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Chapter 31 Agency Formation and Duties See Separate Lecture Outline System I NTRODUCTION Up to this point, most of the material has considered when a person may be liable for something that he or she did.  With this chapter, the text goes a step further to ask when and under what circumstances a person may make another person liable.  That is, when can the actions of an agent bind a principal?  As importantly, when does the law consider a person an agent? One of the most common, important, and pervasive legal relationships is that of agency.  In an agency relationship between two parties, one party (the agent) agrees to represent or act for the other (the principal). A principal has the right to control an agent’s conduct in matters entrusted to the agent.  Generally, the law of agency is based on the maxim that “one acting by another is acting for himself.” A DDITIONAL  R ESOURCES A UDIO  & V IDEO  S UPPLEMENTS 105
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106           INSTRUCTOR’S MANUAL TO ACCOMPANY  BUSINESS LAW , ELEVENTH EDITION The following audio and video supplements relate to topics discussed in this chapter— PowerPoint Slides To highlight some of this chapter’s key points, you might use the Lecture Review PowerPoint slides compiled for Chapter 31. South-Western’s Business Law Video Series The situational video  Employment Law  illustrates some of the material included in this chapter. C HAPTER  O UTLINE I. Agency Relationships An employee or an independent contractor may act in the capacity of an agent. A. E MPLOYER -E MPLOYEE  R ELATIONSHIPS An employee is one whose physical conduct is controlled, or subject to control, by an employer. The key feature is the employer’s right to control the employee in the performance of tasks involved in the employment. An employee can be an agent if the employee has an appointment or contract for hire with authority to represent the employer. A DDITIONAL  B ACKGROUND Restatement (Second) of Agency, Sections 2, 14N, 25 According to the  Restatement (Second) of Agency  employees are always agents.  The following is the text of the  Restatement (Second) of Agency, Sections 2, 14N, and 25  with selected comments. § 2. Master; Servant; Independent Contractor (1) A master is a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.
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