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Skeleton Outline of Agency Lecture

 
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PostPosted: Sat Feb 13, 2016 8:59 am    Post subject: Skeleton Outline of Agency Lecture Reply with quote

PLEASE NOTE: ON THIS POSTING, AND ON ALL FUTURE POSTINGS, THAT ARE EITHER MY PERSONAL LECTURE NOTES OR HYPOTHETICALS THERE MAY BE SPELLING OR GRAMMATICAL ERRORS. THESE ARE ALL FROM MY PERSONAL NOTES AND MAY CONTAIN THESE ERRORS. OFTEN WHEN I AM PREPARING MY PERSONAL NOTES I DON'T CORRECT THESE ERRORS.

AGENCY LECTURE FOR FIRST EVENING:


NATURE OF AGENCY

Agency fiduciary legal relationship where one person represents another in dealing with third persons.

1. PARTIES:

Relationship based upon express or implied agreement that one person (THE AGENT) authorized to act under the control of and for another (THE PRINCIPAL) in making agreements with third persons.

OTHER USES OF TERM "AGENCY":

Common usage with other meanings, e.g: exclusive agency to sell certain products, not a true agency but usually based upon franchise agreement with a manufacturer. Example: Dealer is said to possess automobile agency, but not the agent of manufacturer but merely given the right to sell certain products in a given geographical area.

Case Presented: Tree case re: Independent contractor

See P. 498 Case # 29.1

P. 510 Case # 30.2

AGENCY DISTINGUISHED FROM SIMILAR RELATIONSHIPS:

Since agency involves responsibility of principal for acts of the agent, needs be distinguished from other similar relationships:

ORDINARY EMPLOYEE: [�1332] Not hired to represent employer in dealing with third persons.

INDEPENDENT CONTRACTOR:

Person who contracts to do something according to his own methods not subject to control of the employer except as to results.
(A) Independent contractor as agent: May become an agent if starts making management decisions or controls the operations of the work.

STATUS NOT DETERMINED BY AGREEMENT: The actual fact of control rather than express agreement of parties is controlling factor.

REAL ESTATE BROKERS: Many cases merely a middleman who seeks to locate a buyer or seller for his client. Not a true agent because he has no authority to make a contract with third persons that will be binding upon his client.

BAILEE: Bailment exists when personal property delivered to another under agreement to return property or deliver it to third person. Bailee not an agent as no authority to contract on behalf of owner-bailor.

P. 498 Case # 29.2

Case Presented: Pugh v. Butler

POWER OF ATTORNEY

29.4 Page 270

See Page 498 P. 498

NOTE: DUTY OF LOYALTY
The court held that the general power of attorney in this case which authorized the agent to sell and convey the property on such terms as the attorney in fact deems proper, did not, however, authorize the agent to make a gift of the property. This violated the agent�s duty of loyalty that he owed to the principal.
CREATION OF AN AGENCY:

Can be created by:

AGREEMENT
CONDUCT OF THE PARTIES
ESTOPPEL
RATIFICATION; OR
OPERATION OF LAW.

CAPACITY OF THE PARTIES

CAPACITY OF PRINCIPAL:

Anyone with legal capacity to make contracts.

CAPACITY OF THE AGENT

Anyone who understands legal importance of contracts, even a minor, may serve as an agent.

2. CREATION OF AGENCY BY AGREEMENT:

Most agencies created by contractual agreement: Principal expressly authorizes agent to act.
a. ORAL AUTHORIZATION:
In most situations, oral authorization and agreement
can create an agency.

B. "EQUAL DIGNITIES" RULE:

Agent engaged to make contracts required to be in
writing under the SOF, employment and authorization of agent must be in writing.

C. CONSIDERATION:

Not necessary for either party to create an agency.

AGENCY CREATED BY CONDUCT OF PARTIES, OR IMPLIED AGENCY:

Actual agency created by inferences or deductions made from the words/conduct of principal and the agent.

Case 29.1: Bosse v. Brinker Restaurant Corporation, d.b.a. Chili�s Grill and Bar P. 461 CREATION OF AN AGENCY BY IMPLICATION YES/NO


CREATION OF AGENCY BY ESTOPPEL: {APPARENT AUTHORITY)

Created when principal, by words, actions, or lack thereof, causes third person to REASONABLY believe agency relationship exists or an agent has authority to act where no actual authority exists.

