AGENCY

Definition of Agency A fiduciary relationship. –Trust and confidence Mutual agreement of two persons –that one person (agent) will act on the behalf of the other (principal). –and will be subject to the principal’s control and consent. Capacity to be an agent. –Most people can be agents. –Including minors. But minor would be able to avoid the agreement until he or she reaches the age of majority.

Creation of an Agency Relationship Generally, no formality is required to form and agency relationship Existence of agency relationship is determined objectively. –A. Does agent have power to act for principal –B. Is agent acting as a fiduciary –C. Does principal control agent’s conduct

Creation of an Agency Relationship Writing Required: Statute of Frauds: Agreements for more than one year must be in writing. Equal Dignity Rule : If agent enters into contract for principal which is required to be in writing than agents authority must be in writing.

Creation of an Agency Relationship Agency by Ratification (Page 22, 23) –Principal must exist at time of contract and be competent. –Principal must ratify contract in its entirely with full knowledge. –Principal must ratify before third party withdraws –Agent must have indicated agency relationship to third party

Creation of an Agency Relationship Agency by estoppel. (Apparent Agency) –Actions of principal lead third person to believe that a certain person is her agent. –Third party relies on principal’s conduct.

Agent can affect the legal status of the principal in both contract and tort. –Principal will be bound by contracts entered into by agent –Principal will be liable for torts committed by agent.

Employer-Employee /Independent Contractor  Employer is responsible to provide workers compensation, social security, unemployment benefits and withhold income tax for Employees.  Employer may also provide medical and retirement benefits.  Employer is liable for the torts of an employee Committed within the scope of employment.

Employer-Independent Contractor Independent contractor is hired to do specific job Employee is controlled by employer Factors to consider. whether hired persons has distinct occupation or profession. whether they supplied their own tools and equipment. whether they were employed only for a specific time period whether they are paid hourly or on completion of a job. what degree of skill is required to do the job.

FIDUCIARY A person in a position of trust and confidence. Agent’s duties to principal –Duty of loyalty(Fiduciary Duty) –Duty of obedience –Duty of accounting –Duty of performance Agent must use reasonable care and skill.

Fiduciary Duty Fiduciary duty is one of utmost loyalty and good faith. Requires: A. Agent must act solely in the interest of his principal. B. Cannot compete with principal or act on behalf of a competitor. C. May not use of disclose confidential information D. Account for financial benefits received.

Duty to Account : Agent must maintain and provide true and complete accounting of money and property received or expended on behalf of the principal. Duty of Obedience: Agent must act only as authorized and directed by the principal and obey reasonable instructions of the principal.

Duty of Due Diligence: Agent must act with reasonable care and skill in performing agency responsibilities. Duty to Inform: Agent must provide principal with information relevant to the affairs entrusted to agent. (Notice to agent is notice to principal)

Duties of Principals Principal’s duties to agent –Duty of compensation –Duty of reimbursement and indemnification –Duty of cooperation –Duty to provide safe working conditions

AGENTS AUTHORITY Actual Authority –Express –Implied: –Apparent Authority

Termination of the Principal- Agent Relationship Termination by agreement –Either party may decide to terminate the agency. –Notice should be given to third parties. Actual notice to those who dealt with the agent. Constructive notice by newspaper to others. Termination by law –death of one of the parties. –Loss of capacity. –bankruptcy of the principal. –impossibility of performance. –outbreak of war.

Notification upon Termination Actual notification necessary to those who have dealt with agent. Constructive notice to all other parties. Notice is necessary to terminate agents ability to bind the principal.