An Agency Relationship Can Be Created Only for a Lawful Purpose.
LEARNING OBJECTIVES
- Understand why agency police is important.
- Recognize the recurring legal issues in agency police.
- Know the types of agents.
- Understand how the bureau relationship is created.
Introduction to Agency Law
Why Is Bureau Police Important, and What Is an Agent?
An agent is a person who acts in the proper noun of and on behalf of some other, having been given and causeless some degree of potency to do so. Nigh organized human activeness—and virtually all commercial activity—is carried on through agency. No corporation would be possible, even in theory, without such a concept. We might say "General Motors is building cars in Communist china," for example, but nosotros can't shake hands with General Motors. "The Full general," as people say, exists and works through agents. Likewise, partnerships and other business organisation organizations rely extensively on agents to conduct their business. Indeed, it is non an exaggeration to say that agency is the cornerstone of enterprise organization. In a partnership each partner is a general agent, while nether corporation law the officers and all employees are agents of the corporation.
The existence of agents does non, however, require a whole new law of torts or contracts. A tort is no less harmful when committed past an agent; a contract is no less binding when negotiated past an agent. What does demand to be taken into account, though, is the way in which an agent acts on behalf of his chief and toward a third party.
Recurring Issues in Agency Police
Several problematic fact scenarios recur in agency, and police has adult in response.
John Alden
Consider John Alden (1599–1687), one of the most famous agents in American literature. He is said to accept been the first person from the Mayflower to set foot on Plymouth Rock in 1620; he was a carpenter, a cooper (barrel maker), and a diplomat. His agency task—of interest here—was historic in Henry Wadsworth Longfellow'due south "The Courtship of Miles Standish." He was to woo Priscilla Mullins (d. 1680), "the loveliest maiden of Plymouth," on behalf of Captain Miles Standish, a valiant soldier who was also shy to advise marriage. Standish turned to John Alden, his young and eloquent protégé, and beseeched Alden to speak on his behalf, unaware that Alden himself was in love with Priscilla. Alden accepted his captain's assignment, despite the knowledge that he would thus lose Priscilla for himself, and sought out the lady. But Alden was so tongue-tied that his vaunted eloquence brutal brusk, turned Priscilla cold toward the object of Alden's mission, and somewhen led her to turn the tables in one of the well-nigh famous lines in American literature and poetry: "Why don't you speak for yourself, John?" John eventually did: the 2 were married in 1623 in Plymouth.
Recurring Issues in Agency
Let's clarify this sequence of events in legal terms—recognizing, of grade, that this example is an analogy and that the law, even today, would non impose consequences on Alden for his failure to carry out Captain Standish'south wishes. Alden was the captain's amanuensis: he was specifically authorized to speak in his name in a manner agreed on, toward a specified terminate, and he accepted the assignment in consideration of the captain's friendship. He had, however, a conflict of interest. He attempted to behave out the assignment, simply he did not perform according to expectations. Eventually, he wound up with the prize himself. Here are some questions to consider, the same questions that will recur throughout the discussion of agency:
- How all-encompassing was John's dominance? Could he have made promises to Priscilla on the captain's behalf—for case, that Standish would have congenital her a fine business firm?
- Could he, if he committed a tort, accept imposed liability on his principal? Suppose, for instance, that he had ridden at breakneck speed to reach Priscilla'southward side and while en route ran into and injured a pedestrian on the road. Could the pedestrian have sued Standish?
- Suppose Alden had injured himself on the journey. Would Standish be liable to Alden?
- Is Alden liable to Standish for stealing the heart of Priscilla—that is, for taking the "profits" of the enterprise for himself?
As these questions propose, agency police frequently involves iii parties—the principal, the agent, and a third party. It therefore deals with three different relationships: between principal and amanuensis, betwixt principal and third party, and between agent and third party. These relationships can be summed up in a elementary diagram (see Effigy xi.one "Agency Relationships").
Figure 11.1 Agency Relationships.
In this affiliate, we will consider the principal-amanuensis side of the triangle. In the adjacent chapter we will turn to relationships involving third parties.
Types of Agents
There are five types of agents.
