I. The Law of Agency
a. Creation of the Agency Relationship
i. Definition: Rst. (2d) of Agency §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.”
1. § 387 Default Rule: “Act solely for the benefit of P” in all areas connected to duty
2. §12: “An agent or apparent agent holds a power to alter the legal relations between the principal and third persons and between the principal and himself.”
3. The parties DO NOT need to even have the intent to create the agency relationship.
ii. Basile v. H&R Block, Inc. (PA 2000) H&R Block has a program where they allow customers to get instant tax returns. They get a fee from this, but most goes to the lending agency. Some customers were upset because they weren’t told that H&R Block benefited from the arrangement. The court found there was no agency relationship between the customers and H&R Block because H&R did not have the authority to act on behalf of the customers in taking the loans i.e. to actually alter the principle’s legal relations; instead they presented a package of options (other JSs came out differently)
b. Agent’s Fiduciary Duties to Principal
i. A principal’s duties to the agent include: performance of K obligations; good conduct; noninterference; cooperation; indemnification (under certain circumstances)
ii. An agent has the following major duties to the principal.
1. Duty of care § 379 – standard skills for the locality + any special skills
2. Duty of disclosure §381 – reasonable efforts to inform P of any relevant info about entrusted duties and affairs
3. Duty to obey §385 – all reasonable directions regarding the contracted duty
4. Duty to act within the scope of Authority §383
5. Duty of LOYALTY
a. This is the most important duty; duty to act “solely for the benefit of the principal in all matters connected with [the] agency.” §387
b. §388: “An agent who makes a profit in connection with transactions conducted by him on behalf of the principal is under a duty to give such profit to the principal.”
c. There are other parts of this duty including
i. Not to compete concerning agency subject matter §393
ii. Not to act or agree to act for someone with competing interests §394
iii. Can’t use info acquired while working against P, or for A’s own benefit §395
iv. Not to disclose confidential information, lists or trade secrets including after termination of the relationship. §396
iii. Food Lion, Inc. v. Capital Cities/ABC, Inc. (4th Cir. 1999) Two reporters from ABC News went under cover and got hired as workers at Food Lion. They filmed and broadcast meat packaging stuff. Food Lion sued for breach of duty of loyalty. The appeals court said that this was the kind of breach of duty of loyalty that was tortious under NC and SC law. They usually only allowed tort claims for this when the employee directly competed with their employers, misappr
retation of this manifestation.
3. Apparent Authority can be the basis for liability in two situations:
a. Where persons appear to be agents, even though they do not qualify as such;
b. Where agents act beyond the scope of their actual authority.
c. Tort claims: §§219-220; K claims: §140(c), §161
4. Bethany Pharmacal Co. v. QVC, Inc. (7th Cir. 2001) Bethany tried to assert that Janis, a state employee had some type of apparent authority for QVC. The court did not agree. In order to be the basis for liability, the people must either appear to be agents, even though they are not, or they must be agents acting beyond their authority. In order for it to qualify under the appearance, the Principal must make a manifestation of their approval. This can be done by “written or spoken words or other conduct if the [principal] has notice that another will infer such consent or intention from the words or conduct.” QVC’s letters spelled out the procedure; Janis’ letters can’t create apparent authority.
d. Review of Agency Concepts
i. Chart O’ Liability
1. A’s liability – K: liable for all but disclosed P (§§ 320-22); Tort: generally for all (§343)
2. P’s Liability – K: for all if A has actual or apparent authority (§140); T: all within A’s scope of duty (§219), some torts without (§219(2)), not liable for independent contractors (§220)
3. Third Party’s liability – liable for all tort and most K, though can get out of some Ks if undisclosed P is someone they hate
