
Two or more agents working together.
Partially Disclosed Agent
Given authority to work with a third party but forbidden to reveal identity of the principal.

12. Types of Agents Gratuitous agent Agent that works for free
No contract exists between agent and principal
Agent can terminate relationship at any time
WORKSHEET:
Agency Law
Matching
WORKSHEET:
Agency Law
Review

13. Duties of Agent to the Principal
An agency relationship is fiduciary in nature; a good faith relationship based on trust
Agent must protect the interests of the principal
Breach?

14. Duties of Agent to the Principal
Duty of loyalty –
Faithfulness or acting in best interest
Duty of confidentiality
Not sharing information/processes/recipes/secrets with others
Duty to abide by all lawful instructions -
Obedience - obey reasonable orders
Duty to act with reasonable care –
Loyalty - faithfulness or acting in best interest
Deal honestly without intent to seek personal advantage
Duty to account for funds - accountable for all money entrusted to him/her

15. Duties of Principal to the Agent
Compensation
Payment for services rendered
Reimbursement
Payment for expenses incurred by the agent on behalf of the principal
Indemnification
Payment for losses incurred by the agent on behalf of the principal

16. Duties of Principal to the Agent
Cooperation
Principal must allow agent to perform his/her tasks
Principal must not make agent’s job difficult or impossible to perform

17. Termination of Agency By operation of law: Death of principal or agent
Either party becomes insane
Bankruptcy of principal
Destruction of subject matter
Agent’s objective becomes illegal

18. Who Has Liability? Contractual Liability of Principals
When an agent makes a contract on behalf of the principal, the agent is said to “stand in the shoes of the principal”.
Thus the law holds principals fully liable.

19. Who Has Liability? Contractual Liability of Independent Contractors
Agent is liable when:
Agent made agreement beyond authority
Principal is a minor but did not disclose
Principal is unknown and third party can not identify principal

20. Who Has Liability? Tort Liability of Principals
Generally, all people are responsible for their own torts
The law extends the Master-Servant relationship to the agent-principal relationship
Master is responsible for torts of his or her servants

21. Who Has Liability? Tort Liability of Proprietors
Proprietor may be held liable for torts of an independent contractor
A nondelegable duty is a duty that cannot be delegated or transferred to another party

22. RELATIONSHIPS ARE CREATED
By agreement (contract)
By operation of law (circumstantial or specific)
By statute (special interest of a state)

23. Agreements Requiring Licensed Agents
All states regulate certain professions of agents
Lawyers
Stock Brokers
Insurance Agents
Real Estate Brokers
Must pass examination and be licensed by the state

24. Agreements Involving Minors
Minors may be a principal or an agent
Minors do not have contractual capacity
If minor is a principal, with an adult agent, the agent may be held liable for an injury, breach of contract or error.
If minor is an agent representing an adult principal, the principal must uphold a contract made by the minor

25. CREATING AN AGENCY RELATIONSHIP
Agreements Requiring Licensed Agents
Agreements Involving Minors
Agencies Created by Operation of Law
Agency by Estoppel
Agency by Ratification
Agency by Statute

26. Agencies created by Operation of Law
Agency by Estoppel
When the principal’s actions lead the third party to believe that the agent is working for the principal.
Agency by Ratification
Agent may not have authority but principal chooses to ignore, accept or approves decision

27. Agencies created by Operation of Law
Agency by Statute
State legislature decided to appoint someone as an agent in order to protect an interest

28. Termination of Agency By operation of law Death of principal or agent
Bankruptcy
Impossibility of performance
Agent’s objective becomes illegal

29. Termination of Agency Termination by acts of the parties Performance
Mutual agreement
Agent’s withdrawal
Agent’s discharge

30. Termination of Agency Notice to third parties Actual Notice
Credit has been given to principal.
Cash business has been done.
No notice when third party never heard of agency relationship.
Actual Notice
Notice by Publication

31. Termination of Agency Fulfillment of the agency purpose Mutual content
The agent completes his/her task
Mutual content
Both agent and principal agree to end relationship
Expiration of time
Only applies if the agent is contracted to perform duties within a certain period of time
PROJECT:
Agency Law
Firm Project
WORKSHEET:
Agency
Relationships

32. Summary/Review Agency Law READING: Pages 288 - 319 PROJECT: Agent
Contract
Development