Donna M. Kesot, CPCUCPCU 530 Agency Law March 13, 2013
The parties to an agency? •Agency is a fiduciary relationship where the agent holds a position of trust, manages the principal’s affairs or funds, and has a duty to the principal to act in a trustworthy manner. •Principal: the party in an agency that authorizes the agent to act on that party’s behalf •Agent: the party that is authorized by the principal to act on the principal’s behalf
By Appointment: The principal authorizes the agent to act in her behalfand the agent assents to the appointment. Can be express of implied.Real property requires principal’s signature.By Estoppel: The principal’s words or conduct cause a 3rd party toreasonably believe that an agency exists and the 3rd party materiallyrelies upon the words or conduct, e.g. consignee given space in ashop. Not a genuine agency, protects 3rd Party only.By Ratification: Results when a principal adopts (ratifies) the act ofanother who has purported to act for the principal and has neither thepower nor authority to perform the act for the principal, e.g.insurance agents without LOA. Principal may refuse to approveunauthorized acts.
Match the duty to the party: Loyalty & Obedience Principal to Agent Compensation Agent to Principal Accounting Agent to Principal Reasonable Care Principal to AgentExpense Reimbursement Subagent to PrincipalDuties are not owed for dishonest, immoral, or illegal acts
Agent purports to act for “someone”Principal must ratify entire transaction, not justfavorable partsPrincipal must ratify before 3rd party withdraws from theagreementPrincipal must have all material facts available beforethe ratification is binding
• The liability of multiple defendants either collectively or individually for the entire amount of damages sought by the plaintiff regardless of their relative degree of responsibility. (Deep pockets)
Just cause (fraud, criminal activity, flagrant contract violation)Lapse of time (expiration or reasonable period)Accomplishment of purposeRevocation (requires notification by word or act)Renunciation (agent’s termination of the relationship, “I quit”)Death or Incapacity (incapacity of principal terminates agency,incapacity of agent confers right to terminate agency to principal)Changed Circumstances ( e.g. bankruptcy, discovery oil on land)
If the principal’s words or actions lead a 3rd partyto believe that an agency exists, the principalcannot subsequently deny the agent’s authorityto act on the principal’s behalf.
Independent Contractor = A person hired toperform services for another under the directionand control of the other party TRUE or FALSE?Real Answer:Independent Contractor = A person or organization hired toperform services without being subject to the hirer’sdirection and control regarding work details.
• The legal principle under which an employer is vicariously liable for the torts of an employee acting within the scope of employment• Let the master answer because the employer controls or has the right to control how the agent performs the assigned work.
In contracts arranged by agents, both theprincipal and agent may have right of recoveryagainst 3rd parties.
A principal may be liable to a 3rd partyfor misrepresentation by an agentwhen: The principal intended that an agent make a misrepresentation during the transaction. When an agent has actual or apparent authority to make true statements about a particular subject, whether the principal knew about the misrepresentation or not. When an agent does not have actual authority, misrepresents a particular subject, but has no assets, whether the principal knew about the misrepresentation or not. A & B only A, B & CThe principal intended that an agent make a misrepresentation duringthe transaction. & When an agent has actual or apparent authority tomake true statements about a particular subject, whether the principalknew about the misrepresentation or not.
Certain tasks which do not requirejudgment or discretion Nondelegation Rule: Generally an agent cannot delegate their duties except: 1. Ministerial duties (no judgment required) 2. Customary appointments (custom of the particular business) 3. Emergency appointments (to protect the principal’s interest) Ministerial describes an act or a function that conforms to an instruction or a prescribed procedure. It connotes obedience, performed without the use of judgment by the person performing the act or duty.
Selecting appropriate individuals as agentsGiving them clear instructionProviding them with appropriate tools, equipment, andmaterialsMonitoring their performanceDischarging those who do not perform appropriately
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