APPARENT AGENCY

Case 29.5.

xxxx Apparent Agency

Gene Mohr and Loyd each own 50% of Tri-County Farm Equipment Company.
Tri-County has its depository bank account at First National Bank. Loyd also personally owns an oil business known as (Earthworm). Earthworm banks @ Stanley Bank. Neither Mohr nor Tri-County have any ownership interest in Earthworm. Mohr did not indicate to Stanley that Loyd had any authority to sign checks personally on behalf of Tri-County.
1982, Loyd took eight checks payable to Tri-County; endorsed and deposited them into Earthworm's account at Stanley. Mohr brought action for conversion against Stanley to recover amount of the checks. The bank�s defense: Loyd had apparent authority to deposit checks in his personal business account. Did Loyd possess apparent authority? [Mohr v. State Bank of Stanley, 734 P.2d 1071 (Kan. 1987)]

Apparent Agency

NO. Apparent authority based on intentional actions/words of principal towards 3rd. parties reasonably induces or permits a belief that an agency relationship exists. Court: no action or words on the part of Mohr that would have led the Stanley to believe Lloyd had authority to deposit Tri-County's checks into Earthworm's account. Because Lloyd did not possess apparent authority, the State Bank of Stanley is liable for conversion for the deposited checks. The court awarded $422,650 in damages to Mohr. Mohr v. State Bank of Stanley, 734 P. 2d 1071 (Kan. 1987).

AGENCY CREATED BY RATIFICATION:

Principal accepts benefits from acts of a purported agent, even when unauthorized, agency may be created by ratification.

FIDUCIARY DUTY ALSO p. 483
30.1 Ratification

A. RATIFICATION OF UNAUTHORIZED ACTS:

(1) Principal may ratify the unauthorized acts of his agent, and filing a law suit based thereon is a ratification.

B. PURPORTED AGENCY CONTRACT:

Ratification of unauthorized contract requires contract purports to be one made by agent on behalf of the principal.

IMPLIED RATIFICATION:

When principal, with full knowledge of the material facts surrounding agent's unauthorized act, accepts and retains the benefits.

IMPUTED KNOWLEDGE

29.6 P. 470

WITHDRAWAL BEFORE RATIFICATION:

There is no binding agency before affirmance by the principal, agent or third party can withdraw from the transaction any time prior to ratification. Since the agent acted without authority, principal may repudiate the act.

AGENCY BY OPERATION OF LAW:

Agency implied by operation of law is one created by statute, necessity, or public policy.

EXAMPLE: Nonresident motorist statutes appointing secretary of state as agent for the nonresident for service of process in an action arising from the operation of a motor vehicle w/in the state arise by operation of law.

EXAMPLE: Principal so incapacitated by injuries he cannot act for himself, agency is implied by law.

EXAMPLE: Agency by operation of law occurs where a merchant furnishes necessities to a wife and charges them to her husband's account.

TERMINATION OF AGENCY

MAY BE BY ACTS PARTIES OR BY OPERATION OF LAW.

ACT OF THE PARTIES a. Mutual agreement: Created by mutual agreement; may be terminated in the same manner.

30.2 P. 483 TERMINATION OF AGENCY (ALSO FIDUCIARY DUTY)

EXPIRATION OF CONTRACT:

Agency created for specific time or specified purpose terminated upon expiration of time or completion of purpose.

REVOCATION OF AUTHORITY:

Principal may at any time revoke authority of the agent, with or w/o cause, by giving reasonable notice.

INDEFINITE TIME:

If agency created for indefinite time, may be revoked at any time by either party, without liability, upon the giving of reasonable notice.

DEFINITE CONTRACT PERIOD:

May Still be revoked by either party. However, revocation w/o cause may result in damages for breach of contract.

REVOCATION BY THE AGENT:

Agent may also renounce power, with or w/o cause, by giving reasonable notice to principal. However, may be liable for damages if revoked w/o cause when contract was for definite
period or specific purpose.

