Business Law: Chapter 32-Agency Formation and Duties

Formation of the Agency Relationship

A person must have contractual capacity to be a principal. The idea is that those who cannot legally enter into contracts directly should not be allowed to do so indirectly through an agent. Any person can be an agent, however, regardless of whether he or she has the capacity to contract (including minors). An agency relationship can arise in four ways: by agreement of the parties, by ratification, by estoppel, and by operation of law.

agency

A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal).

exclusive agency

An agency in which a principal grants an agent an exclusive territory and does not allow another agent to compete in that territory.

Constructive Trust

An agent commits a breach of fiduciary duty if he or she secretly retains benefits or profits that, by right, belong to the principal.

fiduciary

As a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking; as an adjective, a relationship founded on trust and confidence.

Agency Relationships

Construction - independent contractor Real estate - independent contractor and agent

Agents and Principals Relationship

In a fiduciary relationship, each party owes the other the duty to act with the utmost good faith.

Indemnification

In certain situations, when a principal is sued by a third party for an agent's negligent conduct, the principal can sue the agent for indemnification—that is, for an equal amount of damages. The same holds true if the agent violates the principal's instructions.

agency

In other words, in a principal-agent relationship, the parties have agreed that the agent will act on behalf and instead of the principal in negotiating and transacting business with third parties.

Created by the Principal's Conduct?

It is the deeds or statements of the principal that create an agency by estoppel. (Chase bank azur and personal assistant (vanek) problem.

Agency by Agreement

Most agency relationships are based on an express or implied agreement that the agent will act for the principal and that the principal agrees to have the agent so act. An agency agreement can take the form of an express written contract or be created by an oral agreement.

Agency by Ratification

On occasion, a person who is in fact not an agent (or who is an agent acting outside the scope of her or his authority) makes a contract on behalf of another (a principal). If the principal approves or affirms that contract by word or by action, an agency relationship is created by ratification.

Agency by Estoppel

Sometimes, a principal causes a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on that belief. When this occurs, the principal is "estopped to deny" (prevented from denying) the agency relationship. The principal's actions have created the appearance of an agency that does not in fact exist, creating an agency by estoppel.

The Detroit Lions, Inc. & Billy Sims v. Jerry Argovitz, Conclusion

The districts courts recession contract is affirmed.

Principal's Duties to the Agent

The principal should "see the risk" in its actions if it fails to "C RISC" ie., mee its duties to agents: C ompensation R eimbursement I ndemnification S afe Working Conditions C ooperation

The Third Party's Reliance Must Be Reasonable for Agency by Estoppel

The third person must prove that he or she reasonably believed that an agency relationship existed.

An agency relationship is a fiduciary relationship, based on trust and confidence. Stated somewhat differently, Ari Gold owes a fiduciary duty to Vincent Chase, his client.

True

Generally speaking, employees acting within the scope of their employment also are agents, even though not dealing directly with third parties. True or False

True

Is an employee usually an agent?

Typically, yes, but if they exceed the scope of their employment then they are no longer an agent.

Avoidance

When an agent breaches the agency agreement or agency duties under a contract, the principal has a right to avoid any contract entered into with the agent.

Before he became Ari's long-suffering assistant, Lloyd worked in the mail room where the firm withheld federal taxes from his pay and controlled the methods and details of the performance of this work. Although he dreamed of meeting the 'rich and famous' someday, at the time he had no contact with the firm's clients. Lloyd was most likely an: a. independent contractor b. an employee and agent c. an employee only d. a principal e. none of the above

b.

agency law is based on

common law

whereas much employment law

statutory law.

principal

the other has the right to control the agent's conduct in matters entrusted to the agent.

Ratification

involves a question of intent, and intent can be expressed by either words or conduct.

fiduciary relationship

means that the relationship involves trust and confidence

The Detroit Lions, Inc. & Billy Sims v. Jerry Argovitz, Facts

Billy Sims - played football for Oklahoma. USFL-United States Football League --> Rival football league Jerry Argovitz - Super Agent

Principal's Duties to the Agent Cooperation

Cannot have agent compete with other agent in same territory hired by the same principal or have agent compete against principal.

gig economy

Centers on short-term, independent workers who are not employees. Companies like Uber and Lyft (discussed in this chapter's feature) provide evidence of this trend. This type of on-demand employment raises questions related to agency, making agency an increasingly important topic for students of business law and the legal environment to understand.

