Agency Law

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.

3. Agency Definitions • Principal • 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.

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)

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

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. 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.

9. Types of Agents • General Agent • 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.

10. Types of Agents • Agent’s 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.

11. Types of Agents • Gratuitous agent • Agent that works for free • No contract exists between agent and principal • Agent can terminate relationship at any time

12. 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

13. Duties of Agent to Principal • Duty of loyalty • Duty of confidentiality • Duty to abide by all lawful instructions • Duty to act with reasonable care • Duty to account for funds

14. 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

15. 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

16. 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

17. Termination of Agency • Fulfillment of the agency purpose • 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