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CHAPTER 29 AGENCY: CREATION AND TERMINATION

CHAPTER 29 AGENCY: CREATION AND TERMINATION. DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8 th Ed.). AGENCY LAW AND AGENCY RELATIONSHIPS. Agency law concerns relationships between employees and employers.

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CHAPTER 29 AGENCY: CREATION AND TERMINATION

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  1. CHAPTER 29AGENCY: CREATION AND TERMINATION DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8th Ed.)

  2. AGENCY LAW AND AGENCY RELATIONSHIPS • Agency law concerns relationships between employees and employers. • Agency law involves duties/responsibilities to each other, and the public at large. • Agency law places significance reliance on state law and precedent.

  3. AGENCY LAW AND AGENCY RELATIONSHIPS • Restatement explains key terms: • Agency is a fiduciary relationship resulting from consent of one person to another that the other shall act on his/her behalf. • Principal one whom action is taken for. • Agent one who is to act.

  4. AGENCY LAW AND AGENCY RELATIONSHIPS • Agency relationship is consensual in nature. • Based on concept that parties mutually agree: • Agent will act on behalf of principal. • Agent will be subject to principal’s direction and control. • Agreement can be expressed or implied.

  5. AGENCY LAW AND AGENCY RELATIONSHIPS • Analysis of Agency Relationships: • Was dispute between principal and agent? • Agency formed voluntarily by principal and agent, or is there other relationship? • Did parties have capacity to perform roles as principal and agent? • What authority did principal vest on agent? • Did agent enter into contract or commit a tort?

  6. RESTRICTIONS ON CREATING AN AGENCY RELATIONSHIP • Agency law affects broad range of situations. • Few restrictions on who can form agency relationship. • One restriction is agency agreement require agent to perform legal acts.

  7. RESTRICTIONS ON CREATING AN AGENCY RELATIONSHIP • Capacity to Be a Principal. • With exception of minors and incompetents, any person can appoint an agent. • Generally any person having capacity to contract can employ servant or nonservant agent. • Capacity to Be an Agent. • Anyone can be an agent. • It is capacity of the principal that controls.

  8. RESTRICTIONS ON CREATING AN AGENCY RELATIONSHIP • Duties an Agent Can Perform. • Agents authorized to do almost any legal task. • There are some non-delegable duties: • Employer’s duty to provide safe working conditions. • Person’s duty under certain contracts. • Landlord duties to tenants. • Common carrier’s duty to passengers. • Duty of person engaged in inherently dangerous work to take precautions. • Non-delegable duties defined by state statutes.

  9. TYPES OF AGENCY RELATIONSHIPS • General and Special Agents. • Special agent: employed to complete one transaction or simple series of transactions, the relationship covers limited period and is not continuous. • General agent: conduct series of transactions, has more discretion to carry out employers’ business.

  10. TYPES OF AGENCY RELATIONSHIPS • General and Special Agents. • Factors that determine agent’s status: • Number of acts agent must complete to obtain an authorized result. • Number of people that must be dealt with. • Length of time necessary to obtain the desired result.

  11. TYPES OF AGENCY RELATIONSHIPS • Gratuitous Agents. • Person volunteers services without an agreement or expectation of payment. • Requirements: • Person volunteered to help another. • Person being helped accepted this assistance.

  12. SERVANTS AND INDEPENDENT CONTRACTORS • Most workers are servants or independent contractors. • Servants and employees are synonymous. • Servants (Employees): • Physically work for Master; and • Master (employer) has right to control how task accomplished.

  13. SERVANTS AND INDEPENDENT CONTRACTORS • Servants: • Distinction between servant and independent contractor in determining liability for employee’s conduct. • Employer liable for physical acts of servant.

  14. SERVANTS AND INDEPENDENT CONTRACTORS • Independent Contractors: • Hired by employer to accomplish a task for someone else. • Hiring party does not control or subject to control physical acts of independent contractor. • Independent contractors who are agents have fiduciary duties and can bind their principals of contracts.

  15. SERVANTS AND INDEPENDENT CONTRACTORS • Responsibility for Independent Contractors. • Contract Liability: principals who engage independent contractors as agents will be liable on contract if contract was authorized. • Tort Liability: independent contractor who is injured while working generally can’t recover from hiring party. Employees of independent contractors have been permitted to recover from independent contractor.

  16. SERVANTS AND INDEPENDENT CONTRACTORS • Responsibility for Independent Contractors. • Employer not liable for physical acts of independent contractors unless hiring party: • Reserves right to supervise/control work. • Directs independent contractor to do something wrong. • Knew about activity and did nothing to stop it. • Does not supervise independent contractor. • Careless in selecting independent contractor. • Independent contractor hired to commit crime and engage in ultrahazardous activities.

  17. DUTIES OF THE AGENT TO THE PRINCIPAL • Agent must protect interests of principal. • Requires agent to perform certain duties: • Duty of Good Faith (a fiduciary duty). • Duty of Loyalty. • Duty to Obey All Lawful Instructions. • Duty to Act with Reasonable Care. • Duty to Segregate Funds. • Duty to Account for Funds. • Duty to Give Notice .

  18. DUTIES OF THE PRINCIPAL TO THE AGENT • Principal duties may be specified in the contract between principal and agent. • In general, principal has following obligations to the agent: • Pay agent per the agreement. • Maintain proper accounts so compensation and reimbursement will be correct. • Provide agent with means to do the job. • Continue employment for time period specified.

  19. TERMINATION OF THE AGENCY RELATIONSHIP • Agreement of Parties. • Contract between principal and agent state when it will end. • Agency at Will. • Terminable at any time by either party after notice. • Fulfillment of the Agency Purpose. • Completion of work terminates.

  20. TERMINATION OF THE AGENCY RELATIONSHIP • Revocation. • Principals revoke authority of agents to act on their behalf. • Renunciation. • Agent notifies principal they quit.

  21. TERMINATION OF THE AGENCY RELATIONSHIP • Operation of Law. • Termination occurs automatically: • Upon death of agent or principal. • Either party becomes insane. • Principal becomes bankrupt. • Agent becomes bankrupts, if bankruptcy affects the agency. • Agency cannot be performed. • Unforeseen events destroy the agency relationship. • Change in law makes agency illegal.

  22. TERMINATION OF THE AGENCY RELATIONSHIP • Importance of Notice. • Early termination by either party, except by operation of law, requires notice. • Actual or constructive notice may be acceptable. • Breach of Agency Agreement. • If principal wrongfully revokes agent’s authority, agent can sue for breach of express or implied contract.

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