Law
Agency:
The Agency 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.
Restatement (Second) of Agency
The legal concept of agency allows one person to act on behalf of another so that
partnerships, corporations, and other employers can operate through their
associates and employees. Not surprisingly, agencies can only be created for
legal purposes.
Remember: an agency agreement is a contract, and the usual contract principles
apply to agency contracts.
Principal: The party who engages another person to act on his or her behalf.
Agent:
The party who agrees to act on behalf of the principal.
Since agency is a contractual relationship, the parties to an agency relationship
must have the capacity to enter into binding contracts.
Employer/Employee Relationship
The extent of the authority of the agent is determined by the agency contract.
Some employees are agents; some are not. Many employees are not authorized
to act on behalf of their employer; they are simply employed to perform a specific
job.
Independent Contractor: An outside agent, who is not an employee, engaged
by the principal to perform certain tasks on behalf of the principal.
These are typically professionals, tradespersons, or other skilled
contractors who perform work without the direct supervision of the
principal.
Forming the Agency Relationship
The law recognizes four ways of establishing an agency:
Expess Agency: This is the most common form of agency. The agency
agreement/contract expressly states the specific authority given to the
agent by the principal.
Powers of Attorney (POAs) are a very formal Express Agency contract.
They may be General Powers of giving Attorney, broad powers to act on
the principals behalf in any situation, or Specific Powers of Attorney,
giving specific authority in limited situations.
Implied Agency: The agency is implied by the conduct of the parties (principal
and agent), similar to the way an implied contract is recognizedby the
conduct of the parties.
Apparent Agency (aka agency by estoppel): When the principal creates the
appearance of an agency that does not, in fact exist, the principal will not be
permitted to deny the agency. The principal is estopped from that
argument.
Agency by Ratification: When the agent misrepresents his agency for a
principal,
i.e., the agency does not exist, but the principal accepts the actions of the
agent, the agency is ratified by the principal.
Duties of Principal and Agent:
Both parties owe fiduciary duties to the other in the performance of the agency
agreement.
Principals Duties:
Duty to Compensate: based upon terms of agency contract.
Duty to Reimburse: if expenses were
1) authorized,
2) necessary, and
3) within agencys scope
Duty to Indemnify: compensate the agent for any losses of agent
due to principals conduct.
Duty to Cooperate: cooperate and assist the agent to achieve the goal of
the agency.
Agents Duties:
Duty to Perform: perform the duties expressed in the agency
contract using reasonable care, skill, and diligence.
Duty to Notify: communicate important, significant information to
principal.
Duty to Account: maintain accurate accounting of all transactions.
Termination of Agency
By Acts of Parties
1. Mutual Agreement
2. Lapse of Time
3. Purpose achieved
4. Occurrence of specified event
By Operation of Law
1. Death of either party
2. Insanity of either party
3. Bankruptcy of principal
4. Impossibility
5. Changed circumstances
6. War