Learning Objectives

After reading this chapter, you should recognize the following:

Why company is important, what an certified dealer is, and also the varieties of agents What an live independence contractor is The duties owed by the agent to the principal The duties owed by the major to the agent

Learning Objectives

recognize why agency law is important. Acknowledge the recurring legal concerns in company law. Understand the varieties of agents. Understand how the company relationship is created.

Why Is firm Law Important, and What Is an Agent?

An certified dealer is a human who plot in the name of and also on instead of of another, having been given and assumed some level of authority to do so. Many organized person activity—and virtually all advertising activity—is lugged on v agency. No corporation would be possible, also in theory, without such a concept. We could say “General electric motors is structure cars in China,” for example, however we can not shake hands with general Motors. “The General,” as human being say, exists and works with agents. Likewise, partnerships and also other organization organizations rely generally on agents come conduct your business. Indeed, that is not an exaggeration come say that firm is the cornerstone of companies organization. In a partnership each companion is a general agent, while under corporation legislation the officers and all employees are agents the the corporation.

You are watching: An agency relationship cannot exist in the absence of a formal agreement.

The visibility of agents does not, however, call for a whole new law that torts or contracts. A tort is no less harmful once committed by one agent; a contract is no less binding as soon as negotiated by an agent. What does need to be taken into account, though, is the way in i m sorry an agent acts on behalf of his principal and also toward a third party.

Recurring problems in agency Law

Several problematic truth scenarios recur in agency, and law has emerged in response.

John Alden

Consider man Alden (1599–1687), among the most well known agents in American literature. He is stated to have actually been the first person indigenous the Mayflower to collection foot ~ above Plymouth rock in 1620; he to be a carpenter, a cooper (barrel maker), and also a diplomat. His agency task—of interest here—was commemorated in Henry Wadsworth Longfellow’s “The Courtship of mile Standish.” He was to woo Priscilla Mullins (d. 1680), “the loveliest maiden that Plymouth,” on behalf of Captain mile Standish, a valiant soldier who was as well shy to propose marriage. Standish rotate to man Alden, his young and also eloquent protégé, and also beseeched Alden come speak on his behalf, unaware that Alden himself was in love with Priscilla. Alden accepted his captain’s assignment, in spite of the expertise that that would for this reason lose Priscilla for himself, and also sought the end the lady. However Alden was so tongue-tied that his vaunted eloquence fell short, rotate Priscilla cold toward the object of Alden’s mission, and eventually led she to turn the tables in one of the most famed lines in American literature and poetry: “Why nothing you speak for yourself, John?” John at some point did: the two were married in 1623 in Plymouth.

Recurring worries in Agency

Let’s analysis this succession of events in legitimate terms—recognizing, the course, the this example is one analogy and also that the law, even today, would not impose after-effects on Alden because that his failure to lug out Captain Standish’s wishes. Alden to be the captain’s agent: he was particularly authorized to speak in his name in a path agreed on, towards a stated end, and also he welcomed the assignment in factor to consider of the captain’s friendship. That had, however, a dispute of interest. That attempted to bring out the assignment, yet he go not do according to expectations. Eventually, the wound up through the prize himself. Below are some questions to consider, the same questions that will recur transparent the conversation of agency:

How extensive was John’s authority? could he have actually made promises to Priscilla ~ above the captain’s behalf—for example, the Standish would have developed her a good house? can he, if he committed a tort, have enforced liability ~ above his principal? Suppose, because that example, that he had actually ridden in ~ breakneck speed to with Priscilla’s side and also while en course ran into and injured a pedestrian on the road. Might the pedestrian have sued Standish? mean Alden had actually injured self on the journey. Would certainly Standish be liable to Alden? Is Alden liable to Standish because that stealing the love of Priscilla—that is, for acquisition the “profits” that the companies for himself?

As these concerns suggest, company law often entails three parties—the principal, the agent, and a 3rd party. It as such deals v three various relationships: in between principal and also agent, between principal and third party, and also between agent and third party. This relationships can be summed up in a an easy diagram (see figure 20.1 "Agency Relationships").

