chapter
4
Agency Law
Chapter Objectives
After reading this chapter, you will know the
following:
• How agency relationship work and the
authority that agents have
• The function of a sport agent
• The duties of agents and principals within
the agency relationship
• The many ways in which athlete agents are
regulated
Definition
• Law that governs the relationship between a
principal and agent
• A legal relationship that is essential to
business function (e.g., entering into
contracts)
Roles of Sport Agents
• Negotiate employment contracts
• Negotiate concession agreements
• Represent organizations in negotiations
with sponsors, advertisers, and media
• Enter team or organization into events
(continued)
Roles of Sport Agents (continued)
• Enter into contracts with entities that run
events
• Conduct estate and financial planning
• Secure investment and appearance
opportunities
• Assist in developing Web presence or
marketing campaigns
Agency Formation
• By agreement: By contract
• By ratification: Principal accepts the acts of
a person who has no authority
• Agency by estoppel (apparent authority):
Third party reasonably believes agency
exists
Agency Relationship
• Both agent and principal must agree to be
part of relationship
• Can be oral or written agreement
• Both parties must have legal capacity to
enter into relationship
Authority
• Actual authority
• Apparent authority
Actual Authority
• Express: Authority specifically granted in
agency agreement
• Implied: Authority that is reasonably
necessary to carry out express authority
(e.g., agent has express authority to
negotiate contracts; has implied authority to
travel, hire employees to aid him or her)
Apparent Authority
• Where a third party reasonably believes
(incorrectly) that the agent is acting with
actual authority
• Principal held liable, even though no actual
authority was given
Duties
• Agent to principal
• Principal to agent
Agent to Principal
• Fiduciary duty: Agent must act for the
benefit of the principal
– Cannot engage in double-dealing (working for principal and
third party)
– Cannot take personal advantage of a business opportunity
• Fiduciary duties
– Duty of loyalty
– Duty of obedience
Principal to Agent
•
•
•
•
Fair compensation
Reimbursement of expenses
Compensate for losses (indemnification)
Duty of good conduct
Liability: Contracts
• Contract: Key is whether agent is within
authority
• If so:
– Principal is liable on the contract
– Agent is not liable, unless agent acts for undisclosed
or partially disclosed principal
– If apparent authority is present, principal is liable and
so is agent (who must reimburse principal for
damages)
Liability: Torts
• Key is scope of employment
• Factors include the following:
– Whether the agent committed an act (resulting in
injury to another) that was authorized by the
principal
– The time, place, and purpose of the act
– Whether act was commonly performed by
employees on behalf of their employers
(continued)
Liability: Torts (continued)
– Whether the employer’s interest was enhanced by
the act
– The extent of involvement of employee’s private
interests
– Whether the employer furnished the means by which
the injury was inflicted
– Whether the employer had reason to know that the
employee would perform the act in question
Liability: Definitions of Torts
• Scope of employment is the realm of
activities engaged in by an agent when
acting on behalf of a principal.
• Respondeat superior is a legal doctrine that
holds people and organizations high in the
chain of command (principals) liable for the
negligent acts of those lower in the chain of
command (agents).
Regulation of Athlete Agents
• The need: Agent abuses in the past required
more regulation.
• Negative impact on athletes: In some cases,
athletes lost money due to agent’s actions.
(continued)
Regulation of Athlete Agents
(continued)
• State laws and the Uniform Athlete Agents
Act
– Many states had their own statutes requiring
registration and licensing
– UAAA (adopted by 35 states)
• Provides for uniformity in registration and certification of
athletes’ agents among the states.
• Provides that agents who sign contracts with studentathletes must provide notice to the particular university and
must make clear to the student-athletes that their eligibility
is affected. Notice must be given in the contract
Regulation of Athlete Agents: Federal
Law
• SPARTA (15 U.S.C. §§ 7801-7807, 2008)
• Sports Agent Responsibility and Trust Act
– Prohibits agents from making false or misleading
promises or providing gifts, cash to student-athletes
and those associated with student-athletes
– Similar to the Uniform Athlete Agents Act, SPARTA
requires written disclosures informing students they
could lose their eligibility to play university sports if
they sign an agency contract. Violators face fines.
– No registration required.
Professional League Unions
• Each of the major league players’
associations requires agents to register
with the appropriate union.
• Standards vary, but NFLPA’s is the most
stringent: Annual classes, passing exam,
upholding code of conduct.
Disputes
• Breach of contract
• Tort law issues: Fraud, misrepresentation