Agency, A Review

1. Agency, A Review Mike Brigner SCC Bus Org II

2. The Law of Agency • One person acts for another by the latter’s authority Principal gives authority to agent to act (enter agreement) Agent acts (manifests agreement) or actually consents New legal relationship arises between Principal & 3d party Agent now can bind Principal in tort and contract

3. Definitions • An agent is one who agrees to act for or represent another, called the principal. • Agency is when one acts for another by the latter’s authority.

4. Three Types of Agency • Express – an agency agreement, written or oral. • Implied – no express agreement, but the parties’ words, conduct, or prior dealings show the existence of their agency relationship. • By estoppel – principal’s acts lead third party to believe an agency relationship exists. (“Apparent Authority”)

5. Three Types of Grant of Authority • Written (Such as POA) • Oral (“Sell my car”) • Conduct (Handshake, Nod) • Ratification – when principal accepts the act of an agent even though the agent did not have prior actual authority to act.

6. Examples of Agency • Durable general power of attorney • Officer of a corporation • Sales clerk at Target • Real estate broker • Partner in a partnership

7. Powers of Attorney • Power of attorney -- the authority to act for another • Special power of attorney -- authority to act for another as to specifically authorized matters • General power of attorney -- authority to act for another as to any matter

8. Agent’s Duties • Performance -- must perform duties with reasonable diligence & care • Notification -- must provide all information relating to the agency • Loyalty -- must act solely for benefit of principal • Accounting -- must account for all money or property received on principal’s behalf

9. Principal’s Duties • Compensation -- must pay agent for services • Reimbursement -- must repay costs and expenses incurred on principal’s behalf • Indemnification -- must compensate for liability incurred by agent while performing duties • Cooperation -- must not hinder agent’s performance of duties

10. Mutual Duties • Agents and principals owe fiduciary duties to each other • Each party owes the utmost duty of good faith, candor, and fair dealing to the other due to the trust each places in the other

11. Tort Liability • An agent is liable for his or her own torts • Generally, a principal is liable for torts of agent committed in the course and scope of the agency

12. Employment Liability • Employer liable if employee’s tort is within scope of employment • Employer is liable for failure to supervise employee • Employer not liable for intentional torts of employee • Employer not liable for an employee’s “frolic of his own”

13. Employment Liability Theory • Respondeat superior = “let the master answer” • Also called vicarious liability • Liability is imposed on the employer-principal even though he/she did not actually commit the wrong, and without regard to actual fault

14. Independent Contractors • Not subject to detailed direction, as are employees • Exercise independent discretion and control of their activities • Generally, employer-principals are not liable for the acts of independent contractors, • Unless they have directed or authorized the wrongful acts

15. Termination of Agency • Upon expiration of stated time • When purposes of agency fulfilled • By mutual agreement • By death or bankruptcy of either • By either upon reasonable notice

16. Agency Examples in Business Relationships • Sole proprietors vicariously liable for their employees • Partners are both agents and principals for each other • Each partner can sign contracts, • hire employees, • purchase goods, • bind the partnership, • bind the other partners

17. Agency Examples in Business Relationships • Directors and officers are agents of a corporation • May be reimbursed for expenses incurred for the corporation • May be indemnified for acts performed on behalf of the corporation • Owe fiduciary duties to the corporation • Owe undivided loyalty to the corporation

18. Agency Review Concluded Mike Brigner SCC Bus Org II