1 / 27

AGENCY LAW

AGENCY LAW. There are THREE relationships involved in Agency Law: Principal – Agent Principal – Third Party Agent – Third Party. Principal. Agent. Third Party. In any situation, the rules relating to each relationship must be applied INDEPENDENTLY of the others.

buck
Download Presentation

AGENCY LAW

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. AGENCY LAW

  2. There are THREE relationships involved in Agency Law: Principal – Agent Principal – Third Party Agent – Third Party Principal Agent Third Party In any situation, the rules relating to each relationship must be applied INDEPENDENTLY of the others. The result in one relationship may have an influence on results (liability) in one or both of the other relationships

  3. The Principal – Agent relationship is governed primarily by: a. the Principal—Agent agreement, b. the law-imposed duties each owes to the other, and c. ______________________ Principal Agent A. The Principal – Agent relationship is created by ________________ 1. The Principal requests [consent] the Agent to do something for the Principal 2. The Agent agrees [consent] to do the act(s) requested by the Principal 3. Except to the extent expressly agreed otherwise, the law: a. Assumes the _____________ in the Principal, which carries with it responsibility for the Agent’s acts while carrying out the agreed tasks (contrary agreement = no agency) b. Imposes many _____________________ on the Agent

  4. IMPORTANT NOTE: 1. The distinction between “employee” and “independent contractor” is irrelevant to the “principal”–“agent” relationship. 2. The rules governing the principal – agent relationship apply equally to employees and independent contractors. 3. If the parties to the agency relationship also have a contract: a. The contract terms may clarify or modify (to some degree) general agency-law rules b. The extent to which the parties perform, breach, can enforce, etc., the contract depend on contract law, not agency law c. The extent to which the parties perform, breach, can enforce, etc., the agency agreement/relationship depend on agency law, not contract law 4. Mixing agency law with contract and/or employment law causes confusion and, frequently, incorrect conclusions

  5. B. Among the things NOT needed to create an agency relationship: 1. A _______________, i.e. consideration is not required 2. Something in writing, unless the act to be done by the agent must be in writing (e.g. signing a real property deed). 3. _________________, such as “principal,” “agent,” “agency,” etc. 4. An _____________ concerning the agent’s duties, the principal’s responsibilities, or other rights and responsibilities » E.G. giving a person the job/title of store manager implies that person has the authority to do what is necessary to perform the functions of store manager (a/k/a “implied actual authority”)

  6. Ratification: “Ratification” happens (in any situation) when one party does some act that may benefit or obligate (intentionally or unintentionally) another party to perform some act(s). The second party can, if it chooses, to perform the obligation/contract. That agreement or actual performance “ratifies” the other party’s act and assumes the obligations (maybe contract) created by that act. One person’s ratification of a contract negotiated by someone who was not the ratifier’s agent is only a ratification of the contract. That does not retroactively create an agency relationship. If the ratifying person/entity ratifies a number of contracts negotiated by the not-agent, a court (applying equity principles) may hold that the ratifying party created “apparent authority” in the negotiating person. That would be something like ratifying the agency relationship. It would also be much like creating an agency “by estoppel”

  7. ALL fiduciaries have duties similar to an agent’s, some-times requiring an even higher duty of care (such as a trustee of property). Having a fidu-ciary duty, however, does NOT necessarily imply the power to legally bind someone else to a contract D. An Agent’s fiduciary duties (imposed by law) 1. The duty of _________________ a. Act only within the __________ her/his/its _________________ b. To always place the principal’s interests higher than anyone else’s (including the agent’s) c. To deliver all property and opportunities to the principal d. To act exclusively for the principal ___________________________ ____________________ otherwise, including (1) Not acting as agent for another party at the same time (2) Not competing with the principal (3) Not personally benefiting as a result of acts or incidents occurring while acting as agent

  8. E. An agent’s other duties to the Principal 1. To ________________ (except ones to do illegal or unethical things) 2. To act with __________________ a. If the agent is a professional, he/she/it is held to professional standards of care b. Applies to all related acts, from driving a car, to renting a hotel room, to dealing with third parties 3. To provide the principal with complete and timely information (because the principal is assumed to know everything its agent knows) An agent’s duties might be summarized as: “An agent has a duty to act in all respects ___________________ if the principal were acting instead of the agent.” The agent is a legal alter ego of the principal and must act accordingly.

