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Unformatted text preview: AGENCY LAW Are agents hurting professional sports? I. Overview Qui facit per alium facit per se . He who acts through another acts himself. This simple Latin phrase provides the keystone upon which the mutual obligations of agency law rest. Agency is defined by Section 1 of the Second Restatement of Agency as the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act. Agency is a legally recognized relationship that allows an attribution of one person's behavior to another. This carryover process is two-sided in that both benefit and burden inure to parties involved in the agency relationship. Under the basic doctrine of agency, the principal is allowed to reap the beneficial harvest of the agent's actions made in his or her behalf. For example, assume an agent has agreed to be paid a set salary of $100 for selling certain kinds of goods. The principal gets to keep the net profits from that agent's selling activities, be they $100 or $1,000,000. This net gain is what allows the use of agency theory to maximize one's profits through the actions of another. Exponential growth of most any sort of enterprise is almost always directly tied to effective use of the talent of others through agency law. There are some limits on this ability to designate others to act on one's behalf based on uniqueness of personal services or on public policy grounds that forbid use of agents, such as voting or serving a criminal sentence. As a practical matter, business as we know it today simply could not be conducted on any scale beyond sole proprietorship without extensive use of agency relationships. The benefits of agency are not without counterbalancing detriment. The Latin maxim respondeat superior may be familiar to you. It means that, in certain instances, a principal is liable to third parties for the acts of his or her agent. Just as the benefits of agency can be great, so can the burdens. One of the fastest growing areas of management specialization in today's business environment is risk management. This area generally concerns business financial responsibility for exposure to specified contingencies or perils. Included in these perils are the acts of the agents for which the principal may be liable. The ironic aspect of all this is that the very same people who help a business grow can lead that same enterprise to financial ruin. Every agency liability question having an involvement with third parties has three subquestions that must be answered in order to come to a final resolution of the issues at hand. They are: 1. What are the responsibilities of the principal and agent vis--vis each other?...
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This note was uploaded on 03/19/2008 for the course BUSA 2106 taught by Professor Lee during the Summer '07 term at University of Georgia Athens.
- Summer '07