Agency and Other Relationships Flashcards
Seller or Agency
An agency relationship does not exist every time one party has a contractual right to control some aspect of another party’s business.
An agency relationship may exist where on party can exercise significant control over another’s conduct, can share in their profits, or control the price of their sales.
Agency or Debtor-Creditor Relationship
When a creditor assumes control of his debtor’s business the creditor becomes a principal, liable for the obligations incurred in the normal course of business by the debtor.
Agency or Trustee
Trustees are not agents because:
(1) agents typically do not hold title to property for their principal
(2) beneficiaries do not typically have control over the trustees;
(3) a trustee cannot subject a beneficiary to liability for their conduct
(4) a trust may be created without consent
(5) a trust is typically not terminable at the will of either party
Agency or Escrow
The escrow holder is not an agent of two principals. An escrow holder must be an objective, neutral, independent third party that is subject to the escrow instructions signed by both parties and the escrow holder. There must be three parties in a contract.
If there are only two parties, the middleman is not an escrow agent, but an agent of one of the parties.
Agency or Franchise
A franchise relationship is typically not an agency relationship because the on behalf of element is typically missing due to the franchisee usually acting in their own interest.
An agency relationship may arise where the franchisor exerts substantial control over the franchisee’s business.
Agency and Insurance
An employer’s administration of a group insurance plan does not create an agency relationship between the employer and the insurance carrier since the employer is acting only for the benefit of its employees.
Insurance Plan Liability: In an employer-administered plan, the insurance company is the correct principal.
Types of Relationship
(1) Seller or Agency
(2) Agency or debtor-creditor relationship
(3) agency or trustee
(4) agency or escrow
(5) agency or franchise
(6) agency or insurance
