ACCT 324 Chap 33

The restatement of agency definition

"the fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act in behalf and subject to his control, and consent by the other so to act" - a fiduciary is a person who has a duty to act primarily for another person's benefit. ex) a lawyer is a fiduciary for their client

Agency by Ratification

Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent two requirements: 1) an individual must misrepresent himself or herself as an agent for another party 2) the principal must accept or ratify the unauthorized act for ratification to be effective two more requirements 1) the principal must have complete knowledge of all material facts regarding the contract 2) the principal must ratify the entirety of the agent's act (the principal cannot accept certain parts of the agent's act and reject others)

In agency by estoppel, the important conduct is how the principal acts to

create the impression that the agent has the authority to act on behalf of the principal

Agency agreements

do not need to be in writing with two important exceptions 1) the agreement must be in writing whenever an agent will enter into a contract that the statute of frauds requires to be in writing 2) the agreement must be in writing whenever the agent is given power of attorney

specific power of attorney

gives authority only for the specific areas or purposes listed in the agreement

General power of attorney

grants broad authority

Agency law

primarily state law. Can vary state from state - ex) MLBPA's regulations governing player agents expressly stated that agents act in a fiduciary capacity vis-a-vis their athlete clients - agency law is especially important for the US firms doing business globally

Because of their fiduciary relationship, the agent has a responsibility to act in the interest of the principal including avoiding

conflicts of interest and protecting the principal's confidentiality

Agency relationships

consensual relationships formed by informal oral agreements or formal written contracts. two criteria: 1) they can be created only for a lawful purpose; thus a principal could not hire an agent to kill someone on their behalf 2) almost anyone can act as an agent; however, an individual who does not have contractual capacity, such as a minor, cannot hire an agent to make contracts on his or her behalf

Expressed agency

An agency created in a written or oral agreement - most common type of agency and gives the agent the authority to contract on behalf of the principal

Arlene wanted to give her friend, Marion, power of attorney over her affrays. To do that arlene and marion will need

a contract specifying the agreement between them

Agency

a relationship between a principal and an agent

Indemminfication

a third party who believes that an agent is acting with actual or apparent authority may sue the principal for any breach of contract. However, if the breach was caused by the agent's negligence, the principal has a right to indemnification; that is when, sued by a third party, a principal may sue his right to recover the amount assessed to the third patty

Durable power of attorney

a written document expressing his or her wishes for an agent's authority not to be affected by the principal's subsequent incapacity. Alternatively, a durable power of attorney might become active only after a principal becomes incapacitated in any matter

If a person represents himself as an agent for an individual and that individual accepts the act of the person representing himself as the agent, this relationship is known as

agency by ratification

Constructive trust

agency relationships exist primarily for the benefit of the principal. Therefore, principals are the legal owners of anything an agent may come to possess through the employment or agency relationship accordingly an agent who through deceit or other means retains such profits or goods has breached his or her fiduciary duties - when an agent illegally benefits from the agency relationship, the principal may enact.a contstructive trust on the profits, goods or property in question

Apparent agency or agency by estoppel

an agency relationship created by operation of law when one party, by her actions causes a third party to believe someone is her agent even thought that person has no authority to act as her agent - if the principal attempt to deny that an agency relationship existed, the third party must demonstrate that he or she reasonably believed, on the basis of the principal's conduct, that an agency relationship existed. The court will consider the principal's conduct in determining whether an agency relationship existed

Demand for an accounting

an agent who feels she is not being properly compensated, especially when working on commission, may demand an accounting and may withhold further performance of her duties until the principal supplies appropriate accounting data

employee v. independent contractor

employer-employee relationship is subject to worker's compensation, workplace safety, employment discrimination, and unemployment status Employer-independent contractor relationship do not have to worry about this - employers are generally liable in tort for the actions of their employees, while they're not generally liable for the actions of independent contractors - when courts are deciding whether a worker is an employee or independent contract the most important consideration is employer control

Power of attorney

establishes an agency by agreement that gives an agent authority to sign legal documents on behalf of the principal. - often given for business and health care purposes ex) an agent can make decisions about a principal's medical care if the principal cannot