REVOCATION BY OPTION:

Option may provide either party may terminate by giving specified notice or paying set amount to the other.

TERMINATION BY OPERATION OF LAW DEATH OF THE PRINCIPAL:

Most states.

MINORITY RULE: Not terminated until agent notified of principal's death. [Cal. Civ. Code �2356]

EFFECT ON AGENTS AUTHORITY:

Most states, third persons can rely on an agent's authority until third person received notice of principal's death.

EXCEPTION:

Attorney-client relationship, if expressed desire of client was for attorney to take case to conclusion, death of the client does not terminate the agency. [Jones v. Miller, 203 F.2d 131 (3d Cir 1953)]

DEATH OF AGENT:

Authority terminates immediately.

MENTAL INCOMPETENCY:

Either principal or agent generally terminates the agency.

NOTE: Some states: Third person w/ knowledge of principal's mental incompetency but deals in good faith w/ the agent protected if an injustice would result.

JUDICIALLY DECLARED INSANITY:

Agency terminated because all persons are then presumed to know of the insanity.

BANKRUPTCY:

Of principal terminates if agent has received notice.

EXCEPTION: Agent involved in uncompleted transactions which agent believes principal desires completed, agency not terminated until transaction is completed.

EXCEPTION: Bankruptcy of principal does not terminate the authority of the agent to deal with the goods actually in the agent's possession.

IMPOSSIBILITY:

Terminates when it becomes objectively impossible to perform. EXAMPLES:
1. Change in law makes performance illegal or criminal;
2. Destruction of subject matter of the agency; and
3. Death or insanity of the third person in the transaction.

WAR:

Outbreak of war places principal and agent in position of alien enemies, agency is terminated, or at least suspended until peace is restored.

CHANGE IN BUSINESS CONDITIONS:

Unusual and unanticipated change in value or of business conditions of such a nature that agent could reasonably infer principal would not desire transaction to be completed, may terminate the agency.

EXAMPLE: Broker engaged to sell land at certain price, but due to oil discovery, land greatly increases in value.

NOTICE REQUIRED TO TERMINATE

NOTICE TO AGENT:

Authority continues until notice of any change or termination.

NOTICE TO THIRD PERSONS:

Authority of agent, actual or apparent, continues until such time as third person receives notice from the principal or some other source that the agent's authority has terminated.

IRREVOCABLE AGENCY

Agency coupled with an interest (one given as security for a debt or obligation) in the subject matter of the agency is irrevocable and the agency cannot be terminated unilaterally by the principal, nor by death, insanity, or bankruptcy. EXAMPLE: Agent advances money to principal for purchase of business with a condition that agent be employed as manager until money advanced has been repaid. This is "power coupled with an interest" in the subject matter and cannot be revoked until the debt is paid.

RELATIONSHIP BETWEEN PRINCIPAL AND AGENT

DUTIES OF THE AGENT

A fiduciary owing a duty of trust, good faith and candor to the principal as well as a duty to use reasonable care, diligence and skill in his work.

XXXXXReasonable Care and Skill Norman R. Barton and his wife decided to vacation in Florida in November 1984. In March 1984, they contacted Wonderful World of Travel, Inc., a travel agency licensed by the state of Ohio, to make the arrangements. They requested a room with a view of the ocean, a kitchenette so they would be saved the expense of dining out, free parking, and a free spa. In August, with the Barton's approval, the travel agency made reservations at the Beau Rivage motel in Bal Harbour, Florida. The travel agency did not confirm the reservations prior to the Bartons' departure in November. When the Bartons arrived at the motel, they found it closed, chained, and guarded. The only other hotel or motel in the area was a Sheraton, which was almost triple the room cost of the Beau Rivage. The Sheraton overlooked the ocean, but it did not have a kitchenette, free parking, or free spa privileges. The Bartons stayed at the Sheraton. They sued the travel agent upon their return. Is the travel agent liable for the increased costs incurred by the Bartons? [Barton v. Wonderful World of Travel, Inc., 502 N.E.2d 715 (Ohio Mun. 1986)]

Reasonable Care and Skill

Yes, the travel agent is liable to the Bartons for the increased cost of their trip to Florida. The court held that a travel agent owes a duty to his customer to not only use reasonable care in making travel reservations, but also in confirming them prior to the date of the trip. This does not mean that the travel agent is a guarantor against all ill that might befall his customers, but he is responsible for failure to exercise reasonable care in checking the reservation and confirming them as the time of the trip approaches. Here, there was a three month period between the date of reservation and the date of departure. The court found that the travel agent was negligent in failing to confirm the Bartons' reservations during this period, and held the agent liable for the increased cost of the Bartons' trip. Barton v. Wonderful World of Travel, Inc., 502 N.E. 2d 715 (Ohio Mun. 1986).

