Agency

Question 1

Agency Law

Answer 1

Agent is anyone authorized to act on behalf of another
- anything you can do for your self

• services contract (common law)
• in writing if more than a year
• most are oral

Two person relationship:
- Principal: hires agent
- Agent: works for the principal in dealings with third parties
Examples: Employees, Independent Contractors (attorneys, CPA’s)

• Principal can fire the agent at ANY TIME without cause
• Agent can quit at anytime

Question 2

Relationships

Answer 2

Act on behalf of the principal
- fiduciary duty to principal
- must act in principal’s best interest
- other duties like obedience and loyalty
- subject to control of the principal

Question 3

Duties

Answer 3

AGENT to PRINCIPAL
- Fiduciary duty (utmost loyalty)
- Confidentiality
- Obedience
- Reasonable Care
- Accounting (what did you spend while you were doing my business)

PRINCIPAL to AGENT
- reimbursement
- compensation
- accounting* - only if commission is involved

Question 4

Contracts

Answer 4

Principal Liability:
liable for contracts entered into by agents as long as those were entered into with authority

Authority of Agent:
1. Actual or Express Authority
2. Apparent Authority - leads a third party to believe they are responsible, based upon appearances like job title
3. Ratification Authority

Disclosed Principal - principal is disclosed to third party at the time of contract

Undisclosed Principal - not disclose the third party at time of contract
- agent can become personally liable if principal backs out

Question 5

Tort Liability

Answer 5

Tort - private wrong when the remedy is usually monetary damages rather than jail time

Principal Liability
- principal is liable for torts committed within the scope of the agent’s employment

Question 6

Terminating an Agent

Answer 6

• Principal always has the power to fire, but may not have the right (look at contract if there is one)

Termination Notice
- notice must be given if principal no longer wants to be obligated by agent
– Actual Notice: current customers (terminate agents actual authority)
– Constructive Notice: potential customers, classified Ad (eliminates apparent authority)

Reasons for Termination:
- Death of principal or agent
- Insanity of principal or agent
- bankruptcy of principal
- illegality of purpose (operating without a required license)
- destruction of the subject matter