Chapter 4- Agency Law

What is Agency?

-A consensual relationship in which the agent agrees to act on behalf of another person (the principal). -Person also agrees to be represented by the agent.

NCAA Eligibility Rules

-A student-athlete loses his or her eligibility if: He/she enters into an agreement with an agent or retains an agent He/she accepts transportation or other benefits from an agent He/she agrees orally or in writing to be represented by an agent for the purpose of marketing his or her athletic ability or reputation

Authority

-Actual authority -Apparent authority

Agent's Duties to Principal

-Fiduciary duty: agent must act for the benefit of the principal No double-dealing (working for the principal and a third party) No self-dealing (taking personal advantage of the principal) -Fiduciary duties Duty of loyalty Duty of obedience

Agency Further Defined

-The fiduciary relationship that arises when one person (a "principal") manifests a desire to have another person (an "agent") act on the principal's behalf and remain subject to principal's control, which the agent consents to do. --Restatement (Third) of Agency, 1.01 (2006) -More simply: Agency describes a relationship between parties in which one party agrees to act as a representative of the other party.

Duties

-Agent to principal -Principal to agent

Agent Registration

-Agents must register in each state in which they have established sufficient minimum contract that would normally make them subject to the jurisdiction of the state's courts. -Safe harbor is provided to unregistered individuals with whom a student-athlete initiates communication.

Disclosure

-All agency contracts must be in a recorded form and signed by the student-athlete. -Agency contract must contain a warning: Amateur eligibility may be lost if student-athlete enters into an agency agreement -Student-athlete can cancel contract within 14 days. -Cancellation of the contract may not restore eligibility.

Notification Rule

-Both the agent and the student-athlete must notify the athletic director that an agency agreement has been entered into. -Notification protects institutions from sanctions/penalties should an ineligible player be allowed to participate. -Possible sanctions/penalties: Loss of scholarships Prohibition from championship events Probation Negative publicity Forfeiture of tournament winnings or other revenue

Professional League Unions

-Each of the major league players associations requires agents to register with the appropriate union Rigor of certification process varies significantly among professional associations. -To protect athletes from a breach of agency agreement, breach of fiduciary duty, or fraud, most player associations: Have registration and certifications procedures for agents. Impose limitations on agent fees. Work to ensure that the individual serving as an agent has necessary competence and skills.

Actual authority

-Express Authority specifically granted in agency agreement -Implied Authority that is reasonably necessary to carry out express authority Example: Agent has express authority to negotiate contracts; has implied authority to travel and hire employees to aid him or her

Principal's Duties to Agent

-Fair compensation -Reimbursement of expenses -Compensate for losses (indemnification) -Duty of good conduct

Fiduciary Relationship

-Fiduciary Defined as a person who acts primarily for the benefit of another. -The agent must act loyally for the principal's benefit in all matters connected with the agency relationship -Both agent and principal owe duties to the other as parties to fiduciary relationship.

Legal Issues Related to Athletes and Athlete Agents

-Has an agent acted in the best interests of the principal? -Has the principal interfered with the agent's ability to perform? -Athlete agents: Has the agent complied with existing laws and acted properly and truthfully so that student-athlete has full knowledge how using an agent may affect his or her amateur status and eligibility?

Your Perspective

-Imagine that you are the agent for a professional baseball player who is weighing two free agency options: One is for a lot of money playing for a small-market team. The other is for less money playing for a larger-market team, where he'll get more exposure. -What do you recommend, and why?

Liability: Torts

-Key is scope of employment -Factors Whether the agent committed on act (resulting in an injury to another) that was authorized by the principal The time, place, and purpose of the act Whether the act was commonly performed by employees on behalf of their employers Whether the employer's interest was enhanced by the act The extent of involvement of employee's private interests Whether the employer furnished the means by which the injury was inflicted Whether the employer had reason to know that the employee would perform the act in question

Liability: Contracts

-Key is whether agent is within authority How a principal is classified helps determine liability of both the principal and the agent. -If so, liability is as follows Principal is liable on the contract Agent is not liable unless agent act of undisclosed or partially disclosed principal If apparent authority is exists, principal is liable and so is the agent (who must reimburse the principal)

Agency Law

-Law that governs the relationship between a principal (client) and an agent. -Law also governs the relationship between the agent and parties the agent deals with on behalf of the principal.

