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Chapter 31: Agency Formation and Duties

Chapter 31: Agency Formation and Duties. Introduction. Agency=Principal and Agent. Agency is the most common and most important legal relationship. Understanding agency is crucial to understanding the legal environment of business. Introduction [2].

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Chapter 31: Agency Formation and Duties

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  1. Chapter 31:Agency Formationand Duties

  2. Introduction • Agency=Principal and Agent. • Agency is the most common and most important legal relationship. • Understanding agency is crucial to understanding the legal environment of business.

  3. Introduction [2] • Principals use agents to be able to conduct multiple business operations simultaneously in various locations. • The principal has the right to control the agent in matters entrusted to the agent.

  4. Employer Employee Independent Contractor § 1: Agency Relationships • Agency is a “fiduciary” relationship based on trust and confidence. • Distinguish Employee vs. Independent Contractor Relationships.

  5. Employee vs. Independent Contractor Relationship

  6. Employer Liability • Determining whether the worker is an employee or an independent contract affects liability of Principal/Employer. • Tax Liability: Employer liable if employee. • Contract Liability: Employer not necessarily liable. • Tort Liability: Employer liable for torts of employee within scope of employment. • Case 31.1: Graham v. James(1998). • Emerging Trends: Vizcaino v. Microsoft.

  7. §2: Formation of the Agency Relationship • Consensual Agreement. • No consideration required. • Principal needs contractual capacity, Agent does not. • For any legal purpose.

  8. Types of Agencies • Agency by Agreement. • Agency by Ratification. • Agency by Estoppel. • Agency by Operation of Law. • Necessaries for family. • Emergency.

  9. Agency By Agreement Formed through express consent (oral or written) or implied by conduct.

  10. Agency by Ratification Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent.

  11. Agency by Estoppel • Principal causes a third person to believe that another person is the Principal’s Agent, and the third person acts to her detriment in reasonable reliance on that belief. • Case 31.2: Williams v. Inverness Corp (1995).

  12. Agency by Operation of Law • Agency based on social duty is formed in certain situations when the Agent is unable to contact the Principal. • Necessaries. • Emergencies.

  13. § 3: Agent’s Duties to Principal • Performance: reasonable diligence and skill (special skills). • Notification to P. • Loyalty (no conflict of interest). • Case 31.3: American Express v. Topel (1999). • Obedience. • Accounting.

  14. Principal’s Duties to Agent • Compensation (Express or Implied). • Reimbursement and Indemnification. • Cooperation. • Provide safe working conditions.

  15. § 4: Agent’s Rights & Remedies Against Principal • Right to compensation, reimbursement, indemnification and cooperation. • Agent can withhold performance and demand an accounting. • Agent can recover damages for past services and future damages.

  16. Principal’s Rights &Remedies Against Agent • Contract remedies for breach of fiduciary duty and performance. • Can sue in tort: libel, slander, trespass, deceit, fraud. • Constructive Trust – money/ property agent steals from Principal. • Avoidance of contract if agent does not do as told. • Indemnification

  17. Law on the Web • Agency at Cornell U. • Legal Research Exercises on the Web.

  18. Emerging Trends Vizcaino v. Microsoft(1999) Ninth Circuit Court of Appeals ruled that “temporary” workers were not independent contractors but rather employees entitled to all Microsoft stock option benefits. Return

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