Creation Of Agency

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Creation of Agency:

1. When principal manifests assent to the agent that the agent will act on the principal’s behalf and be subject to principal’s control.
2. Is a fiduciary relationship because principal entrusts the agent to make contracts for the principal and to possess and use the principal’s property.
3. If parties WRITTEN,SPOKEN WORDS, or CONDUCT indicate an agreement the relationship exists.
4. Creation may be oral unless law provides otherwise.

2 types of Authority:
Actual: consent must be communicated to the agent
1. Express: manifested to the agent in a very specific or detailed language.
2. Implied: agent has implied authority to act in a way the agent reasonably believes the principal wants him to act.

Apparent: communicated to the 3rd party. It arises when the principal’s manifestations causes a 3rd party to believe that the agent is authorized to act in a certain way.
1. Agents cannot give themselves apparent authority without the principal’s consent.
2. 3rd part must reasonably believe in the agent’s authority.


duration of the relationship between the parties provision of empoloyee benefits.
Principal controls manner and means of the agent’s performance.

Non-Employee: contract with the principal to produce a result, and determine for himself or herself how that result will be accomplished.
(Professionals such as brokers, accountants, and attorneys often are nonemployee agents of their clients, although they are employees of the brokerage, accounting or law firms that pay their salaries).

Duties of Agent to Principal
Fiduciary Duties:
1. Avoid conflicts of interests with the principal
Not deal with himself unless principal consents.
Not compete with the principal unless principal agrees.
Not act on behalf of the other party unless principal consents.
2. Not disclose confidential information received from the principal.
3. Act within her actual authority and obey principal’s reasonable instructions for carrying out agency business.

4. Act with Care and Skill: agents who represent they possess a hight than customary level of skill may be h held to a correspondingly higher standard of performance, it may change if both party agree the agent must possess greater or lesser than customary care and skill.

Duties of Principal to Agent
1. Compensate
If no amount is stated, agent must be compensated for market price, customary price of service, or their reasonable value.
Principal must cooperate with achieving agents result, otherwise agent is still entitled to compensation.
Principal is not required to pay for what she did not request, services not consented, and tasks requiring no pay.

2. Reimburse: if an agent expressly or impliedly authorized expenditures while acting on the principal’s behalf is normally entitled to reimbursement, unless otherwise agreed.
3. Indemnify:
Not required to indemnify:
Unauthorized acts or solely from negligence or other fault by agent.

Must indemnify for
Tort damages resulting from authorized conduct that the agent didn’t believe was tortious.
Authorized acts, which constitutes a Breach of contract or tort for which the agent is required to pay damages to a 3rd party.

Agency relationship is terminated:
1. Death of the principal: Under the Restatement of (3rd Agency) it’s effective when the agent knows about the death.
2. Death of the agent
3. Loss of capacity of the principal ends even without notice to the agent.
4. Cessation of existence or suspension of power by the corporation/partnership

Notice to 3rd parties
1. Actual notification
a. Direct personal statement
b. Writing delivered
2. Constructive notification: by advertising the agency’s termination via newspaper, posting in public places and even the website.
Chapter 36

Contract Liability of Principal

Actual Authority: authority the principal wants the agent to possess. It