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