1. Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.
BUSINESS LAW AND ORGANIZATIONS FOR PARALEGALS, second edition
by Emily Lynch Morissette
Chapter 1:
Agency

2. Chapter Objectives Learn what a principal-agency relationship is.
Determine how to form a principal-agent relationship.
Explain the differences between the types of authority an agent may possess.
Be able to identify the duties of agents and principals.
Understand the liability of principals and agents to third parties.
Discuss how to terminate an agency relationship.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

3. Introduction to Agency
Building block of corporate law
On person acts for another.
Person acting is the agent and
The person being acted for is the principal
Used to determine whether the principal has liability for the agent
Not always the same as employer-employee relationship
Discuss how almost all businesses have agents, though they might be called by other terms.
Need consent.
Liability is determined by whether there was actual authority, apparent authority, or ratified authority.
Discuss how employer-employee relationship fits into principal-agent relationship (which is larger, and can also include nonpaying roles).
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

4. Example of Typically Free Principal-Agent Relationship
Durable Power of Attorney
Lets one person make medical decisions on behalf of another,
When that person is incapable of making those decisions himself.
Often, no money is exchanged.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

5. Formation of a Principal-Agent Relationship
To be a principal must have capacity to appoint an agent
Not insane
Not under 18 years old
Must be for valid purpose
Not illegal (i.e. buying/selling street drugs)
Make the point that an agent can actually be mentally insane or a minor!
Remind them that the principal-agent relationship can be formed through: actual, apparent, or ratified authority, or estoppel. About to talk about those.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

6. An Agent’s Authorities
Actual Authority or Agreement
Implied
Express
Stating in writing or orally that one wants such a relationship
Apparent Authority
What does a third party reasonably believe about the agent’s status?
Principal makes it look like there is an agency relationship
Implied actual authority is when someone, by their conduct implicates a principal-agency relationship. Give examples.
Apparent Authority: Three major factors: conduct of principal, reliance by third party, to their detriment.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

7. An Agent’s Duties (Cont’d)
Ratified Authority
After the fact
Estoppel
Fairness argument
Ratified authority: agent has to act on behalf of principal, who then ratifies the act,
Principal has to know all of the material facts in the act,
Must ratify in its entirety,
Principal has to have had authority to authorize the act when it happened and when it was ratified, and
Ratification has to happen before third party voids the act.
Estoppel is slightly different from apparent authority because of the fairness argument. Hinges, in part, on the relative bargaining power of the parties.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

8. Duties Agents and Principals Owe Each Other
Agent’s Duties
Performance
Time is of the essence
Notification
Loyalty
Duty not to compete
No conflict of interest
Accounting
Detailed rendering of expenditures
In general, the agent should act in good faith and handle the principal’s money responsibility. The agent should also act with due care, and not be negligent.
Notification—Some states seem to want attorneys to relay all settlement offers while others only seem to enforce the relaying of reasonable settlement offers (i.e. a third or more of the estimated value of the case).
Accounting—this is usually a good time to let the paralegals know that they should be diligent about recouping their expenses, on behalf of work, from the law firm, including parking.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

9. Duties Agents and Principals Owe Each Other (Cont’d)
Principal’s Duties
Compensation
If not a free agency
Reimbursement
For amounts of money the agent has to spend to perform the tasks for the principal
Indemnification
Cooperation
Indemnification is one of the bigger duties the principal has to the agent. Otherwise, there would not be much point in going to work, if, for instance, a barista could be held liable for accidentally spilling hot coffee on a customer. The barista is probably making a little above minimum wage, and depending upon the severity of the burn, might be sued for hundreds of thousands or millions of dollars. If the employer did not agree to indemnify the employee, the employee would have no reason to go to work.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

10. Liability of Principal and Agents to Third Parties
Vicarious liability is very similar to indemnification.
Just means when the principal is held liable for the injury caused by the agent.
Discuss Warner v. Southwest Desert Images. Herbicide spray got into a building through its air conditioning system. Warner began to be physically ill. The employer of the people spraying was held liable. However, punitive damages were not assessed, because there was not sufficient outrageous conduct.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.

11. The full set of PowerPoint slides is available upon adoption
The full set of PowerPoint slides is available upon adoption. for more information.
Copyright © 2017, Emily Lynch Morissette. All Rights Reserved.