L201 Agency Law (exam 2)

Agency

- A two-party relationship in which one party (agent) is authorized to act on behalf of, & under control of, another party (principal) - All employees are agents, but not all agents are employees (some are independent contractors)

Effect of Termination: Actual Authority

- ends when agency terminates - agents can still have apparent authority

Effect of Termination: Apparent Authority

- not ends automatically if 1) principal dies, 2) principal loses capacity or 3) performance of the agency becomes impossible - ends when actual or constructive notice given

Formation of Agency

1) agent must agree to act for benefit of principal 2) principal must have capacity to appoint agents 3) duties must be delegable - some can't be (require principal's personal performance/ unique skills) such as voting, signing will, testifying under oath

Agency Termination by Act of Parties

1) at a time or event stated in agreement 2) when agency was created to achieve a special purpose & it is achieved 3) mutual agreement 4) at the option of either party

Duty of Loyalty

1) avoid self-dealing, competing with principal and conflicts of interest 2) maintain confidentiality of principal's info during & after agency

Principal's Duties

1) duty to compensate agent 2) duty to reimburse agent for money spent doing principal's business 3) duty to indemnify the agent for losses suffered in doing the principal's business

Duty to Obey Instructions

1) obey legal, ethical, reasonable instructions 2) act within her actual authority

Reid Factors

1) right to control physical details of work 2) skill required 3) source of tools 4) location of work 5) duration of relationship 7) payment method 8) benefits & tax treatment 9) uniqueness of work

Agency Termination by Act of Law

1) serious breach of agent's duty of loyalty 2) principal's permanent loss of capacity or agent's loss of capacity to perform agency business 3) impossibility of performance by agent 4) death or bankruptcy 5) change in value of agency property or subject matter (including loss or destruction) 6) changes in law making agency illegal 7) changed business conditions or outbreak of war

Implied Authority (actual)

1) whatever is reasonable for the agent to do given the principal's direct statements to the agent 2) the nature of the agency and the business

Apparent Authority

1) when a principal's conduct leads a third party to believe an agent (who lacks actual authority) is authorized to act in a certain way 2) the third party reasonably relies on the appearance of authority - to protect third parties, agency law allows agents to bind the principal on the basis of apparent authority

Fiduciary Duty (agent's duties)

Act loyally for the principal's benefit in all matters connected with the agency relationship

Authority to bind principal

Actual authority or Apparent authority - if agent doesn't have either, principal is not bound by agent's actions

Express Authority (actual)

Based on principal's direct statement to agent

Agent's Duties

Duty of Loyalty -avoid self-dealing, competing with principal and conflicts of interest -maintain confidentiality of principal's info during & after agency -

Capacity

Has the capacity to be a principal if the person has the capacity to do the acts for which the agent has been retained

Duty to Account

Keep separate personal accounts, avoid mingling the principal's property with the agent's property

Duty to Act with Care & Skill

Must act with care, competence, and diligence normally exercised by agents in similar circumstances

Actual Authority

Must be communicated to the agent

Duty to Notify

Notify principal of matters reasonably relevant to agency

Employee vs. Independent Contractor

a legal question may depend of whether agent is an employee or an independent contractor independent contractor- skilled work, less control of principal employee- a lot of control by principal Reid factors used to determine

Constructive Notice

given to third parties that have never dealt with agent ex: having receptionist tell third parties who ask for agent that they no longer work there, setting up an auto-reply on their email letting third parties know they no longer work there, posting a bill giving this info

Actual Notice

telling third parties that have dealt with agent/ are dealing with agent that he/she no longer has authority