X REFERENCE PATSURIS CASE ABOVE

DUTY OF GOOD CONDUCT:

Must conduct in such manner to keep the principal or business free from discredit or disrepute. EXAMPLE: Waitress serving as a "call girl" would violate this duty.

DUTY TO GIVE INFORMATION:

Must keep principal informed of all facts concerning the business, so principal can protect his interests.

XREFERENCE 30.2 ABOVE

DUTY TO KEEP AND RENDER ACCOUNTS:

Must account for all property and money of principal coming into agent's possession.

DUTY TO ACT ONLY AS AUTHORIZED:

Must act only in accord with lawful instructions and authority given by principal.

DUTY NOT TO ATTEMPT THE IMPOSSIBLE OR THE IMPRACTICABLE:

Should not subject principal to risk or expense if it reasonably appears to be either impossible or impracticable to accomplish the objects of the principal and the agent is
unable to communicate with the principal.

DUTY TO OBEY:

Must obey all reasonable and lawful directions given by principal; disobedience is cause for terminating the agency.

THE AGENT MUST BE LOYAL AND FAITHFUL TO THE PRINCIPAL.

SECRET PROFITS OR ADVANTAGES:

Cannot obtain any secret profit or advantage from the agency relationship, and principal may recover any items, proceeds, or profits so acquired plus any damages thereby caused, often including punitive awards.

PERSONAL INTEREST:

Cannot enter into any agency transaction in which he has a personal interest, irrespective of the fairness of the transaction or the adequacy of the price, without making full disclosure and obtaining the consent of the principal.

COMPETING:

Must not compete with principal in subject matter of the agency.

CONFLICT OF INTEREST:

30.3 P. 483 Duty of Loyalty

Must not represent anyone whose interest conflicts with that of the principal.

Agent has duty to act only in principal's name and not to appear as owner of the principal's property nor to commingle it with that of the agent. EXAMPLE: Attorney must not put money collected for a client in the attorney's own personal bank account.



DUTY AFTER TERMINATION:

Duty to cease to act as agent for the principal.

DUTIES OF THE PRINCIPAL

DUTY TO PERFORM THE CONTRACT:

DUTY NOT TO INTERFERE WITH THE AGENTS WORK:

Cannot unreasonably interfere. EXAMPLE: Agent given an exclusive sales territory, principal may not invade the territory and make sales. BUT NOTE: Some courts: while principal cannot interfere with exclusive agent by appointing another agent to compete, the principal personally may
compete. [Stahlman v. National Lead Co., 318 F.2d 388 (5th Cir. 1963)]

DUTY TO GIVE THE AGENT INFORMATION:

To inform agent of all risks and dangers in connection with the performance of duty, and furnish such information as is provided in their agreement or by the custom of the business.

DUTY TO KEEP AND RENDER ACCOUNTS:

In connection with the agency business, in accordance with their agreement, custom of the business, method of compensation, and other relevant factors.

DUTY OF GOOD CONDUCT:

Must conduct in such manner as not to harm the agent's reputation nor make it impossible for agent to perform employment and keep his self-respect. EXAMPLE: The agent does not have to put up with physical and verbal abuses and
insults from the principal.

DUTY TO INDEMNIFY:

For any losses or damages suffered without agent's fault while carrying out the agency business.

DUTY TO COMPENSATE:

To pay agent any agreed salary, or, if no sum was set, whatever is customary or reasonable under the circumstances.

DUTY NOT TO TERMINATE OR REPUDIATE:

Agency relationship in violation of the employment contract.

30.7 P. 484 Dual Agency
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