Principal's Duties to the Agent Compensation

Agent's fee for services

Determination of Employee Status Criteria Used by the Courts

1. How much control does the employer exercise over the details of the work? If the employer exercises considerable control over the details of the work and the day-to-day activities of the worker, this indicates employee status. This is perhaps the most important factor weighed by the courts in determining employee status. 2. Is the worker engaged in an occupation or business distinct from that of the employer? If so, this points to independent-contractor, not employee, status. 3. Is the work usually done under the employer's direction or by a specialist without supervision? If the work is usually done under the employer's direction, this indicates employee status. 4. Does the employer supply the tools at the place of work? If so, this indicates employee status. 5. For how long is the person employed? If the person is employed for a long period of time, this indicates employee status. 6. What is the method of payment—by time period or at the completion of the job? Payment by time period, such as once every two weeks or once a month, indicates employee status. 7. What degree of skill is required of the worker? If a great degree of skill is required, this may indicate that the person is an independent contractor hired for a specialized job and not an employee.

Principal's Rights and Remedies against the Agent

1. In general, a principal has contract remedies for an agent's breach of fiduciary duties. 2. The principal also has tort remedies if the agent engages in misrepresentation, negligence, deceit, libel, slander, or trespass. 3. In addition, any breach of a fiduciary duty by an agent may justify the principal's termination of the agency. 4. The main actions available to the principal are constructive trust, avoidance, and indemnification.

Agent's Rights and Remedies against the Principal

1. Remedies of the agent for breach of duty by the principal follow normal contract and tort remedies. 2. An agent can also withhold further performance and demand that the principal give an accounting. 3. When the principal-agent relationship is not contractual, the agent has no right to specific performance.

Duties of the Agent to the Principal

If my agent breaches his duties to me, he/she is: N otification O bedience P erformance A ccounting L oyalty of mine...

Employee Status and the meaning of "Works for Hire"

Ordinarily, a person who creates a copyrighted work is the owner of it—unless it is a "work for hire." Under the Copyright Act, any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is a "work for hire." The employer owns the copyright to the work. In contrast, when an employer hires an independent contractor—such as a freelance artist, writer, or computer programmer—the independent contractor normally owns the copyright. Exceptions are made if contract specifically states "works for hire."

Principal's Duties to the Agent Reimbursement and Indemnification

Indemnification - if you get sued Reimbursement - agent buys something for you

Is an independent contractor an agent?

Maybe. It depends on the facts and degree of control.

Employer-Employee Relationships

Normally, all employees who deal with third parties are deemed to be agents. A salesperson in a department store, for instance, is an agent of the store's owner (the principal) and acts on the owner's behalf. Any sale of goods made by the salesperson to a customer is binding on the principal. Similarly, most representations of fact made by the salesperson with respect to the goods sold are binding on the principal.

independent contractor

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An independent contractor is not an employee but may be an agent.

Agency by Operation of Law

The courts may find an agency relationship in the absence of a formal agreement in other situations as well. Agency by operation of law may also occur in emergency situations. If an agent cannot contact the principal and failure to act would cause the principal substantial loss, the agent may take steps beyond the scope of her or his authority.

Criteria Used by the IRS that determines Employment or Independent Contractor

The most important factor is the degree of control the business exercises over the worker. Even when a firm has classified a worker as an independent contractor, the IRS may decide that the worker is actually an employee. If the IRS decides that an employee is misclassified, the employer will be responsible for paying any applicable Social Security, withholding, and unemployment taxes due for that employee.

Rights and Remedies of Agents and Principals

The remedies available arise out of contract and tort law. These remedies include monetary damages, termination of the agency relationship, an injunction, and required accountings.

agent

agrees to represent or act for the other

Turtle works as VInce's driver. Turtile is Vince's a. agent but not employee b. employee and agent c. employee or independent contractor, depending especially on whether Vince controls the details of his physical performance. d. independent contractor

c

Generally, the agent owes the principal five duties-

performance, notification, loyalty, obedience, and accounting.