Chapter 23: The Agency Relationship- Creation, Duties, and Termination

What is an Agency at will?

A doctrine that stems from the judicial reluctance to force people to continue personal relationships against their will.

The capacity to be an Agent-

A person can have the capacity to act as an agent although he or she does not have the legal capacity to contract.

What is the Duty for Property?

An agent frequently is given money or property (tools, an automobile, or samples) by the principal. If so, the agent has a duty to return them or to account for his inability to do so on request by the principal.

Notice to Third Party

An agent still may be able to bind the principal on contracts with third persons after termination of the agency if the third person is unaware that the agency has ended

Are clubs or neighborhood associations act as an agent?

An unincorporated association is not views as a legal entity. Although its members may appoint an agent and will be bound by the agent's acts the association itself does not become a party to a contract made by an agent.

Legislative Restrictions

Any agency termination based on race, color, sex, religion, national origin, and age generally is prohibited by state and federal legislation.

Contingent Compensation

Compensation that is based on measured performance or results. An agent is entitled to be paid if the agreed-on results os obtained even though the principal does not benefit.

Duty #1 in the common law? Agent to Principal

Duty to Loyalty

Duty #5 in the common law? Agent to Principal

Duty to account for funds and property

Duty #4 in the common law? Agent to Principal

Duty to communicate information

Duty #3 in the common law? Agent to Principal

Duty to exercise care and skill

Duty #2 in the common law? Agent to Principal

Duty to obey instructions

Where do the Duties of an agent to the principal normally derive from?

Either the contract, if any, between them or from the common law of agency.

What is it called when an agent is acting without pay?

Gratuitous agent. In court the duty to exercise as a n gratuitous agent is taken into account and the requirement is less than it is when the agent is to be compensated.

What is the duty for Funds?

If the job of the agent includes receiving payments or operating a farm or business for the principal, the agent must periodically give the principal an accurate record of receipts and expenditures.

Principal

In agency law, one under whose direction an agent acts and for whose benefit that agent acts.

Insurance commissions

In the life insurance businesses, it is customary for the company to pay the agent a commission on all premiums paid on the insurance contracts sold. Also, agents are paid on renewals, by or repeated transactions with, a customer first sold by the agent.

Can an agent/employee supplement their income by taking on a second job?

It all depends on whether if it breaches the duty of loyalty on several factors. One consideration the court could have in deciding if the duty of loyalty is breached, is by possible existence of contractual provisions preventing a second job.

Can a second source of income effect the principal of the first source of income?

It can if there is act of direct competition. Agent should not engage in conduct that causes their principals to lose customers, sales, or potential sales. Nor should they take advantage of their principal by engaging in secret self-serving activities, such as kickbacks from suppliers or usurping the principals' business opportunities.

When is there a breach of dual agency while being a middleman?

It is a breach of duty if the first employing the agent usually expects to and does in fact rely on the agent for advice.

What happens when there is no clear amount of compensation for an agent from a principal?

Many disputes arise because no clear agreement has been reached. In the absence of agreement, the agent is entitled to the customary or reasonable value of the services performed. Custom is sometimes quite clear.

Does Marriage establish as an agency?

No it can not, however a person may be appointed as an agent by his or her spouse.

Are distributors generally agents?

No they are not, and as a result, manufacturers are less likely to be legally responsible for their contracts, torts, or crimes.

Can an agent receive commission on a transaction that occurred after termination of the agency relationship?

No they do not. Th procuring cause is designed to permit agents to collect commissions on sales completed after termination of the agency relationship if the sale primarily resulted from the agent's efforts.

International Agency Agreement

On the US, there are few restrictions on what terms Amy be included in such an agreement. That is not the case, however, in many countries throughout the world.

Duty #3 Common Law? Principal to Agent

The Duty to keep accounts

e-commerce

The Electronic Communications privacy Act (ECPA) prohibits "intercepts" of electronic communications such as email.

What is the Duty to Communication Information?