General Agent
The full general agent possesses the dominance to deport out a broad range of transactions in the proper noun and on behalf of the principal. The general amanuensis may be the managing director of a business or may take a more limited but nevertheless ongoing office—for example, equally a purchasing agent or as a life insurance amanuensis authorized to sign upward customers for the home role. In either example, the general agent has authority to modify the principal'southward legal relationships with third parties. One who is designated a general agent has the authority to human action in any way required by the primary's concern. To restrict the general agent'southward authority, the principal must spell out the limitations explicitly, and even so the principal may be liable for whatever of the agent's acts in excess of his authorization.
Normally, the general agent is a business organisation agent, but there are circumstances under which an individual may appoint a full general agent for personal purposes. One common grade of a personal general agent is the person who holds another'south power of chaser. This is a delegation of authority to another to act in his stead; it can be accomplished by executing a uncomplicated form, such as the i shown in Effigy 11.2 "Full general Power of Attorney". Normally, the power of attorney is used for a special purpose—for example, to sell real estate or securities in the absenteeism of the owner. But a person facing a lengthy functioning and recuperation in a hospital might give a general power of attorney to a trusted family fellow member or friend.
Figure 11.2 General Ability of Attorney.
Special Agent
The special agent is ane who has potency to act just in a specifically designated instance or in a specifically designated ready of transactions. For example, a real estate broker is usually a special agent hired to find a buyer for the main'south state. Suppose Sam, the seller, appoints an agent Alberta to notice a buyer for his property. Alberta's commission depends on the selling price, which, Sam states in a letter to her, "in any event may be no less than $150,000." If Alberta locates a heir-apparent, Bob, who agrees to purchase the property for $160,000, her signature on the contract of sale will non demark Sam. Every bit a special agent, Alberta had authority only to detect a buyer; she had no authority to sign the contract.
Agency Coupled with an Involvement
An agent whose reimbursement depends on his standing to have the dominance to act every bit an agent is said to have an agency coupled with an interest if he has a holding interest in the business. A literary or writer's agent, for example, customarily agrees to sell a literary work to a publisher in return for a per centum of all monies the author earns from the sale of the work. The literary agent also acts every bit a collection agent to ensure that his commission will exist paid. By agreeing with the principal that the agency is coupled with an interest, the agent can prevent his own rights in a item literary work from being terminated to his detriment.
Subagent
To carry out her duties, an agent will oftentimes need to engage her ain agents. These appointments may or may not exist authorized past the primary. An insurance company, for case, might name a general agent to open up offices in cities throughout a sure state. The amanuensis will necessarily deport her business through agents of her ain choosing. These agents are subagents of the principal if the general agent had the express or unsaid authority of the principal to hire them. For legal purposes, they are agents of both the principal and the primary's general amanuensis, and both are liable for the subagent'south conduct although unremarkably the general agent agrees to be primarily liable (see Effigy eleven.three "Subagent").
Figure xi.3 Subagent.
Servant
The concluding category of agent is the retainer. Until the early nineteenth century, any employee whose work duties were subject to an employer's command was called a servant; we would not utilize that term so broadly in modernistic English. The Restatement (2nd) of Agency, Department ii, defines a servant as "an agent employed by a master [employer] to perform service in his affairs whose concrete conduct in the performance of the service is controlled or is subject to the right to control by the master."
Independent Contractor
Non every contract for services necessarily creates a master-servant relationship. There is an important distinction made between the status of a servant and that of an independent contractor. Co-ordinate to the Restatement (Second) of Agency, Section 2, "an independent contractor is a person who contracts with another to exercise something for him only who is non controlled past the other nor subject to the other'south right to command with respect to his physical carry in the performance of the undertaking." As the name implies, the contained contractor is legally democratic. A plumber salaried to a building contractor is an employee and agent of the contractor. Merely a plumber who hires himself out to repair pipes in people's homes is an independent contractor. If you hire a lawyer to settle a dispute, that person is not your employee or your servant; she is an independent contractor. The terms "agent" and "independent contractor" are non necessarily mutually exclusive. In fact, by definition, "… an independent contractor is an amanuensis in the broad sense of the term in undertaking, at the request of some other, to exercise something for the other. As a general dominion the line of demarcation betwixt an contained contractor and a retainer is non conspicuously drawn."1. Flick v. Crouch, 434 P.second 256, 260 (OK, 1967).
