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

Agency and Partnership-Outline-Prof. Rosin Spring 2015
The Agency Relationship
·         Definition
o    A fiduciary relationship that
o    Results from manifestation of consent by Principal and
o    Consent by Agent to do so
o    That Agent shall act on Principal’s behalf
o    Subject to Partner’s control
·         Triangular Relationship
o    This is the nature of an agency relationship
§  There is the relationship between the agent and principal
§  The relationship between the agent and third party
§  Then the relationship between the third party and principal that results from the agent’s actions
·         Compared to Master/Servant
o    Both are fiduciary relationships
o    Agency
§  Focus on liability in contract
§  Principal generally not liable for incidental torts of Agent
o    Master/Servant
§  Respondeat Superior: liability of master for test of servant in scope of employment
o    Major different is control
§  Master/servant is a higher level of control where the employee does what master tells them with little leeway
§  Agent has more ability to make peripheral decisions and take actions to achieve the purpose of the agency relationship
o    Fact intensive questions because there must be an analysis of relationship to determine if it is master/servant or principal/agent
·         Power to Alter Legal Relations
o    Rest. 2d – “Agent acts on Principal’s behalf”
§  Reference to the ability of the Agent to alter the legal relations of the Principal
o    May be the lynchpin to finding an agency relationship in some courts
§  Ex: H&R Block (various results on agency relationship due to the level of ability of H&R to alter the taxpayer’s legal relations)
o    Some courts are strict on this and take a narrow view and some courts take a broader view
o    Agency does not turn on technicality of who signed contract
§  Many times the Agent negotiates contracts where the Principal is the only one to sign
o    Might not always be the actions of the Agent on a contract but could be the receiving of information
§  Hold Principal responsible for the knowledge of the Agent in some cases
·         Non-agency Fiduciary Relationships
o    Fiduciary relationships that put a duty on one party acting with another that is not and agency relationship
o    Confidential Relationships
§  Can include:
·         Business related advisors
·         Advisees where
o    Disparity in position between the parties and
o    Inferior party places primary trust in other’s counsel
o    If courts do not have enough for the Agency relationship then they may hold a party liable under a confidential relationship
Formalities of Formation
·         Formalities in the Restatements
o    The Restatements do not require strict formalities, they only need the elements of the definition for an agency relationship to be present and capacity
§  Rest. 2d and 3d:
·         Manifestation of consent by Principal and
·         Consent by Agent
§  If these are present then according to the Restatements and agency relationship has formed
o    Besides the consent requirements and capacity requirements there are no others under the common law
·         Capacity
o    Ability of the parties to enter into the relationship
§  Think of sound mind to enter into relationship
o    Principal: Legal capacity to consent
o    Agent: physical ability to do the act
·         Statutes
o    Statutes may add additional requirements for an agency relationship
§  Ex: NY Probate law
§  CA Civil code Equal Dignities requirement
·         Equal Dignities
o    This is a legal doctrine that requires the Agent to get written authorization from Principal to complete authorized acts
§  Act delegated requires certain formalities (writing)
§  Manner of authorization must have same formalities
·         Ex: When an Agent is entering into a contract under SoF, the Agent must have written consent of Principal to enter into contract
o    Common Law
§  NO equal dignities rule
§  There was a caveat for contracts under seal
§  Texas does not require this under SoF
o    Statutes may require
§  California Civil Code:
·         Always required
§  Recording statues:
·         Authority of agent signing a deed must be in recordable form
o    E.g. Texas
§  Texas Oddity
·         The authority of the agent must be in recordable form
·         The earnest money can bind the Principal to sale but when it is time to convey it must be the Principal giving written authority in some written form
·         General Introduction to Authority
o    If you are an Agent you can affect the Principal’s legal relations
§  Only to the extent you are authorized
§  This comes from the manifestations of Principal to Agent and Principal’s consent to be bound Rest. 2d § 26
o    Liability of Principal in Contract
§  Principal is liable for authorized acts of agents
§  Principal is not liable for contracts not authorized
·         General Rule – Rest. 2d § 164(1)
o    Principal not liable for contract as made
§  There are limited circumstances where the Agent can still bind a Principal by unauthorized acts
o    Principal not liable for contract as Agent could have made
§  Ex: If there was authority to authorize a contract to a certain degree the Principal is not liable for that degree that was authorized (generally, exception may apply)
·         Exception – Rest. 2d § 164(2)
o    P liable if
§  Only variation is as to
·         Amount or
·         Separable part AND
§  Third party seasonably manifests wiliness to enforce to portion authorized
o    Rest. 3d 6.05(a) follows 164(2)
Third Parties a

er of Attorney
§  General power of attorney an important planning document
§  Statute adopts a “form” power of attorney:
·         General descriptors of categories
·         Statutory elaboration incorporated by reference
§  Interpretative problems remain,
·         Especially re gifts: again, note using a “form”
·         How much variance is “substantially” in property form?
o    There can be some variance
o    Uniform Power of Attorney Act 2006
§  Special grants: express grant required
·         Gifts, etc.
§  General
·         Statutory Form, but also
·         Incorporation by reference in all powers
·         Broader language permitted
§  Not widely adopted
o    Divorce is too personal to be delegated through Power of Attorney
o    Health Care Decisions
§  Especially regarding termination of treatment
·         Note separate act authorizing
·         Texas Durable Health Care Power of Attorney
·         Express Authority
o    Based on Principal’s manifestation of consent, as reasonably interpreted by Agent
·         Implied Authority
o    Grows out of express authority
§  Related acts that are
·         Necessary
·         Incidental Customary
§  In connection with express grant
o    Implied Actual Authority
·         Restatement: 2d v. 3d
o    Different drafting philosophies
o    Rules v. Standards
§  Standards: general principles
§  Rules: applications of general principles
o    Restatement 2d: standards, but also rules for specific contexts
o    Restatement 3d: focus on standards
§  Rules in comments, illustrations, or absent
Subagents and Subservants
·         Subagents and subservant
o    Subagent/subservant:
§  Agent or servant of the agent/servant
§  Agent/Servant delegates performance of duties to Principal
o    Subagents/subservant also an agent or servant of main Principal
o    Subagent/subservant owes fiduciary duties to
§  Main Principal
§  Its own Principal (the agent or servant of Principal)
·         Implied Authority to Hire Subagent/Subservant
o    Contract law delegation doctrine
o    Generally
§  Incidental, mechanic or ministerial duties
§  Not acts involving discretion or skill
§  Not if only a servant (& not agent)
o    Unless context requires