The agent has a duty to inform the principal of knowledge the agent gains in the course o her responsibilities. This duty will be violated if the agent does not promptly notify the principal of anything of relevance to the agency the she knows or should know are of concern to the principal.

What should an agent avoid to honor the duty old loyalty?

The agent should avoid even the "appearance of impropriety".

Duty #1 Common Law? Principal to Agent

The duty to compensate

Duty #2 Common Law? Principal to Agent

The duty to reimburse and indemnify

Which is the most important Duty of Loyalty?

The fiduciary is the most important.

What is the Duty to Exercise Care and Skill?

Unless changed by agreement, the agent has a duty to act with ordinary are and with the skill common for the kind of work he is hired to do.

Is dual agency allowed?

Usually one cannot serve as agent for both parties to a transaction; however the principals may consent to such dual role if the parties are both fully informed.

Breach of Duty by Agent

When an agent's breach of duty harm to the principal, the principal may deduct the loss from the amount due the agent. Principal may even take action in court.

Can Agency relationships agree to NOT have a relationship and yet still technically have one?

Yes, a court can find the there is an agency relationship even though the parties have expressly agreed that they do not intend to create one.

Can a agent exercise the "power to terminate" in a case of agency at Will?

Yes, and the other party may recover monetary damages in a breach of contract suit.

Is anything that come to an agent of value also belongs to the Principal?

Yes, because of the agency relationship belongs to the principal. EXAMPLE: if Alfred is a purchasing agent for General Electric Company and receives kickbacks or secret gifts from supplies from whom he purchase goods for GE, the company is entitled to those gifts.

Do principals normally want to structure their agreements to maintain an independent agent?

Yes, in most nations there are few restrictions on the right to terminate independent contractors. Principals are less likely to be liable for their agents' torts and crimes when they exercise little control over their agents' daily activities.

Can business organizations and groups of people act through as an agent?

Yes, they can ].Each partner is an agent of the other partner(s) in carrying on partnership business. A corporation is a legal entity that can act only through agents.

What is the Duty to Compensate?

a duty to pay the agent is implied unless special circumstanced or the relationship of the parties suggests that a gratuitous agent was intended.

The capacity to be a principal

a person can do anything through an agent that he or she could legally do personally.

Breach of Duty by Principal

an agent who is in lawful possession of property that belongs to the principal has a lien on it for the compensation due him or his performance of the agency responsibilities.

Conversion

any distinct act of domination wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein.

An agent can breach their duty of Loyalty by?

buying for the principal from themselves even if they charge a fair price. Such purchases are permissible when the agent has informed the principal, in advance, of the potential conflict of interest and fully disclose other pertinent facts.

What does the Duty of Loyalty require?

complete honesty from the agent in all dealings with the principal. It also requires either avoidance of conflicts between the interests of the agent and those of the principal or full disclosure of any such conflict to the principal.

Agency relationships are formed by

contract, although they may be found in the absence of a contractual agreement.

Power to terminate

either party generally may terminate the agency at any time, because the relationship is based on mutual consent, even if there is no contractual right to do so.

Commingling

goods that are fungible- that is, if she mixes goods that are identical and cannot be separated -the agent bears the risk of any loss. An agent has a duty to keep the principal's property separate from her own.

Independent contractors are called?

independent agents throughout much of the world, and are permitted to work according to their own methods. They are under the control of their principals as to the "result" that is to be achieved, but not as to the means used to accomplish that result.

Agency coupled with an Interest

is one exception to the general rule that either party has the power to terminate an agency. It arises when the power is given as a security. Such an agency is irrevocable without the consent of the agent.

Constructive Notice

is sufficient for persons who may have been aware of the agency but have never formally dealt with it.

Agent

is the substitute of representative of his principal and derives his authority from him.

When do courts make an exception of the dual agency?

merely as a "middleman". If an agent is employ4d to find a buyer for one party and a seller for the other, and the parties intend to and do negotiate their own transaction, the agent is only a middleman.

Do agents maintain their own inventory of goods?

no they do not, instead they take orders on behalf of their principal.

