chapter 4 Agency Law

Chapter Objectives After reading this chapter, you will know the following: How agency relationship work and the authority that agents have The function of a sport agent The duties of agents and principals within the agency relationship The many ways in which athlete agents are regulated

Top 12 best sports agents most-powerful-sports-agents/ most-powerful-sports-agents/

Arnold Palmer and Mark McCormack

Show Me the Money!

Definition of Agency Law Law that governs (applies and explains) the relationship between a principal and agent Defines the rights and responsibilities of both principals and agents, the authority of the agent as he/she works for the principal. A legal relationship that is essential to business function (e.g., entering into contracts)

Most Common Roles of Sport Agents Negotiate employment contracts Negotiate concession agreements Represent organizations in negotiations with sponsors, advertisers, and media Enter team or organization into events (continued)

Roles of Sport Agents (continued) Enter into contracts with entities that run events Conduct estate and financial planning Secure investment and appearance opportunities Assist in developing Web presence or marketing campaigns

Agency Formation By agreement: Contract between Principal and Agent – an authorized representative By ratification: Principal: accepts the acts of a person who has no authority – “I didn’t give him permission…but yes, I will honor it” By Implied authority – Gave the agent an umbrella of permission to represent them Agency by estoppel (apparent authority) Third party reasonably believes agency exists by observing the relationship

Agency Relationship Facts Both agent and principal must agree to be part of relationship Express contract can be an be oral or written agreement Both parties must have legal capacity to enter into relationship (of age, sound mind, etc.) Can be either an individual or a business entity

Actual Authority – 2 types Express: Authority specifically granted in agency agreement Implied: Authority that is reasonably necessary to carry out express authority (e.g., agent has express authority to negotiate contracts; has implied authority to travel, hire employees to aid him or her)

Apparent Authority Where a third party reasonably believes (incorrectly) that the agent is acting with actual authority Principal held liable, even though no actual authority was given…this is where principal must me very careful.

Duties Let’s look at both sides: Agent to principal Principal to agent

Side 1 - Agent to Principal Fiduciary duty: Agent must act for the benefit of the principal and in their best interest –Cannot engage in double-dealing (working for principal and third party) –Cannot take personal advantage of a business opportunity Fiduciary duties –Duty of loyalty – “solely and completely” for principal –Duty of obedience – follow all reasonable instructions

Principal to Agent Fair compensation - fair and reasonable market value Reimbursement of expenses Compensate for losses (indemnification) Must pay for losses if agent acted in good faith Duty of good conduct – principal cannot demean the reputation of the agent

Liability: Contracts Contract: Key is whether agent is within authority If so: –Principal is liable on the contract –Agent is not liable, unless agent acts for undisclosed or partially disclosed principal –If apparent authority is present, principal is liable and so is agent (who must reimburse principal for damages)

Question: What if my agent does something on my behalf that causes harm to another? Who is liable? The Principle can be held responsible for the torts or wrongful acts of the agent

Liability: Torts Key is scope of employment Factors include the following: –Whether the agent committed an act (resulting in injury to another) that was authorized by the principal –The principle negligently hired the agent – hiring a felon or with bogus qualifications –The principle failed to properly supervise the agent –Whether act was commonly performed by employees on behalf of their employers or extraordinary (continued)

Liability: Torts (continued) –Whether the employer’s interest was enhanced by the act –The extent of involvement of employee’s private interests –Whether the employer furnished the means by which the injury was inflicted –Whether the employer had reason to know that the employee would perform the act in question –The employer gave faulty instructions

The Big 4 of Agency Liability 1.The agent was hired to perform that particular type of act 2.The agent’s act occurred at an authorized place and during an authorized time of employment 3.The agent’s act was inspired by the intent to assist the principal 4.The agent’s method could have been anticipated by the principal Legally licensed plumber Pete incorrectly repairs a gas line… and the house blows up. His employer is liable for this mistake. All 4 rules apply.

Liability: Definitions of Torts Scope of employment is the realm of activities engaged in by an agent when acting on behalf of a principal. Respondeat superior is a legal doctrine that holds people and organizations high in the chain of command (principals) liable for the negligent acts of those lower in the chain of command (agents). Latin: “Let the superior respond”

Regulation of Athlete Agents The need: Agent abuses in the past required more regulation. Negative impact on athletes: In some cases, athletes lost money due to agent’s actions. Reggie Bush OJ Mayo - handout (continued)

Video What is a sports agent? u1hEG23lw

Regulation of Athlete Agents (continued) State laws and the Uniform Athlete Agents Act –Many states had their own statutes requiring registration and licensing –UAAA (adopted by 35 states) Provides for uniformity in registration and certification of athletes’ agents among the states. Provides that agents who sign contracts with student- athletes must provide notice to the particular university and must make clear to the student-athletes that their eligibility is affected. Notice must be given in the contract

Regulation of Athlete Agents: Federal Law SPARTA (15 U.S.C. §§ , 2008) Sports Agent Responsibility and Trust Act –Prohibits agents from making false or misleading promises or providing gifts, cash to student-athletes and those associated with student-athletes –Similar to the Uniform Athlete Agents Act, SPARTA requires written disclosures informing students they could lose their eligibility to play university sports if they sign an agency contract. Violators face fines. –No registration required.

Professional League Unions Each of the major league players’ associations requires agents to register with the appropriate union. Standards vary, but NFLPA’s is the most stringent: Annual classes, passing exam, upholding code of conduct.

Disputes Breach of contract Tort law issues: Fraud, misrepresentation