Introduction to Agency and Business Organizations Chapter 1 Introduction to Agency and Business Organizations

Agency Concepts & Definitions Agent –the person authorized by the principal to act with third parties on the principal’s behalf General-an agent authorized to transact all business of the principal or employment of particular nature Special-an agent employed to conduct a particular transaction or piece of business for his/her principal or authorized to perform a specified act Principal-an employer or anyone else who has another an agent do things for him/her See examples of page 2.

Master and Servant Master-employer/principal Servant-employee/agent Independent Contractor –person who contracts with an employer to do a particular piece of work by his/her own methods and under his/her own control. See factors on page 3-4.

Power of Attorney-a special type of agency created by a written instrument that authorizes another to act as one’s agent. General POA-authorizes attorney in fact to act on behalf of the principal in all matters. Durable POA-lasts as long as individual remains incapable of making decisions (usu. about health care)

Agency Creation Elements (1) consent of the parties (2) capacity of the parties to act No minors or no people of unsound mind (3) no written agreement required Rem: SOF (4) no exchange of consideration required (5) proper purpose Purpose must be legal

Creating the agency relationship (1) express agreement Verbal or written (2) implied agreement Intent and actions (3) conduct of the principal/agent Apparent agency-principal intentionally or negligently causes a third party to rsbly believe that another individual is acting as the principal’s agent and the third party relies on that belief (4) ratification –principal accepts the benefits derived from the agent acting on his/her behalf or otherwise affirms the conduct of an individual acting on the principal’s behalf See example on page 9 (5) estoppel –agency created to prevent a loss by innocent persons

Agency Relationship An agent is a fiduciary. Agent’s authority –agent’s power to act on behalf of the principal Actual authority Express authority Implied authority Incidental to express authority Implied because of emergency Apparent authority Inherent agency authority

Agent’s duties to principal Duty to perform Reasonable care Fiduciary duty Duty to notify Duty of loyalty Remedies available to principal

Principal’s duties to the agent Duty to compensate Duty to cooperate Duty of care Indemnification –the principal must compensate or promise to compensate the agent for any damages incurred in the course of acting as agent

Principal’s Liability to Third Parties The principal is liable for the acts of the agent. Tort liability Respondeat superior Acts intended by the principal Negligence or recklessness by the principal

Agent’s Liability to Third Parties The agent is usually not liable if acting within scope of agency. The agent may be liable for his/her own wrongdoing and torts committed by them.

Agency Termination Expiration of agency term Fulfillment of agency purpose Death or incapacity of principal or agent Change in circumstances-impossibility of performance Act or agreement of the parties Renunciation by agent Revocation of authority by principal Termination of apparent authority

Agency and Business Organization Sole proprietorships General partnerships and limited liability partnerships Limited partnerships and limited liability limited partnerships Limited liability companies corporations

The Paralegal’s Role See corporate paralegal profile on pages 23-24. See ethical consideration on page 24.

Resources Agency treatises Online agency law resources