1. Chapter 18: Creation of Agency

2. TERM
What you think it means?
Actual Definition
Agency
Agent
Prinicpal
Master
Servant
Independent Contractor
Respondeat Superior
General Agent
Special Agent
Agency By Estoppel
Ratification

3. Agency Relationship
Lets us act through other people to accomplish tasks that might be difficult or impossible to do on our own.

4. 3 Types Principal-Agent Master-Servant
Proprietorship-Independent Contractor

5. Agency
Allows us to act through other people to accomplish tasks that might be difficult or impossible to do on our own

6. Agency Relationships Principal-Agent Relationship PRINCIPAL
THE PARTY WHO NEEDS A REPRESENTATIVE
PERSON FOR WHOM THE AGENT ACTS
AGENT
PERSON WHO ACTS FOR PRINCIPAL IN BUSINESS TRANSACTIONS WITH THIRD PARTIES
THIRD PARTY
PERSON THE AGENT DEALS WITH ON BEHALF OF THE PRINCIPAL
Principal-Agent Relationship

7. PRINCIPAL-AGENT RELATIONSHIP
Consensual – Both Parties Agree
Not Always Contractual
Gratuitous Agent – Does Not Receive Consideration (aka $)
Relationship is FIDUCIARY – Based On Trust Between Agent and Principal
Some Agents Are Considered Employees

8. Principal-Agent Relationship
Let’s find some…
Example:
Jay Z has a manager for his finances.
Principal is Jay Z
Agent is John Meneilly

9. Master-Servant Relationship
Master: The Person Who Has The Right To Control The Conduct Of Another Who Is Performing A Task For The Benefit Of the Master
Servant: A Person Whose Conduct In The Performance Of A Task Is Subject To The Control Of Another
A Servant May Also Be An Agent

10. Master-Servant Relationship
Example:
Sally tends house for Mary, an elderly woman who lives alone. Mary is very particular about her house, so Sally cleans exactly as directed. Sally knows Mary doesn’t have the money to pay her, so she never asks.
Sally is only a SERVANT.

11. Master-Servant Relationship
Example 2:
Oprah has a personal assistant, Judy, who is paid weekly. Judy is responsible for taking care of Oprah’s daily meeting schedule. Oprah demands that her schedule be maintained in a particular way.
Judy is a servant, but also an agent.

12. Master-Servant
Master CONTROLS Conduct of Servant

13. You Find Master-Servants…
Using the Internet, Research 3 Famous Master-Servant Relationships
Explain who was the master, who was the servant….
Was the servant also an agent?
What did the servant do for the master?

14. Proprietor-Independent Contractor Relationship
Independent Contractor: Works For But Is Not Under The Control Of The Proprietor
Proprietor: Chooses To Have Someone Perform A Task On His Or Her Behalf, But Has NO CONTROL Over The Activity Of The Independent Contractor

15. Proprietor-Independent Contractor Relationship
Suzy purchased a home with a 3 acre lot of land.
Due to her demanding job, she is unable to care for the lawns and shrubbery.
Suzy hired Mike to take care of her lawn.
Suzy’s only order to Mike was that he make her lawn the best-looking in town.
Mike works as he wishes, with the tools he wa

16. Proprietor-Independent Contractor
Examples:

17. Servant or Independent Contractor
Does the hiring person supply the tools for the worker?
Is the worker paid by the hour?
Does the hiring person set the worker’s hours?
Is the worker employed only be the person responsible for hiring?
Is the business of the worker the same as the business of the hiring person?
Does the worker lack authority to hire or fire other workers?
Does the worker perform his or her tasks in a highly supervised environment?
Is very little skill required to perform the worker’s job?

18. Let’s Compare…

19. Why are relationships important?
Contractual Liability
Principal Is Bound To Terms Of Agent
Unless Agent Has No Authority To Enter Contract
Servant Does Not Have Authority To Negotiate Contracts For Master
Unless Also An Agent
Independent Contractor Has No Right To Bind Proprietor To A Contract
Unless Expressly Permitted

20. Tort Liability
Tort: A wrongful act from which injury occurs to another
Respondeat Superior: Latin Phrase for if the servant has wronged someone, let the master respond

21. Was servant acting within scope of authority or course of employment?
commits
tort against
third party.
YES NO
RESPONDEAT SUPERIOR

22. Types of Agents Distinguish between:
The extent of the agents’ authority
How the agents relate to one another

23. General Agent
A person who has been given authority to perform any act within the scope of a business
AKA Discretionary Agents
May hire or fire
Ex: Dr. R
Ex: Manager

24. Special Agent
A person who is employed to accomplish a specific purpose or to do a particular job
Ex: Sales representatives
sell and pass titles to specific goods sold, but that is the extent of their authority
Cannot make purchases for principal
Cannot collect $ unless they actually deliver

25. How Agents Relate to One Another
Subagent: Agent lawfully appointed by another agent
Occurs when:
Principal gives agent power to appoint subagents.
Agents can appoint subagents for routine or simple clerical tasks.
An agent in an emergency can appoint subagent
Agent’s authority to appoint subagent is often recognized as part of power that goes with being an agent

26. How Agents Relate to One Another
Subagent: Agent lawfully appointed by another agent
Occurs when:
Principal gives agent power to appoint subagents.
Agents can appoint subagents for routine or simple clerical tasks.
An agent in an emergency can appoint subagent
Agent’s authority to appoint subagent is often recognized as part of power that goes with being an agent

27. Subagent Example: Andy is the manager of a Pat-Med Hotel.
The P-M Hotel workers go on strike.
Andy can’t get a in touch with the general manager because he is on safari in Africa.
Andy hires Fred Mars as an attorney to negotiate with the union.
Fred is a Subagent

28. Agent’s Agent
When an agent has no power to appoint a subagent, but does so anyway
Example:
PM Hotel
Suppose in previous example, no strike.
Andy hired Fred even though owner expressly forbid him from hiring.
Fred is an Agent’s Agent.
Owner does not have to honor any contracts Fred negotiates.

29. Coagents Principal hires two or more agents
Both subject to authority of the principal, but not one another unless principal so authorizes
Authority flows from principal to agents

30. Scenarios…
Create Subagent, Agent’s Agent, and Coagent Scenarios

31. How Agency Relationships Are Created
By Agreement
By Operation of Law
By Ratification

32. Agency By Agreement Most Often Usually Contracts
Must Include Consideration to be a contract
May be oral or written
If NOT a contract, Gratuitous Agency

33. Example:
Matron of Honor

34. Express Agreements One that involves clearly stated terms of agreement
Example: Chauffeur

35. Agency By Operation of Law
May be created automatically, by circumstance, or through enactment of specific laws.
Agency by Estoppel:
AKA Apparent Authority
When the law creates an agency relationship.
Ex: Phony Salesperson

36. By Statute
When a state legislature decides that certain situations justify automatic creation of agency relationships by statute

37. Agency By Ratification
When a person acts as an agent without authority and the principal, with full knowledge of the facts, accepts the benefits of the unauthorized act.
If principal does not accept, the would-be agent is liable to the third party.

38. You Create Examples…