The Agency Relationship

Question 1

What is required for an agency relationship?

Answer 1

Every agency relationship must have a principal and an agent.

Question 2

Why create an agency relationship?

Answer 2

1. To extend the principal’s economic reach
2. To acquire the agent’s expertise
3. To make money

Question 3

Common examples of principal-agent relationships:

Answer 3

1. Employee-employer
2. Named agents (e.g., talent agent, government agent, etc.)
3. Partner-partnership
4. Officer/Director-corporation

Question 4

When might a principal be liable to third parties for the actions of the agent?

Answer 4

1. In contracts
2. In torts

Question 5

Three components of an agency relationship:

Answer 5

1. Assent
2. Benefit to the Principal
3. Sufficient Control over the agent

Question 6

T or F: Consideration is required to form an agency relationship

Answer 6

False

Question 7

If parties dispute the existence of an agency relationship, what will courts look like to determine if a relationship exists?

Answer 7

Courts will look to manifestations of assent which can range from a formal letter, to spoken word, to physical actions