Creation of Agency Basics Flashcards
(35 cards)
Definition of Agency Relationship
Agency is a fiduciary relationship arising when:
a. A principal manifests assent to another person (agent) that the agent shall act on the principal’s behalf and subject to the principal’s control; and
b. The agent manifests assent or otherwise consents to act.
Elements of Agency Relationship
Mutual Assent, Control, Acting on Behalf of the Principal.
Definition of Control
principal must have the right to direct the agent’s actions toward a specific goal.
Definition of Mutual Assent
parties agree that the agent will act on behalf of the principal and subject to the principal’s control.
- Court looks at OUTWARD MANIFESTATION from the viewpoint of a reasonable observer
Key Cases Illustrating Agency Principles
Gorton v. Doty (teacher loaning car to football coach) & Gay Jenson Farms v. Cargill (Cargill financed grain operations)
Gorton v. Doty
Facts: A teacher loaned her car to a football coach to transport students to a game, with the condition that the coach must drive. - An accident occurred, and a student sued the teacher, claiming the coach was her agent.
Issue: Whether an agency relationship existed between the teacher and the coach.
Holding: The court found an agency relationship existed because the teacher gave control over the car to the coach, acting on her behalf.
Rule: An agency relationship exists when one person consents to act on behalf of another and is subject to their control, even if the parties do not intend to form an agency.
Gay Jenson Farms v. Cargill
Facts: Cargill financed Warren’s grain operations and exercised significant control over its business decisions. - Farmers sued Cargill, claiming it was liable as a principal for Warren’s debts.
Issue: Whether Cargill’s control over Warren established an agency relationship.
Holding: The court found that Cargill’s extensive control over Warren’s operations made it a principal, liable for Warren’s contracts.
Rule: A creditor who assumes control of their debtor’s business may become liable as a principal for the debtor’s actions if control extends beyond ordinary creditor protections.
Agency by Circumstantial Evidence
even if parties do not expressly label relationship as agency, courts will imply one when conduct of the parties and course of dealings evidence control and acting on behalf of another.
types of Principles
Disclosed, Unidentified, and Undisclosed
Disclosed Principal
Existence and identity of P are known to third parties.
Apparent and Actual Authority.
Unidentified Principal
existence of P is known, but identity is not disclosed.
Apparent and Actual Authority.
Undisclosed Principal
Neither existence nor identity of P is disclosed to third parties.
Actual Authority.
Principals Fiduciary Duties to Agent
Duty Created by Contract, Duty to Indemnify, Duty to Fair Dealings and Good Faith
Duty Created by Contract
P has duty to act in accordance with express and implied terms of any contract between P and A.
Duty to Indemnify
P has duty to indemnify A when:
1. Agent makes payment within Agent’s actual authority.
2. Payment is beneficial to the P (unless Acts officiously).
3. A suffers a loss that fairly should be borne by P.
P’s Duty to Deal Fairy and in Good Faith
including providing A with information about risks of physical harm or pecuniary loss that P knows or should know but A may not be aware of.
P must cooperate with A and not interfere unreasonably with A’s performance of duties.
A’s Fiduciary Duties to P
Duty of Loyalty, Duty of Care, Duty of Performance
Agent’s Duty of Loyalty to P
A may not put their own interest or interests of third party ahead of interest of P when A is acting within agency relationship.
- duty not to acquire material benefit from third party in connection with transaction conduct, or otherwise through A’s use of A’s position.
- duty to refrain from competing with P and from taking action on behalf of or otherwise assisting the P’s competitors.
- duty to (1) not use P’s property for A’s own purposes or those of third party; AND (2) not to use or communicate confidential information of P for A’s own purposes or those of third party.
Agent’s Duty of Performance to P
Duty created by contract.
Duties of Care, Competence, and Diligence.
Duty to Act Only Within Scope of Actual Authority and to Comply with P’s Lawful Instructions.
Duty to Provide Information.
Duties Re. P’s Property: Segregation, Record-Keeping, and Accoutning
Duties of Care, Competence, and Diligence.
Duty to act with care, competence, and diligence normally exercised by A’s in similar circumstances - subject to any agreement with P.
if agent claims to possess special skills or knowledge, A has duty to P to act with such care, competence, and diligence normally exercised by A with such skill/knowledge.
Otherwise, standard is ordinary care; gross negligence for unpaid A’s.
Agent’s Duty to Act Only Within Scope of Actual Authority and to Comply with P’s Lawful Instructions
Duty to take action only within scope of A’s actual authority.
Duty to comply with all lawful instructions receive from P and persons designated by P concerning A’s actions on behalf of P.
Agent’s Duty of Good Conduct to P
Duty to act reasonably and to refrain from conduct that is likely to damage P’s enterprise.
Ex: Veggie Delight v. Cattle Call
- Wearing Veggie delight t-shirt while eating lunch at Cattle Call.
Duty to Provide Information
Duty to use reasonable effort to provide P with facts that A knows, has reason to know, or should know when subject to any manifestation by P.
- A knows or has reason to know P would wish to have facts, or
- facts are material to A’s duties to P.
Duties Re. P’s Property: Segregation, Record-Keeping, and Accounting
Duty not to deal with P’s property so that it appears to be A’s property.
Duty not to mingle P’s proeprty with anyone else’s property.
Duty to keep and render accounts to P of money or other property received or paid out of P’s account.
- ALL SUBJECT TO AGREEMENT.