Professional Athletes and Agents

-Main job of a sport agent is contract negotiation -Agent must possess the necessary training and expertise to be an effective negotiator. -Type of agency relationship: Usually express agency Other types of relationship when the agent serves as financial consultant or endorsement representative

Roles of Sports Agents

-Negotiate employment contracts -Negotiate concessions agreements -Represent organizations in negotiations with sponsors, advertisers, and media -Enter team or organization into events -Enter into contracts with entities that run events -Conduct estate and financial planning -Secure investment and appearance opportunities -Assist in developing online presence or marketing campaigns

Student-Athletes and Agents

-People who need to understand legal issues and laws affecting athlete agents: Athlete agents University compliance officers Student-athletes Professional athletes Employees of the NCAA enforcement staff Contract negotiators for a professional sports team

Uniform Athlete Agents Act (UAAA)

-Regulates the conduct of individuals who contract athletes in order to obtain agency contracts. -Notifies educational institutions when an agency contract is signed by a student-athlete. -Provides a remedy for an educational institution damaged by the conduct of an athlete agent or a student athlete. -Establishes civil and criminal penalties.

Liability: Definition of Torts

-Repondeat superior is a legal doctrine that holds people and organizations high in the chain of command (principals) liable for the negligent act of those lower in the chain of command (agents) Negligent act must fall within scope of employment (agency) -Scope of employment is the realm of activities engaged in by an agent when acting on behalf of a principal

Regulation of Athlete Agents

-The need for regulation: agent abuses in the past -Negative impact on athletes: in some cases, athletes lost money due to agent's actions -State laws and Uniform Athlete Agents Act Many states had their own statutes requiring registration and licensing UAAA (adopted by 40 states and Washington, D.C.) Provides for uniformity in registration and certification of athletes' agents among the states Provides that agents who sign contracts with student-athletes must provide notice to the particular university and must make clear to the student-athletes that their eligibility is affected; notice must be given in the contract

Agency Relationships

-Types of relationships : Employee and employer relationship Principal and agency relationship Principal and independent contractor relationship -Examples in the sport industry: Principal and agency: Pro athlete and athlete agent Principal and independent contractor: University and a general contractor building a new stadium

Your Perspective

-When young athletes are represented by powerful sports agents as they come through the draft: What are the pros and cons for other team athletes? For professional sports and team owners? -In your opinion, do athlete agents have too much power, the right level of power, or too little power?

Apparent Authority

-Where a third party reasonably believes (incorrectly) that the agent is acting with actual authority -The principal created the reasonable (but incorrect) belief

Implied agency

Agency relationship is implied from the conduct of the parties.

Agency Formation

By contract -Rules of contract formation apply By ratification -Principal accepts the acts of a person who had no authority Agency by estoppel (apparent authority): -Third party reasonably believes agency exists

Express agency

Formal written or oral agreement is made between the parites.

Ratification of agency

No actual agency exists, but the principal accepts or ratifies the unauthorized acts of the agent.

Sport Agent Responsibility and Trust Act

SPARTA (15 U.S.C. §§ 7801-7807, 2013) -Prohibits agents from making false or misleading promises or providing gifts and cash to student-athletes and those associated with student-athletes -Similar to UAAA, SPARTA requires written disclosures informing students they could lose their eligibility to play university sports if they sign an agency contract; violators face fines -No registration is required -Not as comprehensive as UAAA

Apparent agency

Third party relies on conduct of the principal suggesting that agent has authority, so principal is estopped from denying agency relationship.