® A principle is liable for the acts of his agent which are committed within the scope of his agency.
® Applies to sole proprietorship – simplest form of business organization
® Comes about by CONDUCT, not INTENT, of the parties
§ define agency relationship
§ understand different legal concepts of authority
§ issues of liability of agent & principle
§ fiduciary duty distinguished from contract and arm’s length dealing
R2d of Agency §1: The fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act on his behalf, and subject to his control and consent by the other so to act.
R2d of Agency §13: An agent is a fiduciary with respect to matters within the scope of the agency.
1. Agreement (not necessarily a contract/parties do not have to intend to create such a relationship / Consent of parties (objectively manifested –may be implied)
2. A acts on P’s behalf
3. P exercises control over A
1. Is there an agency relationship? (see 1-3 above)
2. What is its scope? (is the activity giving rise to liability within the scope of the agency)
Principle—the one for whom action is taken
Agent—the one who acts
General Agent—one authorized to conduct a series of transactions
Special Agent—one authorized to conduct a single transaction or series; no continuity of service
Disclosed Principle – principle whose existence and identity are known to third persons
Partially Disclosed Principle – principle whose existence but not identity is known to third party
Undisclosed Principle—principle whose existence and identity are unknown to third party
Master- employer; one type of principle
Servant – employee; one type of agent
Independent Contractor – one who contracts to do something for another but who is not a servant (not subject to direct control with respect to physical conduct); may or may not be an agent
§1 Agency; Principle; Agent
(1) Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other to so act.
(2) The one for whom action is to be taken is the principle.
(3) The one who is to act is the agent.
Authority is the power of the agent to affect the legal relations of the principle by acts done in accordance with the principle’s manifestation of consnet to him.
§8 Apparent Authority
Apparent authority is the power to affect the legal relations of another person by transactions with third persons, professed
and not dependent upon authority or apparent authority.
PRINCIPLE is liable to THIRD PARTY if A had actual authority, apparent authority, was an agent by estoppel, or had inherent authority, or if principle ratified the act.
AGENT is liable to THIRD PARTY T if no agency exists, also on common law tort misrepresentation theory (Implied Warranty of Authority). Agent is liable if P is undisclosed or partially disclosed (although P is also liable)
THIRD PARTY is liable to PRINCIPLE if Principle would b liable to third party, except the third party is not liable to an undisclosed principle if the agent or principle knew the third party would not have dealt with the principle.
TYPES OF AUTHORITY
1. Actual Authority
Actual authority exists if P’s words or conduct would lead a reasonable person in A’s position to believe that the principle had authorized A to so act; binds P even if third party didn’t know authority existed or thought that A was P
-Implied – (“sell my car” implies the authority to transfer title, give possession, maybe extand credit) – more common than express