Agency Law Overview

Agency

• Agency law governs the legal relationship between two people when one person acts as an agent for another.
• Common relationships include Principal/Agent, Master/Servant, and Employer/Employee.

Authority in Agency Relationships

• Agency relationships can be formed through several methods.
• Actual Authority: The principal explicitly grants authority to the agent.
• Apparent Authority (Agency by Estoppel): A third party reasonably believes the agent has authority, even if the principal didn't explicitly grant it.
• Ratification: The principal accepts an act performed by an agent that lacked actual authority.

Fiduciary Obligations

• Agents owe fiduciary duties to their principals.
• These duties include:
  • Duty of Loyalty: Acting faithfully and putting the principal's interests ahead of their own.
  • Duty of Care: Exercising reasonable care in performing duties, similar to ordinary prudence.

Duty of Loyalty

• Agents must act faithfully in their duties.
• Agents must maintain a higher standard of behavior, akin to that of a trustee.
• Agents must prioritize the business entity's interests over their personal interests.

Duty of Care

• Agents have a duty to exercise due care.
• This means acting in good faith and performing their duties with the same care as a prudent person in similar circumstances.

Respondeat Superior

• The principle of "let the master answer."
• An employer is liable for the acts of an employee within the scope of their employment.
• If an employee's actions are outside the scope of employment, or exceptionally egregious, the principle of respondeat superior might not apply.
• Agents are always liable for their own torts.
• Plaintiffs can sue both the employer and the employee.

Independent Contractors

• Independent contractors may be agents, but they are not employees.
• The principle of respondeat superior does not apply to independent contractors.

Independent Contractor or Employee?

• Factors to consider when differentiating between an independent contractor and an employee:
  • Extent of Control
  • Type of Work
  • Skill Required
  • Amount of Supervision
  • Use of Employer's tools, equipment, etc.
  • Payment method (by job, hour, etc.)
  • Whether the work is part of the employer's regular business
  • Whether parties perceive the relationship as employment and how long the relationship has lasted.