Formation of The Agency Relationship

Question 1

Agency - Definition

Answer 1

A fiduciary relationship which
* results from the manifestation of consent by one person to another
* that the other person shall act on his behalf and be subject to his control and
* consent by the other to do so.

Question 2

Agent

Answer 2

The person acting on behalf of the other.

The agent must act subject to the principal’s control.

Question 3

Principal

Answer 3

The person that appoints another to act on his behalf.

Question 4

Three Requirements To The Agency Relationship

Answer 4

1. Consent – Mutual consent of the principal and the agent is necessary. Consent can be express or implied through parties’ conduct.
2. “On Behalf Of” – Agent must act primarily to benefit the principal.
3. Control – The agent must act subject to the principal’s control.

Question 5

“On behalf of”

Answer 5

The agent must be acting primarily to the benefit of the prinicipal rather than for the benefit of himself or some other party.

Question 6

“Control”

Answer 6

The agent must act subject to the principal’s control but the degree of control exercised by the principal doesn’t have to be significant.

The requisite level of control.

Question 7

Agency Capacity

Answer 7

• The principal must have contractual capacity;
• the agent only needs minimal capacity.
• Agent Exception: If the agent has literally no mental capacity, they cannot act for the principal.
• A minor’s appointment of an agent is VOIDABLE.
• Incompetents and most unincorporated organizations cannot be principals.

Question 8

Agency Formalities

Answer 8

1. Consent - of both parties (ALWAYS required)
2. Writing - if required by Statute of Frauds or by statute
3. Consideration – NOT required

Question 9

Agency – Methods of Creation

Answer 9

1. By Act of Parties – through actual authority or apparent authority, or by ratification
2. By Operation of Law – estoppel and statute