Agency and Partnership OUTLINE
Agency
1) Policy
a) Minimize divergence of interest between principal and agent.
b) Avoid disadvantaging 3rd P who deal with agent instead of principal. (ties go to the 3rd P).
2) Definitions
a) A fiduciary relationship, where two parties agree agent will act on behalf of and under the control of the principal. As a fiduciary, have both:
i) Duty of Care: breach = $ damages
ii) Duty of Loyalty: can’t act on own behalf or 3rd P behalf without disclosing. Breached by self-dealing or usurpation of opportunity.
b) Consent, control and “on behalf of” (exclusivity in the subject matter of the relationship).
Formation
1) Intent. Not necessary. Intent to do thing that constitute principal/agent makes it so – even despite written agreement to contrary. It is an issue of fact.
2) Capacity. Any Jure person can be an agency. Rules of infancy apply. Voidable, affirmable upon majority.
3) Ramifications
a) If Agent, where they servant. If servant, where they within scope of employment? If yes to all, liable for torts.
Categories & Authority
1) Servant-type agents
a) An agent over whose moment-to-moment activities the principal/master has the power of direct control (whether exercised or not). Examples:
i) Cook carries pot of coffee out of kitchen, trips, burns customer. He’s probably a servant, and restaurant is vicariously liable.
ii) Cook calls supplier, orders more sugar. In that case, this servant is also an agent as to this transaction (or as restatement puts it, a servant and an independent contractor). Any agent with authority can bind the principal.
2) Agents (who are not servants)
3) Independent Contractors
Classification of Principals
1) Disclosed Principal:
a) Definition: 3rd P knows they’re dealing with an agent, and they know who th
incipal.
ii) No rights and obligations between co-agents.
b) Subagents
i) Created by agent who with permission delegates authority to another.
ii) Subagent can go to Principal for agent’s unfulfilled duties.
c) Agent’s agent
i) Created by agent without permission to delegate.
ii) Principal owes no duty to agent.
Power or Authority of an Agent to Bind Principal
1) Requirements
a) Power is limited by authority.
b) Agency Authority must eminate from principal.
2) Express Authority. Created by manifestation from principal to agent.
a) Actual Authority = Express + Implied
Implied Authority. Authority which, though not express, is reasonably necessary to carry out the express authority.