  9. F. Principal’s remedies in case of Agent’s breach of duty 1. The agent must ____________________________ received beyond those expressly provided for in the principal – agent agreement 2. Damages for ________________ incurred by the principal (including profits the principal could have made if the agent had acted properly) a. Includes losses [indemnification] and costs incurred [reimburse- ment] in performing contracts with third parties when the agent did not have actual authority to agree on the principal’s behalf b. Includes tort damages paid by the principal to third parties injured by the agent’s negligence 3. Rescission of any contracts between the principal and agent

  10. G. Principal’s duties to Agent 1. To ______________________ for costs incurred while carrying out the agency a. Applies even if the agent is a friend acting gratuitously b. Assumes that the costs were reasonable and appropriate (if not, agent would have breached a duty) 2. To __________________ for any contract liability imposed on agent 3. To indemnify agent for any tort liability imposed on agent for acts which were specifically authorized (and agent did not know it was a tort) 4. To _______________ with the agent so that the agent can perform a. Other agents of the principal may not do anything the principal could not do directly b. Not unreasonably interfere with the agent’s performance [But if the agency is not exclusive (area, subject matter) the principal can compete]

  11. TERMINATION of a Principal – Agent Relationship The course text (and most others) do not make sufficient distinction between the agency relationship, which is based on consent, and the related contract, if any. The agency relationship can be terminated by either party at any time. Whenever an agency relationship ends, one or both parties may have a cause of action against the other for relationship-related things (indemnification, etc.) IF the agency relationship is part of, or related to, a contract, the act terminating the agency relation- ship may breach that contract. IF there was a contract involved, the non-breaching party might also have a cause of action based on the contract (separate from any concerning the agency).

  12. A. Things that terminate a Principal – Agent Relationship 1. The ________________ by either Principal or Agent (with notice, of course). 2. Any event that would terminate a contract between the parties: a. Agreement between Principal and Agent to terminate b. Completion of the agency’s purpose c. Performance of agency becomes impossible (1) Act/purpose becomes illegal (2) The subject matter ceases to exist (cow died) (3) Agent or Principal looses necessary qualification (which usually makes performance illegal) d. The Agent _____________ his/her ___________________

  13. 3. Termination of the agency ONLY terminates the agent’s __________ ____________ for the principal a. Obligations between the parties that were created during the relationship are not automatically terminated (1) Any duty to ______________________________ continues (2) Duty of indemnification and reimbursement continue until fulfilled (3) Duty to surrender Principal’s property and account continue until fulfilled b. Agent’s general duty of loyalty does terminate In all aspects of the Principal—Agent—Third Party situation, it is VERY important to keep a clear separation between the rights, duties and obligations imposed by _____________ and any rights or obligations ____________________________.

  14. AGENCY LAW – Part 2 The “Outside” Relationship There are THREE relationships involved in Agency Law: Principal – Agent Principal – Third Party Agent – Third Party Principal Agent Third Party In any situation, the rules relating to each relationship must be applied INDEPENDENTLY of the others. The result in one relationship may influence results in on one or both of the other relationships

  15. I. Principal – Agent & AUTHORITY A. This relationship is governed by agreement between Principal and Agent B. Most important with respect to third parties is Agent’s authority C. In Principal – Agent relationship, the key is “_____________________” 1. Actual authority can be either _______________________ a. Express actual authority includes all the actions, authorities, duties, etc., Principal expressly grants Agent authority through: (1) Contract, if any (2) Job description of Agent’s position (3) Specific instructions (oral or written) on any topic b. Implied authority is based on ______________________ of scope of authority normally associated with a particular job 2. May vary over the term of the relationship

  16. D. Relationship between actual authority and Agent’s and Principal’s liability to each other 1. If Agent is acting within her/his actual authority, Principal is responsible ________________ for carrying out any obligation agreed to by Agent Example: Agent agrees with Zelda that Principal will sell Zelda 100 purple widgets at $5.25 each. Principal must perform that contract, even if Principal did not really want to sell to Zelda. (If Agent knew Principal did not want to sell to Zelda, the contract would not be within her actual authority.) 2. If Agent acts outside of actual authority, Principal is _______ responsible ________________ to perform the contract, and Agent must indemnify Principal for any resulting losses, costs [Principal may still be ______________________ to perform the contract.] 3. If Agent acts within actual authority but Principal does not meet the obligation incurred, Principal must _________ Agent for any losses, etc., suffered by the Agent

  17. II. THE PRINCIPAL – THIRD PARTY RELATIONSHIP A. The Principal – Third Party Relationship is controlled by _______________________ rules 1. “Apparent authority” is based on what a third party can reasonably conclude about the Agent’s authority ____________ _____________________________ 2. Relevant acts of the Principal include (among other things) a. The Agent’s job title b. Giving the agent business cards, company forms, company car, telephone number at company offices, c. _____________________________________________ about the Agent and her/his relationship with principal d. General publicity concerning the Principal and Agent e. Actually performing contracts arranged by Agent can become apparent authority only after that becomes a pattern known to the third party

  18. B. Relationship between “apparent authority” and parties’ liability to each other 1. If an agreement made by Agent with a third party is within the scope of Agent’s apparent authority, Principal is responsible ___________________________ for performance 2. An agent has ______________________________ based on apparent authority rules for any agreement made by Agent on behalf of the Principal (Third party may have some other basis for going after the Agent.) 3. Apparent authority, as such, is _____________ to the Principal – Agent relationship (But some factors used to deter- mine the scope of implied actual authority are nearly the same as factors used to determine apparent authority.)

