Agency

Question 1

What are Corporations?

Answer 1

1. Fictional “persons” under the law, and exist as creatures of statute.
2. Can incur liabilities + exercise legal rights only through the acts of human beings.

Question 2

What is Agency?

Answer 2

• Fiduciary relationship that results from:
  
  • 1) Manifestation of consent by one person (principal) to another (agent)
  • 2) That the other (agent) shall act on his (principal) behalf and
  • 3) Subject to his (principal) control, and
  • 4) Consent by the other (agent) so to act.

Question 3

What is a Principal?

Answer 3

The one for whom the action is to be taken.

Question 4

What is an Agent?

Answer 4

The one who is to act.

Question 5

When does an Agency Relationship exist?

Answer 5

When elements are met. Substance over form. Label doesn’t matter.

Question 6

What is a Master-Servant relationship?

Answer 6

A type of Agency relationship where the Master control’s the servant’s physical conduct and how the goal is accomplished.

Question 7

What is an Independent Contractor relationship?

Answer 7

A type of Agency relationship where physical conduct is not controlled by the Principal.

Question 8

Agency and Vicarious Liability / Respondeat Superior

Answer 8

• Independent contractor does not trigger vicarious liability
• In master-servant relationship, principal = liable for torts of employee/agent when acting within scope of his duties.

Question 9

What is a Master?

Answer 9

Principal who employs agent to perform service in his affairs + controls (or has right to) physical conduct during performance.

Question 10

What is a Servant?

Answer 10

Agent employed by master to perform service in his affairs + physical conduct is controlled during performance.

Question 11

What is an Independent Contractor?

Answer 11

• Person who contracts with another to do something for him, but who is NOT controlled by the other nor subject to the other’s right to control with respect to his physical conduct.
• IC = may or may not be an agent.

Question 12

Figuring out Servant v. Independent Contractor

Answer 12

• Factors:
  
  • Extent of control master has over details of work
  • Kind of occupation (whether usually master/servant)
  • Skill required in particular occupation
  • Whether the employer or workman supplies tools/place of work, etc.
  • Length of time that person is employed
  • Method of payment

Question 13

Fiduciary Obligations of Agents - Duty of Care and Skill (R2)

Answer 13

• A paid agent is subject to a duty to the Principal to act with a standard of care and with the skill which is standard in the locality for the kind of work which he is employed to perform.
• Apply skill in reasonable way, in which reasonably prudent person would do, act carefully
• Don’t be grossly negligent or incompetent

Question 14

Fiduciary Obligations of Agents - Duty of Care, Competence, and Dilligence (R3)

Answer 14

• An agent has a duty to the Principal to act with care, competence, and diligence normally exercised by agents in similar circumstances.
• If an agent claims to possess special skills or knowledge, the agent has a duty to the Principal to act with the care, competence, and diligence normally exercised by agents with such skills or knowledge.

Question 15

Duties during Agency -

Answer 15

• An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship.
• An agent has a duty not to acquire material benefit from a third party in connection with transactions conducted or other actions taken on behalf of the Principal or otherwise through the agent’s use of the agent’s position.
  
  • In other words: Agents under duty of loyalty may not use resources, reputation, or property of the Principal to benefit himself. If agent does, then remedy = disgorgement (giving back money to Principal with which agent was unjustly enriched).
  • Agent has duty to fully disclose profits and obtain consent from Principal.
  • Case – Singer = Singer accused of acting as broker instead of being general manager; breached duty to disclose.
    
    • Futility Defense / Financial Incapacity = “the reason they didn’t bring it up is because the principal isn’t capable or in a position to take advantage of the opportunity.
      
      • Usually ineffective defense
  • An agent must not use or communicate confidential information of the Principal for the agent’s own purpose or that of a third party.

Question 16

Duties During Agency - Effect of Principal’s Consent

Answer 16

• Conduct by an agent that would otherwise constitute a breach of duty does NOT if the Principal consents to the conduct and the agent:
  
  • Acts in good faith
  • Discloses all material facts that the agent knows or should know that would affect the principal’s judgment
  • Otherwise deals fairly with the principal

Question 17

Duties During and After Term. of Agency - Competetion

Answer 17

• During: Agent has duty to refrain from competing with the Principal and from aiding Principal’s competitors. However, Agent may prepare for competition following termination of agency relationship.
  
  • Also, Agent can contract around this duty.

Question 18

Duties During and After Term. of Agency - Confidential Information

Answer 18

• Confidential Information
  
  • After termination of agency, the agent:
    
    • Has no duty not to compete with Principal
    • Has a duty to the Principal not to use or to disclose, in competition with the Principal or to his injury, trade secrets, written lists or names, or other similar confidential matters given to him only for the Principal’s use or acquired by the agent in violation of his duty.
  • Case: Town & Country = former employees use customer list. Court found that it was breach because employees not only knew home addresses of clients, but rates paid and manner in which customers wanted their homes cleaned.

Question 19

Duties During and after Term of Agency - Duty of Loyalty

Answer 19

• An agent CAN:
  
  • Compete with the Principal after termination of agency
• An agent MAY:
  
  • Affirmatively disclose profits and secure informed consent
  • Be fully devoted to the interests of his/her Principal
• An agent CANNOT:
  
  • Utilize property of principal for own benefit
  • Exploit or disclose trade secrets (even after termination of agency)
  • Generate secret profits