Chapter 18

Agency Law

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Agency
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A fiduciary relationship “which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act”
Agency relationships are formed by the mutual consent of a principal and an agent.
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Principal

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Agent

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Agency

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The party who employs another person to act on his or her behalf

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The party who agrees to act on behalf of another

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The principal-agent relationship

Any person who has capacity to contract can appoint an agent.

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Exhibit 18.1 - Principal–
Agent Relationship

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 Employer-employee
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relationship

A relationship that results when an employer hires an employee to perform some task or service but the employee has not been authorized to enter into contracts on behalf of the employer

 Principal-agent
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A relationship that results when an employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf

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Formation of an Agency
 Express

agency: An agency that occurs when a principal and an agent expressly agree to enter into an agency agreement with each other Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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Power of Attorney
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An express agency agreement that is often used to give an agent the power to sign legal documents on behalf of the principal
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General power of attorney: A power of attorney in which a principal confers broad powers on the agent to act in any matters on the principal’s behalf Special power of attorney: A power of attorney in which a principal confers powers on an agent to act in specified matters on the principal’s behalf
Durable power of attorney: A power of attorney that survives the principal becoming incapacitate.

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Formation of an Agency
 Implied

agency: An agency that occurs when a principal and an agent do not expressly create an agency, but it is implied from the conduct of the parties
 Agency by ratification: Occurs when
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A person misrepresents himself or herself as another’s agent when in fact he or she is not
The purported principal ratifies (accepts) the unauthorized act

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Formation of an Agency
 Apparent

agency (agency by estoppel): Agency that arises when a principal creates the appearance of an agency that in actuality does not exist
Cargill v Mountain Cement

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Principal’s Duties
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Duty to compensate: Owed by a principal to pay an agreed-upon amount to the agent either upon the completion of the agency or at some other mutually agreeable time
Duty of reimbursement: Unless otherwise agreed, a duty a principal owes to reimburse an agent for expenses incurred by the agent if the expenses were:
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Authorized by the principal
Within the scope of the agency
Necessary to discharge the agent’s duties in carrying out the agency

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Principal’s Duties
 Duty

to indemnify – for losses suffered by the agent.
 Duty to cooperate: duty to cooperate with and assist an agent in the performance of the agent’s duties and the accomplishment of the agency

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Agent’s Duties
 Duty

to perform: An agent’s duty to a principal that includes
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