Understanding Agency Relationships and Liabilities

agency relationship

A legal relationship where one person (agent) acts on behalf of and for the benefit of another (principal).

fiduciary relationship

A relationship of trust and loyalty requiring special duties between agent and principal.

agency by agreement

Formed by express consent (written or spoken) or implied by conduct.

agency by ratification

Principal approves an act done without prior authority, creating agency after the fact.

agency by estoppel

Principal's words or actions lead a third party to reasonably believe an agency exists.

agency by operation of law

Agency created automatically due to family relationships or emergencies.

actual authority

Authority expressly given or implied by the principal to the agent.

apparent authority

Authority the principal makes a third party reasonably believe the agent has.

agent's duties to the principal

Performance, notification, loyalty, obedience, and accounting.

principal's duties to the agent

Compensation, reimbursement, indemnification, cooperation, and safe working conditions.

principal liability on a contract

When the agent acts within their actual or apparent authority.

agent liability on a contract

If the principal is undisclosed or partially disclosed, or if the agent exceeds authority.

respondeat superior

The principal is vicariously liable for torts committed by an agent within the scope of employment.

detour vs. frolic

Detour = minor deviation (principal still liable); Frolic = major personal deviation (principal not liable).

principals liability for agents' crimes

Only if the principal participated in or authorized the crime.

termination of agency by parties

Revocation, renunciation, lapse of time, purpose achieved, mutual agreement, or occurrence of an event.

termination of agency by operation of law

Death, insanity, bankruptcy, illegality, or destruction of subject matter.

scope of authority

The range of actions an agent is authorized to perform on behalf of the principal.

factors determining employee vs. independent contractor

Level of control, supply of tools, method of payment, degree of supervision, and skill required.

agent liability for torts and crimes

The agent is always liable for their own torts and crimes.

vicarious liability

Liability of the principal for acts committed by the agent within the course and scope of employment.

independent contractor as an agent

Yes, but typically the employer is not liable for their torts unless negligent in hiring or supervising.