Can an agent mix their funds and the principals fund in the same account?

no, an agent has the duty to deposit funds of the principal in a separate bank account. This should be either an account in the principal's name or a special account in the form "Ames, in trust for Fund".

Fiduciary

one who holds goods in trust for another or one who holds a position of trust and confidence.

Do agents bear the financial risk?

rarely bear risk of a nonpayment by the purchaser.

Procuring Cause

rule may entitle the procuring agent to her commission regardless of who eventually completes the sale.

duty to reimburse and indemnify

sometimes agents make advances from their own funds in conducting the principals business. If the agent is acting within the scope of their authority, the principal has a duty to reimburse the agent for expenses incurred for the principal.

Duty to keep accounts

the principal has a duty to keep records from which the compensated due the agent cane determined. this duty is reinforced by tax laws.

What happens if an agent uses the money of the principal for the agent's purposes?

the principal may choose either to sue for the money or to obtain whatever was purchased with it.

Who finalizes an agreement with a commercial agent?

the principal must finalize the agreement itself.

Agency laws focus on

the relations Between principals and agents and the third persons with whom agents deal in making contracts on behalf of principals.

Employees are called?

they are dependent agents through much of the world. They are under the control of their employer/principal as to both the "objective" of their work and the "means" used to achieve it.

What is required by an Accountant to a principal?

they are more than just giving the principal a record of receipts and expenditures. It also involves an agreement, express or implied, between the agent and the principals that the record is correct.

embezzlement

this is when an agent are often given property of the principals for use in the principal's business. If the agent takes the property with the intent to deprive the principal of it then the agent is guilty of this crime.

What should businesses be careful about ?

to not inadvertently transform their distributors into agents. In many countries, failure to disavow an agency relationship in a distributorship may result in the creation of an agency.

What is an "Actual Notice"?

to those who have dealt with the former agent, a written notification generally is most desirable because it is east to prove its existence to avoid being bound by acts of the agent after termination.

International distributors

unlike agents typically purchase products directly from the manufacturer and beast the risk of no sale or nonpayment by the ultimate purchaser.

What is the legal affect of the agent's action of the principal?

usually is the same as if the principal had done the act.

Real Estate Commissions

who represents a seller normally earns the commission when he finds a buyer "ready", "willing", and "able" to make the purchase on the offered terms. Commission is not earned until the contract of purchase has been made.

An Agency can either be in what form?

written or oral, compensated or uncompensated.

Do agents often posses the authority to contract on behalf of their principals?

yes agents posses that authority.

Is it common to compensate on a commission basis to an agent ?

yes its common to have commission basis a monthly or weekly "draw" against commission to be earned.

Are agents usually compensated?

yes they are compensated through payment of a commission when a sale is completed.

Is the agent obligated to obey instructions from the principal?

yes, an Agent is not entitled to substitute her personal judgement for that of the principal. The agent may not ignore instructions just because they seem unwise or not truly in the best interests of the principal. If no instruction is given, the agent should exercise her best judgment to further the interests of the principal.

Is disclosing or using the principals secrets a breach of duty of loyalty?

yes, an agent breach this duty by either disclosing confidential information to others or use it to benefit themselves. Trade secrets such as formulas, processes, and mechanisms are included within this duty; so are customers lists, special selling techniques, and sales manuals.

Do courts make a distinction between a commercial agent and a sales agent?

yes, both are agents, however the term "sales rep" often is used to describe an agent who does NOT posses the authority to contract on behalf of its principal. Whereas a commercial agent can.

Can exporters risk of becoming subject to restrictive labor laws?

yes, if they closely control their agents' hours and working conditions.

What are the two instances considered as exceptions to the rule that one posses the power to terminate the agency at any time?

1. Agency coupled with an interest 2. certain legislative restrictions.

Termination by Operation of Law

1. lapse of time 2. destruction of the specific subject matter of the offer 3. death or incompetence of the offeror or the offeree 4. supervening illegality of the proposed contract