This distinction between agent and independent contractor has important legal consequences for taxation, workers' compensation, and liability insurance. For example, employers are required to withhold income taxes from their employees' paychecks. Merely payment to an independent contractor, such as the plumber for hire, does not crave such withholding. Deciding who is an independent contractor is not ever easy; there is no single gene or mechanical answer. In Robinson v. New York Commodities Corp., an injured salesman sought workers' compensation benefits, claiming to be an employee of the New York Bolt Corporation. Robinson v. New York Commodities Corp., 396 N.Y.South.2d 725, App. Div. (1977). But the state workmen'southward bounty board ruled confronting him, citing a variety of factors. The claimant sold canned meats, making rounds in his car from his dwelling. The company did non found hours for him, did not control his movements in any way, and did not reimburse him for mileage or any other expenses or withhold taxes from its direct commission payments to him. He reported his taxes on a form for the cocky-employed and hired an accountant to prepare it for him. The court agreed with the compensation board that these facts established the salesman's status equally an independent contractor.
The factual situation in each instance determines whether a worker is an employee or an independent contractor. Neither the company nor the worker can establish the worker's condition by agreement. As the North Dakota Workmen's Compensation Bureau put information technology in a message to real estate brokers, "It has come to the Bureau's attending that many employers are requiring that those who work for them sign 'independent contractor' forms so that the employer does not have to pay workmen'southward compensation premiums for his employees. Such forms are meaningless if the worker is in fact an employee."Vizcaino 5. Microsoft Corporation, discussed in Section 11.3.two "Employee versus Independent Contractor", examines the stardom.
In addition to determining a worker's status for tax and compensation insurance purposes, information technology is sometimes critical for decisions involving personal liability insurance policies, which ordinarily exclude from coverage accidents involving employees of the insureds. General Accident Fire & Life Assurance Corp v. Pro Golf Association General Accident Burn down & Life Assurance Corp 5. Pro Golf Clan, 352 N.Eastward.2nd 441 (Ill. App. 1976). involved such a situation. The insurance policy in question covered members of the Professional Golfers Clan. Gerald Hall, a golf pro employed past the local park department, was afforded coverage nether the policy, which excluded "bodily injury to any employee of the insured arising out of and in the class of his employment by the insured." That is, no employee of Hall'south would be covered (rather, any such person would have coverage under workers' compensation statutes). Bradley Martin, historic period 13, was at the golf game grade for junior league play. At Hall's request, he agreed to retrieve or "shag" golf balls to exist hit during a lesson Hall was giving; he was—every bit Hall put it—to exist compensated "either through golf game instructions or money or hotdogs or whatever." During the grade of the lesson, a golf ball hit past Hall hit young Martin in the middle. If Martin was an employee, the insurance visitor would exist liable; if he was not an employee, the insurance visitor would not liable. The trial court determined he was non an employee. The evidence showed: sometimes the boys who "shagged" balls got paid, got golfing instructions, or got food, so the question of compensation was cryptic. Martin was not directed in how to perform (the admittedly simple) task of retrieving golf game balls, no control was exercised over him, and no equipment was required other than a handbag to collect the assurance: "We believe the show is susceptible of unlike inferences.…Nosotros cannot say that the decision of the trial court is against the manifest weight of the evidence."
Creation of the Agency Human relationship
The agency relationship can exist created in two ways: by agreement (expressly) or past functioning of constabulary (constructively or impliedly).
Agency Created by Agreement
About agencies are created by contract. Thus the general rules of contract law covered in Chapter 8 "Contracts" govern the constabulary of agency. Only agencies can also be created without contract, by agreement. Therefore, three contract principles are especially of import: the first is the requirement for consideration, the 2nd for a writing, and the third concerns contractual capacity.
Consideration
Agencies created by consent—agreement—are not necessarily contractual. Information technology is not uncommon for 1 person to act as an amanuensis for some other without consideration. For example, Abe asks Byron to run some errands for him: to purchase some lumber on his account at the local lumberyard. Such a gratuitous agency gives rise to no different results than the more common contractual agency.
