Law test 3 SG.docx - 10 Agency Law body of law that governs...

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10Agency Law- body of law that governs the relationship when one party hires another party to act on their behalfGenerally, exists on the state statutory level Clarified by the Restatement (Third) Party which is the American Law Institute Can only end through terminationAgent-one who agrees and is authorized to act on behalf of another Principal-gives instructions to the agent whose performance benefits their business venture Ex.) Insurance Agent, Sports Agent, PR Agent, Real Estate Agent Classifications of Agents:1.Employee Agents:Principal controls what/how things will be done and are liable for the employee’sactionsMust have some sense of authority to represent the agent (i.e. not all employees are agents Nonagent Employee Relationship “Master Servant”)Ex. at BOA, the teller and branch manager are employee agents of BOA, the security guard is not2.Independent Contractor:Principal controls only the direct the result of the work, not the means by which it is performedNot considered an employee (i.e. not covered by protections or benefits)The principal has no liability for them Ex. attorneys, outside accountants, architects (professional service providers)3. Gratuitous Agent: not very relevantAnyone who acts on behalf of a principal and receives no compensationThe duty of care is very lowEx. any sort of “favor”)Direction/Control Test for Classifying EA vs. IC: the status of an agent is not based on what exactly the parties agree to, but by the actual working relationship (amount of direction and control the principal has over the agent)Analyzed in the courts by substance over formEA –principal sets work schedules, pay rates, working conditions, and amount of supervision requiredIC-work on their own schedule with a deadline to the principal, and work for their own pay by submitting invoices of services to their principalABC Test: courts look to state common law and statues to prove ICa)The individual is free of direction and controlb)The service is performed outside the usual course of business
c)The individual is engaged in individual business activities IRS 3 Prong Test: used when the employee is in a battle about their tax context, not binding in courts but used as a helpful tool that analyzes Behaviors aspects regarding control of the agency relationshipFinancial agreements of the relationshipWorking relationship in terms of benefits and promises Fiduciary Relationship-2 parties agree with consent on one’s action for the others benefit with good faith to carry out the best interest for each1)Manifest-determines whether the principal actually intended that the agency be created 2)Consent-determines whether the agent did in fact agree to the actionObjective Standard-given the parties outward expressions, actions, and words, would a reasonable person concluded manifest and consent about the relationshipThere must be clear understanding that the principal is in controlLow levels of formal agreement are needed Fiduciary Duties- agent’s duties to the principal LoyaltyObedienceDue CareDisclosureAccountingReimbursement and Indemnification- principal’s duties to the agent (all with regards to Responds Superior Doctrine)Payments or expenses the agent made to a third party or incurred for the principal’s benefitClaims made by third parties that put the agent at lossAgent Authority-agents power to bind the principal to an agreement 1)Actual Authority – when the parties expressly agree to create an agency, or it is implied based on past dealings and specific powers are granted to an agent 2)Apparent Authority- principal’s actions lead to reasonable belief of a third party that the agent has authority to act on their behalf 3)Ratification- the principal gives the agent authority of an action after-the-fact even if the action was previously unauthorized by …expressly ratifying the actionnot repudiating the actionAgent Liability to Third Parties- an authorized agent who enters into a contract with a third partybinds the principal to certain obligations and if they refuse to perform the agent may be held liable

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