A principal always has the rights of (blank) so agents may not use the agency relationship to obtains goods or property for themselves if the principal desired to obtain the same goods or property

first refusal

Agency by implied authority

in some cases, an agency relationship is not created by an express agreement but is instead implied by the conduct of the parties ex) if a homeowner asked a real estate broker to help sell her home, her words imply that an agency relationship has been formed - implied authority cannot conflict with any express authority

Identify the principal's duties in a principal-agent agency relationsiph

indemnification compensation

A principal has the duty of reimbursement and

indemnification of the agent

A third party who believes that an agent is acting with actual or apparent authority

may sue the principal for any breach of contract

Gratuitous agent

one who acts without consideration; that is such an agent is not paid for his or her services. - function much like regular agents minus a few exceptions

If there is no agency agreement or the contract is for personal services, and the principal fails to perform as agreed, the agent may

recover for services rendered and future damages

Duty of notification

the agent has to communicate not only offers from third parties but also, under this any information. he or she thinks could be important to the principal. - if a third party has made an agreement with a principal through an agent and fails to meet the agreement, the agent must notify the principal in a timely manner. the law typically assumes that the principal is aware of all information revealed to the agent, regardless of whether the agent shares it with the principal

Agency relationship

the agent is authorized to act for and on behalf of the principal, who hires the agent to represent him or her.

Duty of performance

the agent owes the principal is twofold. 1) First the agent must perform the duties as specified in the agency agreement 2) the agent must perform the specified duties with the same skill, care, and professionalism as a reasonable person in the same situation would provide

Duty of loyalty

the most important duty an agent owes to a principal. Because of their fiduciary relationship, the agent has a responsibility to act in interest of the principal, including avoiding conflicts of interest and protecting the principal's confidentiality - an agent cannot represent both the principal and a third party in an agreement because there could be a conflict of interest - duty of loyalty also requires that the agent keep confidential any information about the principal, during the course of agency as well as after the agency relationship has been terminated

Duty of cooperation

the principal also owes a duty of cooperation to the agent and must therefore assist the agent in the performance of his or her duty

Duty of reimbursement and indemnification

the principal has a duty of reimbursement and indemnification to the agent. ex) suppose an agent makes an agreement with a third party on behalf of the principal and the principal fails to uphold the agreement. The third party could sue the agent for damages but the principal has a duty to indemnify the agent for the losses the third party regains

Duty compensation

the principal has a duty to compensate the agent for services provided, unless the parties have agreed the agent will act gratuitously

Duty to provide safe working conditionsq

the principal has a duty to provide safe working conditions for the agent, including equipment and premises

Principal duties to the agent

the principal owes certain duties to the agent. If these duties are not fulfilled, the principal has violated the agent's rights and the agent can sue for contract or tort remedies. The agent can also refuse to act on behalf of the principal until the failure is remedied.

Employer - Independent contractor relationship

the restatement of agency defines an independent contractor as "a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking" - ex) building contractors, doctors, stockbrokers, and lawyers - independent contracts cannot enter into contracts on behalf of the principal unless the contractor posses authority from the principal

Principal-agent relationship

typically exists when an employer hires an employee to enter into contracts on its behalf. - most basic type of agency relationship - parties have agreed that agent will have power to bind principal in contract - contract law

Specific performance

when a contract exists and a principal agrees to certain conditions but fails to perform, under contract remedies the agent may seek court assistance in forcing the principal to perform the contract as stipulated

Avoidance

when an agent breaches an agency contract or his fiduciary duties principal may use her right of avoidance to nullify at her discretion any contract the agent negotiated

Remedies

when an agent breaches his or her duties to the principal, the principal can terminate the agency relationship and seek remedies

Employer-Employee

whenever an employer hires an employee to perform some sort of physical service, the parties have created an employer-employee relationship in which the employee is subject to the employer's control - employer has right to control conduct of employees - tort law, tax law, wage law, discrimination law, copyright law - employees are agents of an employer