AGENCY LAW
Objective 3.02
Understand agency law
What is Agency Law?
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This is not in your notes!!!!
Agency refers to a type of working relationship in
which one person represents another person in a
business transactions with a third party
The concept of agency is an important legal foundation
in the work world. You can be in an agency
relationship whether you work for a company or for
yourself. An agency relationship underlies employee
employer situations. The cashiers at a supermarket are
agents for their store, Salespeople in a department
store are agents. Whether the worker is actually called
an agent does not matter.
What is agency law?
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Area of law dealing relationships created between
two parties in which the principal (store)gives
authority to an agent (employee)to act of the
principal’s behalf in business transactions with a
third party.(customer)
Agency Definitions
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Principal
 Individual

who gives authority to the agent.
Agent
 Individual
employed by principal to work with the third
party.
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Third party
 The
person or company whom the agent deals with on
behalf of the Principal.
Types of Work Relationships

Principal-Agent Relationship
 “Genuine”
agency relationship
 Agent has conducts business on behalf of the principal
(it is as if the principal has acted)
Types of Work Relationships

Proprietor-Independent Contractor
 Proprietor
is an individual or business that hires
someone to perform a task
 Independent contractor (plumber, electrician, lawyer,
etc.) works for the proprietor
 Independent contractor cannot act on behalf of
proprietor without expressed permission
Types of Work Relationships
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Master-Servant Relationships
A
master is a person who has the right to control the
actions of another person
 Actions include where to work, what time to arrive at
work and tasks to complete at work.
 The person performing the actions is the servant
 At times, the interactions between employer-employee
are considered to be master-servant
Actual Authority
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If the principal intentionally gives express and
implied powers to the agent to act for him/her, the
agent possesses actual authority.
Express Powers

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Responsibilities of the agent are written or spoken.
Implied Powers

Responsibilities created by the agent’s actions.

Power of Attorney – is any writing granting someone
authority to act as an agent.
Apparent Authority

Apparent Authority
 Also
called, agency by estoppel.
 Created by law or circumstance.
 Occurs when a principal, intentionally or negligently,
causes or allows a third person to believe that an
agency relationship exists, when there is no express
agency. See example on next slide.
 Principal remains liable for the agent’s actions.
Agency by estoppel example
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Phil told Terry to come to his jewelry store at 8 pm
where someone would help her buy a ring on sale.
However, Phil left his store early for a family
emergency. He asked his acquaintance, Axel to
keep an eye on the store. Terry arrived at 8 pm
and assumed that axel was an employee. She
picked out a ring and paid Axel $1000.00. The
next day, Phil called Terry and said her ring was not
on sale and cost $500 more. Terry refused to pay
it. She is within her rights because Phil created an
agency by estoppel with Axel
Types of Agents
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General Agent
 Given
authority by principal to perform a VARIETY of
tasks.

Special Agent
 Authority

restricted to certain, specific tasks.
Subagent
 An
agent appointed by another agent with the
knowledge and consent of the principal.
Types of Agents

Agent’s Agent
 An
agent appointed by another agent without the
knowledge and consent of the principal.

Co-agents
 Two

or more agents working together.
Partially Disclosed Agent
 Given
authority to work with a third party but
forbidden to reveal identity of the principal.
Types of Agents
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Gratuitous agent
 Agent
that works for free
 No contract exists between agent and principal
 Agent can terminate relationship at any time
Duties of Agent to the Principal
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An agency relationship is fiduciary in nature; a
good faith relationship based on trust
Agent must protect the interests of the principal
Duties of Agent to Principal
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Duty of loyalty
Duty of confidentiality
Duty to abide by all lawful instructions
Duty to act with reasonable care
Duty to account for funds
Duties of Principal to the Agent
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Compensation
 Payment
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for services rendered
Reimbursement
 Payment
for expenses incurred by the agent on behalf
of the principal
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Indemnification
 Payment
for losses incurred by the agent on behalf of
the principal
Duties of Principal to the Agent
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Cooperation
 Principal
must allow agent to perform his/her tasks
 Principal must not make agent’s job difficult or
impossible to perform
Termination of Agency

By operation of law:
 Death
of principal or agent
 Either party becomes insane
 Bankruptcy of principal
 Destruction of subject matter
 Agent’s objective becomes illegal
Termination of Agency

Fulfillment of the agency purpose
 The

agent completes his/her task
Mutual content
 Both

agent and principal agree to end relationship
Expiration of time
 Only
applies if the agent is contracted to perform
duties within a certain period of time