The Agency Relationship

THE AGENCY RELATIONSHIP:

Agency:

-Agency can exist even if 2 parties said that there is no agency

-Principal or agent who lacks the needed mental capacity when the agency is formed, can release himself from the agency at his option (minors and mentally ill)

Duties that cannot be delegated to an agent:

-making statements under oath

-voting in public elections

-signing a will.

Agency Authority:

Authority - is an agents ability to affect his principals legal relations.

2 types of Authority:

a. Actual Authority - must be communicated to the agent

b. Apparent Authority - must be communicated to the 3rd party

A. Actual Authority (2 forms)

1. Express Authority - is created by the principal's Actual words (written or oral) to the agent, giving agent authority to bind principal on a contract or other matters. (a precise statement).

2. Implied Authority - An agent has implied Authority to bind the principal to do whatever it is reasonable to assume that the principal wanted him to do.

-- Related Factors:

-Principals Express statements

-The nature of the agency

-The acts reasonably necessary to carry on agency business

-The acts customary done when conducting that business.

B. Apparent Authority

Apparent Authority - arises when principals behavior causes a 3rd party to believe reasonably that the agent is authorized to act a certain way.

-Depends on:

1) what the principal communicates to the 3rd party (directly or through the agent).

2) the 3rd party must reasonably believe in the agents authority.

-An agent cant give themselves apparent authority

-Apparent authority doesn't exist where an agent creates and "appearance" of authority w/o the principal's consent.

AGENCY TYPES:

1. General - continuously employed to conduct a series of transactions

2. Specific - Employed to do a single transaction or one specific transaction (sell car but not house).

3. Sub Agent - an agent of an agent. (subagents can only be appointed if the agent of the subagent has the authority from the principal to appoint a subagent.)

EMPLOYEES & INDEPENDENT CONTRACTORS:

REID Factors: (help distinguish between Employee or Independent Contractor)

- Most important factor is the principal's right to control the manner and means of the agent's performance or work.

o The hiring parties right to control the manner and means by which the product is accomplished.

o The skill required

o The source of the instrumentalities and tools

o The location of the work

o The duration of the relationship between the parties

o Weather the hiring party has the right to assign additional projects to the hired party.

o The extent of the hired party's discretion over when and how long to work

o The method of payment

o The hired party's role in hiring and paying assistants

o Weather the work is part of the regular business of the hiring party

o Weather the hiring party is in business

o The provision of employee benefits.

o The tax treatment of the hired party.

DUTIES OF AGENT TO PRINCIPAL (AGENT  PRINCIPAL):

I. Fiduciary Duty - Duties that agent owes to principal because the principal entrusts its business to the agent. ( it is a relationship of trust and confidence).

II. Types of Fiduciary Duties:

1. Duty of Loyalty - An agent must: 1) avoid conflicts of interest. 2) not disclose confidential information received from principle.

i. Conflicts of Interest:

1. Agent can not deal with himself, unless consented by principal.

2. Agent can not compete with the principal

3. May not act on behalf of the other party unless principal knowingly consents (Agent may not act as agent for both parties).

ii. Exception - agent will not breach these duties if agent acts in good faith by disclosing all the facts regarding the conflict of interest.

2. Confidentiality - Agent may not disclose confidential information unless otherwise stated that he may do so. ( this lasts even after an agency relationship has ended.)

III. Agents Duty to Obey instructions:

1. Agent must obey instructions given to him by the principal

i. Exceptions:

1. A gratuitous agent need not obey his principal's order to continue to act as an agent.

2. Need not obey if activity is illegal or unethical.

IV. Agents Duty to Act with care and skill:

1. A paid agent must act with care, competence, and diligence. (A gratuitous agent need only to exercise the care and skill required of non-agents who perform similar gratuitous undertakings.

V. Agents Duty to Notify:

1. An agent must promptly communicate to the principal matters within the agents knowledge that are relevant and material to the agency business and that he knows or should know are of concern to the

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