Figure 20.1 company Relationships


In this chapter, us will consider the principal-agent side of the triangle. In the next chapter us will rotate to relationship involving third parties.

General Agent

The general agentSomeone authorized to transact every kind of company for the principal. Possesses the government to bring out a broad range of transactions in the name and also on instead of of the principal. The general agent might be the manager of a business or may have actually a more limited but nevertheless ongoing role—for example, as a purchasing agent or together a life insurance certified dealer authorized to sign up customers because that the residence office. In one of two people case, the general agent has actually authority to alter the principal’s legal relationship with 3rd parties. One who is designated a basic agent has actually the government to plot in any method required by the principal’s business. Come restrict the general agent’s authority, the principal have to spell the end the limitations explicitly, and also even therefore the principal may be liable for any type of of the agent’s action in excess of his authority.

Normally, the general agent is a business agent, however there are circumstances under i m sorry an individual might appoint a basic agent for personal purposes. One common type of a personal general certified dealer is the human who stop another’s strength of attorney. This is a delegation of government to one more to act in his stead; it can be achieved by executing a an easy form, such together the one presented in figure 20.2 "General strength of Attorney". Ordinarily, the strength of attorney is used for a distinct purpose—for example, to sell real estate or securities in the lack of the owner. Yet a person dealing with a prolonged operation and also recuperation in a hospital can give a basic power of attorney to a trusted family members member or friend.

Figure 20.2 general Power that Attorney


Special Agent

The distinct agentAn agent hired by contract to carry out specifically declared activities. Is one who has actually authority come act only in a specifically designated instance or in a especially designated set of transactions. For example, a actual estate broker is generally a special agent hired to discover a the person who lives for the principal’s land. Suppose Sam, the seller, appoints an agent Alberta to uncover a the person who lives for his property. Alberta’s commission relies on the selling price, which, Sam says in a letter come her, “in any kind of event may be no less than $150,000.” If Alberta locates a buyer, Bob, who agrees to purchase the building for $160,000, she signature ~ above the contract of sale will certainly not tie Sam. Together a one-of-a-kind agent, Alberta had authority just to find a buyer; she had no authority to sign the contract.

Agency Coupled through an Interest

An agent who reimbursement counts on his proceeding to have the government to act as an certified dealer is stated to have an company coupled through an interestAn agency in i beg your pardon the agent has an interest in the property about which he or she is exhilaration on the principal’s behalf. If he has actually a home interest in the business. A literature or author’s agent, for example, customarily agrees to sell a literary occupational to a publisher in return because that a portion of every monies the writer earns indigenous the revenue of the work. The literary agent likewise acts as a repertoire agent come ensure the his commission will be paid. By agreeing through the major that the agency is coupled with an interest, the agent deserve to prevent his very own rights in a particular literary occupational from gift terminated to his detriment.


To lug out her duties, an certified dealer will regularly need to choose her very own agents. These appointments might or might not be authorized by the principal. An insurance company, for example, can name a basic agent come open offices in cities throughout a specific state. The agent will certainly necessarily conduct her business through agents that her own choosing. These agents are subagentsThe agent of an agent. The the major if the general agent had the refer or implied government of the major to rental them. Because that legal purposes, they space agents that both the principal and the principal’s basic agent, and both space liable for the subagent’s command although generally the general agent agrees come be mainly liable (see figure 20.3 "Subagent").

Figure 20.3 Subagent



The final classification of agent is the servantAn employee.. Until the early nineteenth century, any kind of employee whose work duties were topic to an employer’s regulate was referred to as a servant; we would certainly not usage that ax so generally in contemporary English. The Restatement (Second) that Agency, section 2, specifies a servant together “an agent employed by a grasp to perform business in his affairs who physical conduct in the power of the company is controlled or is subject to the right to manage by the master.”