Formalities
Most oral agency contracts are legally binding; the police does non require that they exist reduced to writing. In practice, many agency contracts are written to avert bug of proof. And there are situations where an agency contract must exist in writing: (ane) if the agreed-on purpose of the agency cannot be fulfilled inside one twelvemonth or if the agency relationship is to last more one year; (2) in many states, an agreement to pay a commission to a real estate broker; (three) in many states, authority given to an agent to sell real manor; and (4) in several states, contracts between companies and sales representatives.
Fifty-fifty when the agency contract is not required to be in writing, contracts that agents make with third parties often must be in writing. Thus Department 2-201 of the Uniform Commercial Code specifically requires contracts for the auction of appurtenances for the cost of v hundred dollars or more to be in writing and "signed by the party against whom enforcement is sought or by his authorized agent."
Capacity
A contract is void or voidable when one of the parties lacks capacity to make one. If both principal and agent lack chapters—for instance, a small-scale appoints another minor to negotiate or sign an agreement—there tin be no question of the contract'south voidability. Just suppose only ane or the other lacks chapters. Generally, the law focuses on the principal. If the principal is a pocket-size or otherwise lacks chapters, the contract can be avoided even if the amanuensis is fully competent. There are, however, a few situations in which the capacity of the amanuensis is important. Thus a mentally incompetent agent cannot demark a main.
Agency Created by Functioning of Law
Near agencies are made by contract, but agency too may arise impliedly or plain.
Implied Agency
In areas of social need, courts have declared an agency to be in the absence of an agreement. The agency relationship then is said to take been implied "by functioning of law." Children in about states may buy necessary items—food or medical services—on the parent'southward account. Long-standing social policy deems it desirable for the caput of a family unit to support his dependents, and the courts will put the expense on the family caput in club to provide for the dependents' welfare. The courts achieve this outcome by supposing the dependent to exist the family unit head'south agent, thus allowing creditors to sue the family head for the debt.
Implied agencies as well ascend where one person behaves equally an amanuensis would and the "principal," knowing that the "agent" is behaving so, acquiesces, allowing the person to hold himself out as an agent. Such are the basic facts in Weingart v. Directoire Eatery, Inc. in Department 11.3.1 "Cosmos of Agency: Liability of Parent for Contracts Made past "Amanuensis" Child".
Apparent Bureau
Suppose Arthur is Paul's agent, employed through October 31. On Nov 1, Arthur buys materials at Lumber Yard—as he has been doing since early spring—and charges them to Paul's account. Lumber Yard, not knowing that Arthur's employment terminated the day before, bills Paul. Will Paul have to pay? Yeah, because the termination of the agency was not communicated to Lumber Yard. Itappeared that Arthur was an authorized agent. This upshot is discussed further in Affiliate 12 "Liability of Master and Amanuensis; Termination of Bureau".
Fundamental TAKEAWAY
An agent is one who acts on behalf of another. Many transactions are conducted by agents and so acting. All corporate transactions, including those involving governmental organizations, are so conducted because corporations cannot themselves actually human action; they are legal fictions. Agencies may be created expressly, impliedly, or apparently. Recurring problems in agency police include whether the "amanuensis" actually is such, the scope of the agent's authority, and the duties among the parties. The five types of agents include: general agent, special agent, subagent, agency coupled with an interest, and servant (or employee). The independent contractor is not an employee; her activities are not specifically controlled past her client, and the client is not liable for payroll taxes, Social Security, and the similar. But it is not uncommon for an employer to claim workers are independent contractors when in fact they are employees, and the cases are often difficult-fought on the facts.
PRACTICE EXERCISES
- Why is agency law specially important in the business concern and government context?
- What are the five types of agents?
- What distinguishes an employee from an independent contractor?
- Why do employers oft try to pass off employees as independent contractors?
Reflection Questions
- What learning outcome relates to this content?
- What are the key topics covered in this content?
- How can the content in this section help yous demonstrate mastery of the learning issue?
- What questions do you lot have about this content?
Source: https://courses.lumenlearning.com/masterybusinesslaw/chapter/introduction-to-agency-and-the-types-of-agents/
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