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AGENCY Definition of Agency A fiduciary relationship. Mutual agreement of two persons Trust and confidence that one person (agent) will act on the behalf of the other (principal). and will be subject to the principal’s control and consent. Capacity to be an agent. Most people can be agents. Including minors. But minor would be able to avoid the agreement until he or she reaches the age of majority. FIDUCIARY A person in a position of trust and confidence. Agent’s duties to principal Duty of loyalty (Fiduciary Duty) Duty of obedience Duty of accounting Duty of performance Agent must use reasonable care and skill. Fiduciary Duty Fiduciary duty is one of utmost loyalty and good faith. Requires: A. Agent must act solely in the interest of his principal. B. Cannot compete with principal or act on behalf of a competitor. C. May not use or disclose confidential information D. Account for financial benefits received. Duty to Account : Agent must maintain and provide true and complete accounting of money and property received or expended on behalf of the principal. Duty of Obedience: Agent must act only as authorized and directed by the principal and obey reasonable instructions of the principal. Duty of Due Diligence: Agent must act with reasonable care and skill in performing agency responsibilities. Duty to Inform: Agent must provide principal with information relevant to the affairs entrusted to agent. (Notice to agent is notice to principal) Duties of Principals Principal’s duties to agent Duty of compensation Duty of reimbursement and indemnification Duty of cooperation Duty to provide safe working conditions Creation of an Agency Relationship Expressed agency or agency by agreement No formality required, however agency agreements for more than one year must be in writing. Also equal dignity rule may require a writing. Power of attorney. A legal document used to establish an agency relationship giving agent authority to sign legal documents on behalf of principal. General or limited. Health care power of attorney. Gives agent authority to make health care decisions if principal AGENTS AUTHORITY Actual Authority Express: Authority found in the spoken or written words communicated to agent by principal. Implied: a. Authority which agent reasonably infers the principal intends. b. The authority to do those things necessary to accomplish express authority. AUTHORITY Apparent Authority: Created by words or actions of principal causing third parties to believe agent has authority. Principal’s and Agent’s Liability to Third Parties (Contract) Disclosed Principal: Third party knows they are dealing with an agent and knows the identity of the principal. Principal is liable. (Assuming agent has authority) Agent is not liable. Principal’s and Agent’s Liability to Third Parties (Contract) Partially Disclosed Principal : Third party knows they are dealing with an agent but does not know the identity of the principal. Principal and Agent both liable. Principal’s and Agent’s Liability to Third Parties (Contract) Undisclosed Principle: Third party does not know they are dealing with an agent. Both principal and agent are liable. LIABILITY TO THIRD PARTIES Tort liability Respondeat superior Employer is liable for torts committed by employees if within the scope of their employment. Criteria for determining scope of employment: Was the agent acting in the principal’s interest? Was the agent authorized to be in the particular place where the tort was committed? Employee or Independent Contractor Determines liability to pay and withhold Federal income tax, Social security Medicare taxes, Federal unemployment tax, Medical Benefits, Retirement, etc. Above paid for employee but not for Independent Contractor Employer-Independent Contractor Hired to do specific job Factors to consider. whether hired persons had distinct occupation or profession. whether they supplied their own tools and equipment. whether they were employed only for a specific time period whether they are paid hourly or on completion of a job. what degree of skill is required to do the job. Termination of the PrincipalAgent Relationship Termination by agreement Either party may decide to terminate the agency. Notice should be given to third parties. Actual notice to those who dealt with the agent. Constructive notice by newspaper to others. Termination by law death of one of the parties. insanity of one of the parties. bankruptcy of the principal. impossibility of performance. outbreak of war.