Agency Rules 1

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Agency Rules 1
2010-07-14 10:50:44
Agency relationship

Agency Relationship
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  1. Creation of agency relationship
    • By appointment (express)
    • By conduct or actions (implied)
    • By court
    • By misinterpretation by a third party via principal's fault
  2. Determining existence of agency relationship
    • Principal manifests assent to agent
    • Agent acts on principal's behalf
    • Agent is subject to principal's control AND
    • Agent manifests assent
  3. The principal
    Entity with legal capacity to possess rights and incur obligations. (unincorporated associations can't be principal's)

    Has control over agent

    Special types:

    • Master - a principal who controls not only ends of an agent's performance, but also the means (i.e., the physical conduct of the agent's performance)
    • Employer - differentiate from master by looking at whether employer exercises control over worker's day to day activities, supplies tools, pays on structured pay period, and directs completion of work, and whether worker's skill level is specialized.
    • Entrepreneuer
    • Corporations
    • Partnerships
  4. The agent
    Anyone with MINIMAL capacity can be an agent. Minors and incompetents may serve as agents.

    An agent:

    • performing tasks delegated by principal
    • manifests assent and consent to act on principal's behalf
    • is subject to principal's control


    • Gratuitous - does not receive compensation
    • General - has broad authority over wide variety of tasks with little direction from principal
    • Trustee - settlor's agent
    • Real estate brokers - must provide disclosure form in writing to buyer, seller, landlord, or tenant before entering agency relationship.
    • Subagents - those to whom an agent has delegated agent duties. Agent is liable to principal for subagent's conduct, and principal will be bound by the subagent's acts.
  5. Termination of Agency relationship
    By expuration of time

    By revocation, renunciation, and cancellation - effective when other party obtains notice.

    By operation of law:

    • Death of principal - effective immediately after the death, even if agent doesn't have notice (NY rule), except agent banks require notice and death of principal in military does not terminate power of attorney until agent /w the power receives notice.
    • Death of agent - effective immediately
    • Principal's loss of capacity - may be overcome if agent has durable power of attorney
    • Agent's breach of fiduciary duty

    EXAM NOTE: Agency questions frequently ask examinees to determine if a principal is liable for terminating an agency relationship early, where there is a written agreement between the parties. Before you answer yes, remember that it depends. If you want to terminate agency without liability, look for an act of breach by the agent.