Daniel J.H. Greenwood

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Agency

• I. Definition of Agency
• A. Principal "manifests" that agent shall act for it/him/her
• B. Agent accepts undertaking (consents)
• C. Parties understand that principal is in control.
• II. Actual, apparent, implied & inherent agency
• A. Actual:
• explicitly or implicitly authorized.
• B. Apparent:
• Principal makes it appear that agent has authority (e.g., put him in teller’s booth).
• TEST: Reasonable 3d party might think there was actual authority.
• C. Inherent:
• Agent always has authority to commit a tort on behalf of the principal even if the 3d party has been informed to the contrary;
• agent for undisclosed principal binds the principal even if he exceeds his actual authority.
• TEST: Reasonable PRINCIPAL might have foreseen this abuse of authority.
• III. Tort Rules: Master/servant v. Independent Contractors.
• A. Servant: A master is a principal who controls the PHYSICAL CONDUCT of the agent (servant).
• Ordinarily, employees are servants.
• Masters are liable for their servants’ torts under respondeat superior or inherent agency.
• B. Independent Contractor: An independent contractor is an agent, but not a servant.
• Usually the I.C. controls his/her/its own work place, work tools, work methods, working hours.
• Often the IC has multiple clients (rather than a single employer).
• People who sell a product or service (rather than labor time) are almost always independent contractors (or contracting opposites and not agents at all).
• IV. The contract liability rules for principals: disclosure and authority

	apparent authority	actual authority
disclosed principal	agent binds principal	agent binds principal
partially disclosed	agent binds principal	agent binds principal
undisclosed principal	agent doesn't bind principal	agent binds principal

• When can the principal sue the third party?
• Anytime the reverse is true,
• EXCEPT that the undisclosed principal has no rights if the principal or agent had reason to know the 3d party wouldn't have dealt with the principal.
• V. The contract liability rules for agents: disclosure and authority

	apparent authority	actual authority
disclosed principal	a. not liable, p is	a not liable, p is
partially disclosed	a and p liable -- (credit)	a and p liable
undisclosed		a and p liable--but sometimes quirky

• NOTE that if the principal is NOT bound, the agent IS -- based on breach of implied warranty of authority, or on the contract itself.
• VI. Fiduciary Responsibility: Agency v. Contract
• A. Contract:
• Contracting parties are presumed to be equal and to retain that equality except as specified in the contract.
• Each party is permitted to look out for him/her/itself, within the limits of the law of fraud and good faith and fair dealing. Contractual obligations normally limit this self-interestedness only to the extent agreed upon in the contract.
• Contracts last until the contract is fulfilled or as provided by agreement.
• Contractual relations, therefore, are equal and disinterested.
• B. Agency:
• An agent agrees to accept direction from the principal and to act on behalf of the principal.
• An agent has a fiduciary duty to act on behalf of the principal and may not place her/his/its interests above those of the principal. There is no obligation in the reverse direction.
• Agency relations may be terminated at any time by either party for any reason.
• Agents, therefore, are subordinate and other directed or altruistic.