Chapter 33
Agency Formation and
Duties
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Introduction to Agency Law

Agency: Relationship between principal and agent

Agent: One authorized to act for/on behalf of principal

Principal: One who hires agent to represent him/her

Fiduciary: One with duty to act primarily for another person’s
benefit
33-2
Creation of Agency Relationship

Expressed Agency: Agency formed by making written/oral agreement

Power of Attorney: Document giving agent authority to sign legal documents
on behalf of principal

Durable Power of Attorney: Power of attorney intended to continue to be
effective/take effect after principal incapacitated

Agency By Implied Authority: Agency formed by implication, through
conduct of parties

Agency By Estoppel: Agency formed when principal leads third party to
believe that another individual serves as his/her agent (although principal had
actually made no agreement with purported agent)

Agency By Ratification: Agency that exists when individual misrepresents
himself/herself as agent for another party, and principal accepts/ratifies
unauthorized act
33-3
Requirements for “Agency By Ratification”

Individual must misrepresent himself/herself as agent for
another party

Principal accepts/ratifies unauthorized act

Principal has complete knowledge of all material facts regarding
contract

Principal must ratify entirety of agent’s act
33-4
Agency Relationships

Agency Relationship: Fiduciary relationship (relationship of trust) in which
agent acts on behalf of principal

Principal-Agent Relationship: Employer hires employee to enter into
contracts on behalf of employer; parties have agreed that agent will have
power to bind principal in contract

Employer-Employee Relationship: Employer hires employee to perform
certain tasks; employer has right to control conduct of employees

Employer-Independent Contractor Relationship: Employer hires persons
(other than employee) to conduct some sort of task; employer has no control
over details of conduct of independent contractor
33-5
Exhibit 33-4: Independent Contractor or
Employee?

Does worker engage in distinct occupation/independently established
business?

Is work done under employer’s supervision, or does specialist without
supervision complete the work?

Does employer supply the tools?

What skill is required for the occupation?

What is the length of time for which worker employed?

Is worker a regular part of the employer’s business?

How is worker paid?
33-6
Principal’s Duties To Agent

Compensation

Reimbursement and Indemnification

Cooperation

Safe Working Conditions
33-7
Agent’s Duties To Principal

Loyalty

Notification

Performance

Obedience

Accounting
33-8
Principal’s Rights and Remedies Against
Agent

Constructive Trust

Avoidance

Indemnification
33-9
Agent’s Rights and Remedies Against
Principal

Tort and Contract Remedies

Demand For An Accounting

Specific Performance
33-10