The Agency Relationship

Question 1

Who Can Be a Principal?

Answer 1

Almost any persons or entity that has legal capacity

EXCLUDES:

(1) Minors
(2) Anyone incapacitated by illness or intoxication

Question 2

Who Can Be an Agent?

Answer 2

Any person or entity who has minimal capacity

Minimal capacity means that the agent cant perform the three components of the agency relationship

Question 3

Components of Creating an Agency Relationship

3

Answer 3

ABC

(1) Assent - Both parties must manifest assent to work with one another
(2) Benefit - Agent agrees to work for principals benefit
(3) Control - Agent agrees to work subject to principal’s control

DOES NOT NEED TO BE IN WRITING

Question 4

Consideration

Answer 4

NOT NEEDED to create agency relationship

Question 5

Exam Tip

Answer 5

The parties are not going to always say, or even think, that they are in an agency relationship

As long as the essential elements are there, an agency relationship exists

Question 6

Examples of Manifestation of Assent

Answer 6

(1) Formal Letter
(2) Spoken Words
(3) Physical Actions

Question 7

Two Main Types of Agents

Answer 7

(1) Employees - Employer has right to control agent’s physical conduct of work
(2) Independent Contractors - Principal does not control or have right to control agent’s physical conduct of work

Question 8

Characteristics of an Independent Contractor

Answer 8

(1) Maintain high level of independence
(2) Free to work for other people
(3) Paid on fixed fee
(4) Typically owns own tools

Question 9

Terminating Agency Relationship

Answer 9

Either party can terminate an agency relationship unilaterally