  19. III. AGENT – THIRD PARTY RELATIONSHIP A. The Agent – Third Party relationship is governed principally by the extent to which the agent’s status is known by the third party 1. _______________________ Agency a. The third party knows that the agent is __________________ and _____________________ of the principal b. The _________________ to the third party for the performance of any agreement made on the principal’s behalf, UNLESS the agent somehow indicates his/her personal agreement (1) An agent may join with his/her principal as a contract party (2) If an agent signs a contract document without indicating he/she is signing as an agent, law assumes that he/she intends to be a party to the contract

  20. 2. _______________________ Agency a. The third party knows that the agent is acting as an agent, but ______________________ the identity of the principal b. ________ the agent and the principal are liable to the third party for agreements made on the principal’s behalf (1) The principal is liable because it was the third party’s intent to enter into a contract with the principal (2) The agent is liable because, in fact, the third party was __________________________________________ and other facts when making the agreement c. There can be no _________________ in this situation because there is no information flowing directly from the principal to the third party

  21. 3. _____________________ Agency a. The _________________ that the agent is acting as an agent, or (obviously) the identity of the principal b. The agent is personally liable _____________________ for performance of the agreement c. The agent can _______________________________ to the principal, so long as that is consistent with contract-law rules on assignment and delegation d. The __________________________ an assigned/delegated agreement is governed by Principal – Agent relationship rules e. The third party’s obligation to accept performance from the principal is based on contract-law rules concerning assign- ment and delegation f. If the agent is acting beyond the scope of his/her actual authority, the principal has ______________________, unless she/he/it ratifies the agreement

  22. IV. ON AGENTS and EMPLOYEES A. Text says all employees are agents. 1. That is true in the limited sense that all employees do something for the employer. However, the term “agent” is normally used with respect to persons who have some authority to deal with third parties on the principal’s behalf. a. A person can be an agent without being an employee b. Many employees have no authority (actual or apparent) to deal with third parties on their employer’s behalf 2. Whether a particular person is an employee (or not) is based on the extent to which the employer has the __________________ the details of that person’s actions a. An employer has the right to specifically control every aspect of an employee’s work b. An ________________________ agrees to provide a result, and has the right to decide how that is done

  23. B. It is better to intellectually separate “employees” and “agents” 1. The rules and considerations applicable to “agency” are principally concerned with third-party contract problems 2. The rules and considerations applicable to employer-employee relationships and third parties are principally concerned with tort problems (i.e. non-contract injuries to third parties)

  24. V. PRINCIPAL’S LIABILITY FOR INTENTIONAL TORTS A. Agent or Employee is always liable for his/her own torts (intentional or otherwise) B. Principal is liable for Agent’s torts committed __________________ by Principal 1. If a person commits a tort on the instructions of, and for the benefit of, another person, that other person is liable as principal (Implicit agency agreement) 2. Agent may receive indemnification from Principal if Agent had no reason to believe that the instructed act would be a tort C. Principal MAY be liable for ____________ committed by employee or agent 1. If employee/agent is ________________________________ and just happens to commit a tort in the process, principal/employer is probably liable 2. If agent’s purpose when committing the tort was personal, principal is probably NOT liable

  25. VI. EMPLOYER’S LIABILITY FOR EMPLOYEE’S NEGLIGENCE A. Employer’s liability for employees’ acts is based on “_________________________” 1. Theory is based on the assumption that the employer has the _________________________________________ 2. If the person committing the tort fits the definition of “employee” the employer does have that power 3. If a person/firm is acting as an “independent contractor” the other party to the contract (sometimes called “employer”) does not have the necessary power to control

  26. B. An employer is liable for an employee’s negligence when the employee was ___________________________________ when the tort occurred 1. “Scope of employment” is interpreted ________________ 2. A person is acting within the scope of his/her employment if a. He/she is properly following instructions and doing what the employer hired her/him to do b. She/he is attempting to do the job, but may not be doing it strictly as instructed c. He/she is at a particular place at a particular time ___________ ___________________, with the possibility of doing particular acts, even if they violate instructions EXAMPLE: Bus driver assigned to drive a long route. Rules require that he rest before driving again. Driver stays in motel, goes to restaurant/bar for dinner, after dinner drinks. Driver gets in a fight in the bar, injures third party. Bus operator is liable as employer.

  27. 3. Employer is NOT liable if employee has “abandoned” acting for the employer and is, instead, pursuing his/her personal interests a. An employee’s abandonment of employer’s interest is never assumed b. That the employee is pursuing only his own interests must be obvious c. So long as the employee is doing something within the scope of his/her employment, the fact that she/he is also doing something for personal benefit or enjoyment does not exempt the employer. (Think talking on cell phone while delivering pizza.) d. As soon as the employee resumes doing the employer’s work, she/he is back within the scope of employment, even if she/he is far from where she/he would have been if there had been no abandonment. EXAMPLE: Zeke is told to drive to Dallas with a truck load of widgets. Zeke drives north on US 59 to Texarkana, then turns east to visit his girlfriend in Little Rock. When he turns east, he is on his own. When Zeke finishes his visit in Little Rock and gets back on I-30, he is back within the scope of employment, even though he is still deep in Arkansas.

More Related