Agency Basics

Question 1

What is agency?

Answer 1

It is a fiduciary relationship that arises when one person, the principal, manifests assent to another person, the agent, that the agent shall act on the principal’s behalf and be subject to the principal’s control, and the agent manifests assent or consents to the principal’s authority and control.

Question 2

What is the significance of an agency relationship?

Answer 2

It allows the agent to bind the principal and act on his behalf, without the principal having to act personally. Thus, the law deems a principal to have intentionally engaged an agent to represent him in business and legal affairs.

There are four consequences of entering into an agency relationship:

1. duties arise between the principal and agent;
2. the agent has the power to bind the principal and act on his behalf without the principal having to act personally, but under the principal’s control;
3. liability is imposed on the principal for the agent’s actions; and
4. knowledge of the agent is imputed to the principal.

Question 3

What is the employer-employee relationship?

Answer 3

It is an employment relationship in which the employer has the right to control the details of of the physical conduct the the employee in the performance of the service, not only as to the result, but also as to the means to be used to achieve the result.

Under vicarious liability (respondeat superior), an employer is generally liable for his servant’s torts committed within the scope of his employment.

Question 4

What is the employer-independent contractor relationship?

Answer 4

It is an employment relationship in which, unlike the employer in the employer-employee relationship, has no right to control the details of the performance of the independent contractor.

The distinction lies in the right to control - the degree to which the employer could intervene in the control of the employee’s manner of performance.