Select Page

Agency and Partnerships
South Texas College of Law Houston
Rosin, Gary S.

Agency & Partnership Outline
Rosin – Spring 2013
Chapter 1: The Firm and Its Agents
A.      Agents, Servants and Strangers
a.       An agent/agency is a (R2A):
                                             i.      Fiduciary relationship
                                            ii.      That results from a manifestation of consent by the principal
                                          iii.      And consent by the agent to do so
                                          iv.      That the agent shall act on the principal’s behalf
b.       Factors or Elements?
                                             i.      Depends on the courts’ treatment of a case
                                            ii.      Agent has power to alter principal’s legal relations
1.       Agency does not turn on technicality of whose name appears on a K
a.       Attorney’s often negotiate for clients, but only client signs final agreement
b.       Principals often hire consultants, etc.
2.       The rights of the principal are affected by facts the agent knows or has reason to know, even if the agent does not tell the principal
                                          iii.      Duty to act primarily/solely for the benefit of the principal
                                          iv.      Principal’s right to control that agent
c.        Master-Servant vs. Agent-Servant Relationships
                                             i.      Both fiduciaries
                                            ii.      Principal/Agent:
1.       Focus on liability in contract
2.       Principal is generally not liable for the incidental torts of the agent
3.       Only a minimal degree of control is necessary – the right to specify the object of the agency
4.       Focus on whether principal is bound by contracts entered into by the agent on the principal’s behalf
                                          iii.      Master/Servant
1.       Respondeat superior: liability of the mater for torts of the servant in the course and scope of employment
2.       Greater degree of control necessary – the right to control the details of the work
d.       Restatement Third Definition
                                             i.      Elements
1.       Consensual relationship in which one person, to one degree or another, acts as a representative of, or otherwise acts on behalf of another person with power to affect the legal rights and duties of the other person
2.       Agents who lack authority to bind their principals to contracts nevertheless often have authority to transmit or receive information on their behalf
3.       Agency consists of three parties:
a.       Agent
b.       Principal
c.        Third part with whom agent deals
                                            ii.      Acting on behalf of…
1.       Employee and non-employee agents who represent their principal in transactions with third parties act on the principal’s account and behalf
2.       Employee-agents whose work does not involve transactions with third parties also act “on behalf of” their employer-principal
3.       By consent to act on behalf of the principal, an agent who is an employee consents to do the work that the employer directs and is subject to employer’s instructions
a.       In either case, actions on behalf of the principal do not entail that the principal benefits as a result
                                          iii.      Intermediaries (i.e., translators)
1.       A translator’s duty to principal can be one of agency
2.       Translator acts on behalf of principal and principal has power to provide instructions as to how the translation shall be performed
B.      Formalities of Formation
a.       Agency relationship results from:
                                             i.      Manifestation of consent by the principal; AND
                                            ii.      Consent by the agent
b.       Capacity
                                             i.      Principal must have legal capacity to act
                                            ii.      Agent must have physical ability to do the act
1.       Ex: principal gives kid money to go get a drink for principal
                                          iii.      At common law, no other requirements
                                          iv.      Statutes may add other requirements
1.       Ex: NY Probate Law, CA Civil Code Equal Dignities Requirement
c.        Equal Dignities Rule
                                             i.      Act delegated requires certain formalities
1.       Ex: written, or acknowledgement before a notary; cannot orally authorize something to avoid SOF
                                            ii.      Manner of the authorization must have the same formalities
1.       Ex: Ks w/in SOF
                                          iii.      Common law equal dignities
1.       Equal dignities are not required at common law
2.       Only Ks under seal required equal dignities
                                          iv.      Statutes may require equal dignities
1.       In Texas, there is no requirement regarding SOF; so you can orally authorize an agent to enter K w/in SOF
                                           v.      Corporate Principals
1.       Corporations meet the equal dignities requirement by deeming acts of certain persons are in themselves the acts of the corporation
a.       Ex: management of a corporation’s business is entrusted to the BOD
b.       BOD is not an agent of the corporation, but rather the BOD acts on its behalf
2.       The authorized acts of certain officers are deemed to be the acts of the corporation
a.       Authority of such officers act need not be evidenced separately
C.      Firm’s Liability in Contract for Acts of Its Agents
a.       Rule for contracts unauthorized in part
                                             i.      The principal is not liable for the contract as made
                                            ii.      The principal is not liable for the contract as the agent could have made
                                          iii.      Exception:
1.       Principal can be liable if th

gned by an authorized agent, regardless of whether the principal’s name appears on the instrument
f.        Can Owner avoid or rescind a K entered into by Agent?
                                             i.      A fraud or misrepresentation COA
1.       Agent falsely represents to Third Party that Agent does not act on behalf of Owner
2.       Third Party may avoid K or conveyance if Owner or Agent had notice Third Party would not have dealt with Owner
3.       If identity of principal is relevant and material, and there is a lie, and they knew you would not deal with them, may be able to pursue fraud/misrepresentation
                                            ii.      Implied misrepresentation
1.       Agent never says not acting for principal
2.       A failure to disclose may be enough where principal identification is material to K
a.       Show:
                                                                                                                                       i.      Identification of principal assumption and third party had mistaken belief
                                                                                                                                      ii.      Mistake
1.       Makes K unconscionable; OR
2.       Known to agent or principal; AND
                                                                                                                                    iii.      Material and adverse effect on performance
Chapter 2: Actual Authority of Agents
A.      Introduction
a.       Authority (or actual authority) is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to agent
B.      Express Actual Authority
a.       Express authority is based on principal’s manifestation of consent, as reasonably interpreted by agent
                                                               i.      Interpretation (ways courts interpret express authority):
1.       Strict construction
2.       Courts tends to read broad expressions narrowly
a.       Ex: “convey” is broad, but interpreted narrowly
3.       Gifts (unlikely to be in principal’s interest)
a.       Courts tend to not like gifts b/c unlikely to be in principal’s best interest
b.       Gifts allowed if expressly given by clear powers
c.        Gifts allowed if necessary/implied by clear powers
d.       Gifts allowed if principal later consents (maybe)