Independent Contractor

Not every contract for solutions necessarily create a master-servant relationship. Over there is vital distinction made in between the status of a servant and also that the an independent contractorA person who is hired to attain a an outcome but is not subject to particular control through the one hiring.. According to the Restatement (Second) of Agency, ar 2, “an live independence contractor is a human being who contracts with one more to execute something for him but who is not regulated by the other nor subject to the other’s appropriate to manage with respect come his physical command in the performance of the undertaking.” as the name implies, the live independence contractor is legally autonomous. A plumber salaried come a building contractor is an employee and agent of the contractor. Yet a plumber who hires himself out to fix pipes in people’s dwellings is an live independence contractor. If you rental a lawyer to resolve a dispute, that person is no your employee or her servant; she is an independent contractor. The terms “agent” and also “independent contractor” room not necessarily support exclusive. In fact, by definition, “… an elevation contractor is an agent in the wide sense the the term in undertaking, at the inquiry of another, to execute something for the other. Together a general ascendancy the line of demarcation between an independent contractor and a servant is not plainly drawn.”1.Flick v. Crouch, 434 P.2d 256, 260 (OK, 1967).

This difference between agent and also independent contractor has necessary legal aftermath for taxation, workers’ compensation, and also liability insurance. Because that example, job are compelled to withhold revenue taxes from their employees’ paychecks. However payment come an independent contractor, such together the plumber for hire, walk not need such withholding. Deciding that is an independent contractor is not constantly easy; over there is no single factor or mechanically answer. In Robinson v. New York products Corp., an injured salesman seek workers’ compensation benefits, claiming to it is in an employee the the brand-new York products Corporation.Robinson v. New York assets Corp., 396 N.Y.S.2d 725, App. Div. (1977). However the state workmen’s compensation board ruled versus him, citing a variety of factors. The claimant marketed canned meats, making ring in his automobile from his home. The firm did not establish hours because that him, walk not control his activities in any type of way, and also did not reimburse him for mileage or any type of other costs or withhold taxes from its right commission payment to him. He report his count on a kind for the self-employed and also hired one accountant come prepare it because that him. The court agreed with the compensation board that these facts established the salesman’s standing as an independent contractor.

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The factual instance in each case determines even if it is a worker is an employee or an live independence contractor. No the agency nor the worker can establish the worker’s standing by agreement. As the north Dakota Workmen’s Compensation Bureau put it in a bulletin to real estate brokers, “It has pertained to the Bureau’s attention that plenty of employers room requiring that those who work-related for them sign ‘independent contractor’ develops so that the employee does not have to pay workmen’s compensation premiums for his employees. Such creates are meaningless if the worker is in fact an employee.” Vizcaino v. Microsoft Corporation, disputed in ar 20.3.2 "Employee matches Independent Contractor", examines the distinction.

In enhancement to identify a worker’s status for tax and also compensation insurance money purposes, the is sometimes an essential for decisions involving personal liability insurance policies, which commonly exclude indigenous coverage accidents involving employee of the insureds. General Accident Fire & Life Assurance Corp v. Agree Golf AssociationGeneral Accident Fire & Life Assurance Corp v. Pro Golf Association, 352 N.E.2d 441 (Ill. App. 1976). Affiliated such a situation. The insurance policy in concern covered members of the experienced Golfers Association. Gerald Hall, a golf agree employed by the neighborhood park department, was afforded coverage under the policy, i m sorry excluded “bodily injury to any employee the the insured emerging out of and also in the food of his employed by the insured.” the is, no employee the Hall’s would certainly be covered (rather, any such human being would have coverage under workers’ compensation statutes). Bradley Martin, age thirteen, was at the golf course because that junior organization play. In ~ Hall’s request, the agreed come retrieve or “shag” golf balls to be hit during a lesson room was giving; that was—as Hall placed it—to be compensated “either through golf instructions or money or hotdogs or whatever.” throughout the food of the lesson, a golf round hit by room hit young young name in the eye. If Martin to be an employee, the insurance firm would be liable; if the was no an employee, the insurance agency would not liable. The trial court identified he was no an employee. The evidence showed: occasionally the boys that “shagged” balls obtained paid, acquired golfing instructions, or acquired food, so the inquiry of compensation was ambiguous. Boy name was no directed in exactly how to execute (the admittedly simple) task of retrieving golf balls, no regulate was worked out over him, and no equipment was forced other 보다 a bag to collect the balls: “We think the evidence is prone of various inferences.…We cannot say that the decision that the psychological court is against the manifest load of the evidence.”