Agency outline

Agency Relationship

• An agency relationship involves two parties: the principal and the agent.

• Consideration Requirement: No consideration is needed to form an agency relationship.

Principals

• Principals manifest assent to work with agents.

• Court's interpretation of agency relationship occurs when one party disclaims it by observing the manifestation of assent.

Agents

• Agents agree to work for principals' benefits and under principals' control.

• Common examples include:

  • Employee-employer

  • Named agents

  • Partner-partnership

  • Officer/director-corporation

Fiduciary Duties

• Termination: Either party may unilaterally terminate the agency relationship.

• Duties of the agent include:

  • Duty to exercise reasonable care

  • Duty of loyalty to the principal

  • Duty to obey reasonable instructions

• Restrictions on Agents:

  • Cannot usurp business opportunities.

  • Cannot take secret profits.

  • Cannot compete against the principal in a competing business.

Employee vs. Independent Contractors

• Employees:

  • Employers control the agent's physical conduct of work.

• Independent Contractors:

  • Maintain a high level of independence.

  • Free to work for others, often paid via a fixed fee, typically owning their own tools.

Legal Authority

Types of Authority

• Express Authority: Actual authority explicitly granted by the principal to the agent.

• Implied Authority: Authority inferred from the principal's conduct or circumstances to achieve objectives.

• Apparent Authority: Authority perceived by third parties based on the principal's representation, causing reasonable belief.

• Ratification: Occurs when:

  • The principal has knowledge of the contract's material terms.

  • The principal accepts the benefits of the contract.

Termination of Authority

• Express authority terminates upon the death of the principal.

• It also terminates for the agent immediately upon the agent receiving knowledge of the principal's death.

Disclosure of Principals

• Disclosed Principals: Third party knows both the agent is acting for the principal and the principal's identity.

• Partially Disclosed Principals: Third party knows the agent is acting for a principal but not the principal's identity.

• Undisclosed Principals: Third party isn't aware of the agent's status or the principal's identity.

• Liability considerations depend on whether the agent had authority.

• Estoppel: Principals can be estopped from denying liability if they fail to inform third parties about the lack of authority.

Contract Liability

• The principal is bound by a contract when:

  • The agent was authorized to enter the contract.

  • The agent acts with legal authority.

Liability to Third Parties

Vicarious Liability

• A principal may be liable for an agent's tortious acts if:

  1. The principal has sufficient control over the agent’s conduct (usually in an employer-employee relationship).

  2. The tort was committed while the agent was within the scope of employment.

• Generally, a principal is not liable for acts outside the scope of employment.

Exceptions to Employer Liability

• Exceptions where the principal may still be liable despite the tort occurring outside of employment scope:

  1. Conduct occurred within time and space limits of employment.

  2. The agent was partially motivated to benefit the principal.

  3. The act was of a kind the agent was hired to perform.

Frolic and Detour

• Frolic: Significant deviation from an assigned path; principal is not liable.

• Detour: Minor deviation from assigned path; principal is liable if it falls within the scope of employment.