Creation of an Agency

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Chapter 18

• Creation of an Agency

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Agency

• A relationship in which one person (agent),
  represents another person (principal) in a
  business transaction.
• They can negotiate deals, enter into contracts,
  and have the authority to act.
• The Principal is legally bound to the agreement
  made by the agent.

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Principal-Agent

• A true agency relationship, but not always
  contractual.
• Gratuitous Agent representing a principal
  without being paid
• Fiduciary relationship is based on the trust
  that exists between agent and client.

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Master-Servant

• Master has the right to control the conduct of
  another who is performing a task for them.
• Servant person whose conduct is subject to
  control of another.

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Proprietor-Independent Contractor

• Proprietor person who chooses to have someone
  performs a task on his/her behalf
• Independent Contractor someone hired to perform
  a task, but not controlled by proprietor.

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Contractual Liability

• Principal is bound to the terms of a contract
  made by the agent.
• If the agent enters a contract that they do not
  have authority for there is no liability.

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Tort Liability

• Vicarious Liability the law holds not only the
  tortfeasor, but also the person hired by them
  liable.
• A security guard injures a person while detaining
  them for suspected shoplifting. The store may
  also be held liable
• Respondeat Superior let the master respond
• See questions p. 398

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Scope of Employment

• When the tort was committed the worker must have
  been performing the task for which he or she was
  hired
• Taking a side trip to make a personal purchase is
  not within the scope of a workers employment.

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Negligent Hiring

• The proprietor can be held liable if they do not
  check a contractors qualifications.

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Negligent Retention

• After hiring the contractor, the proprietor
  learns about incompetence
• They should fire them at that time.

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Non-delegable Duty

• Proprietor cannot pass off to another party
• A common carrier such as a railroad, cannot
  delegate its duty to maintain a system that
  protects the safety of its passengers.

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Types of Agents

• General person who has been given authority to
  perform any act within the scope of business
  (store manager)
• Special employed to accomplish a specific
  purpose or to do a particular job. (sports agent)

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How Agents Relate to One Another

• Subagents an agent lawfully appointed by
  another agent
• When???
• A principal may give an agent express power to
  appoint subagents
• Most agents can appoint subagents to carry out
  routine tasks
• In an emergency that would prevent the agent from
  performing

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How Agents Relate to One Another

• Agents Agent a subagent appointed without the
  power to do so.
• Co-agents If the principal has hired two or
  more agents
• Subject to the authority of principal but not one
  another

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How Agency Relationshipsare Created
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By Agreement

• Agreements are usually contracts but not always
• No consideration no contract
• Express clearly stated and usually in writing
• Implied words or actions

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By Operation of Law

• Agency by Estoppel when the law created an
  agency relationship by circumstance
• Can a third party reasonably assume that a
  non-agent is an agent?
• Also known as apparent authority

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By Statute

• Sometimes a state legislature decides that
  certain situations justify automatically creating
  agencies.
• The law requires corporations to appoint an agent
  who can be served with a complaint and summons.

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By Ratification

• Occurs if the principal, with full knowledge of
  the facts, accepts the benefits of the
  unauthorized act.
• A principals failure to ratify leaves the agent
  open to liability to a third party.