Concepts of Agency and Authority | Brian JM Quinn | February 22, 2013


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Concepts of Agency and Authority

by Brian JM Quinn Show/Hide

Agency was once one of those classes that nearly every student took while in law school. It has, in recent decades, fallen out of fashion. By now, it is rarely taught as a standalone class. When it is taught, it is often taught in conjunction with partnership. Alternatively, some students may only run across agency in the context of their first year torts class when they are introduced to the concept of respondeat superior. To a certain extent, the downgrading of agency is a shame. Indeed, it's a critical important part of the law for almost any practicing lawyer and well worth learning.

This chapter of the casebook will focus on agency as a building block for understanding the corporate law. An agency is perhaps the simplest business organization. A principal engages an agent to undertake some activity on the principal's behalf. It turns out that the lessons of authority of agents and the fiduciary duties of agents are important analogues in understanding the corporate law. In fact, once a student has mastered the agency concepts with respect to these two areas, the bright student can by and large intuit the right results in the corporate law.

So, we start with agency – not as an end in and of itself – but as a tool for better understanding and clarifying the issues that will later present themselves when we turn to the corporate law.


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  1. 1 Show/Hide More Restatement of Agency
    Original Creator: Brian JM Quinn

    Unfortunately, the Restatements of Agency are not available as open source documents. In this section you will find links to HeinOnline versions of the Restatement of Agency (3rd) and the Restatement of Agency (2d). Because I cannot edit materials on HeinOnline these links are to the complete Restatements, which will be much more than you need. I will make an effort to help identify the relevant sections of interest to us during the course of the semester.

    Although in class I will emphasize the use of the Restatement of Agency (3rd), when you read the cases you will inevitably notice that judges and commentators will often refer to the Second Restatement. This is not because the Second Restatement is somehow “better” than the Third. The Second has just been around longer. In any event, there are a number of substantive changes between the Second and the Third, so it is worth being familiar with Third and how it differs from the previous Restatement.

  2. 2 Show/Hide More Fiduciary Duties of Parents and Subs
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn

    Stockholders do not normally have fiduciary duties with respect to other stockholders. This principle makes sense for a number of reasons. Stockholders with small stakes have no ability to influence the board of directors and therefore should be free from restrictions in their dealings with other stockholders.

    However, this principle is subject to an exception. When stockholders can, through their ownership position influence and control the direction of the corporation, then those stockholders have fiduciary obligations with respect to minority stockholders.

  3. 3 Show/Hide More Who is an Agent?
    Original Creator: Brian JM Quinn

    Often the question of who is an agent is contentious. This chapter focuses on the sources of agency, including actual and apparent agency. In addition to the sources of agency is the question of the limits of an agent's authority. It is important to recognize that although there are different sources of authority of agents, that the source of an agent's authority does not matter. In the end, regardless of the source, once a person is empowered with authority, a court will consider that person an agent.

    This section examines the role of agency in the franchise form. The franchise business is a common form of business organization. It may be a surprise to learn, but with respect to the franchisee/franchisor, agency plays a critically important role. Indeed, lawyers whose practice involves franchise businesses often become experts in agency law.

    This section also spends time on the difference between employees and independent contractors. As you will see, employees are obviously agents. But a more common question relates to independent contractors. Are they agents? And, if so, to what extent can they be considered agents?

    1. 3.3 Show/Hide More Harmon v. State
      Original Creator: Brian JM Quinn
      In Harmon we consider whether an agent has authority and the sources of authority, both actual and apparent.
    2. 3.4 Show/Hide More Smith v. Hansen Hansen & Johnson
      Original Creator: Brian JM Quinn
      Agents acting without authorization and apparent agency.
      Sometime agents act without authority. What are the limits of a principal's liability for acts done by an agent without authority? Who is or should bear the consequences of such an agent's acts? What are the incentives created by the rule laid out by courts and the restatement?
    3. 3.5 Show/Hide More A. Gay Jenson Farms Co. v. Cargill Inc.
      Original Creator: Brian JM Quinn
      When do creditors, ostensibly third parties at arm's length, cross the line and become principals?
    4. 3.6 Show/Hide More Agency and the Franchise
      Original Creator: Brian JM Quinn
      The franchise is a common business organization. From fast food to hotels, the franchise structure is pervasive throughout our economy. The following cases help us think about the nature of the franchise/franchisee relationship. Is it an agency relationship? Or, is it something else?
      1. 3.6.2 Show/Hide More Allen v. CHOICE HOTELS INTERNATIONAL
        Original Creator: Brian JM Quinn

        More on the question of agency in the context of franchise liability.

        Question for discussion: what is the plaintiff's best legal theory based on apparent authority. Is the court correct in its conclusion with respect to that theory? Yes or no?

    5. 3.7 Show/Hide More Independent Contractors v Employees
      Original Creator: Brian JM Quinn
      Principals will often hire “independent contractors” to undertake work on their behalf. What is the distinction between independent contractors and employees? Are independent contractors agents? And, if so what are the limits of their authority?
      1. 3.7.2 Show/Hide More Kane Furniture Corp. v. Miranda
        Original Creator: Brian JM Quinn
        This case further examines the distinction between independent contractors and agents. In addition, this case raises the question of the limits of a principal's liability for an employee and when an employee might be acting within the scope of their employment.
      2. 3.7.3 Show/Hide More Millsap v. Federal Express Corp.
        Original Creator: Brian JM Quinn
        In modern business organizations, much work is “outsourced” to independent contractors. Are independent contractors agents? If so, are principals liable for the actions of independent contractors?
        In modern business organizations, much work is “outsourced” to independent contractors. Are independent contractors agents? If so, are principals liable for the actions of independent contractors?
    6. 3.8 Show/Hide More Intentional Torts of Agents
      Original Creator: Brian JM Quinn
      Sometimes agents commit intentional torts against third parties. These torts are often against the explicit instructions of the principal. When, if ever, are principals liable for these intentional torts?
      1. 3.8.1 Show/Hide More Manning v. Grimsley
        Original Creator: Brian JM Quinn
        Intentional Torts of Agents and the scope of employment
      2. 3.8.2 Show/Hide More Burlington Industries Inc. v. Ellerth
        Original Creator: Brian JM Quinn
        Are principals liable for the torts of their agents who are acting in the scope of their employment?
      3. 3.8.3 Show/Hide More Arguello v. Conoco Inc.
        Original Creator: Brian JM Quinn
        Summary of franchise issues as well as the scope of the employment question.
  4. 4 Show/Hide More Agency by Estoppel
    Original Creator: Brian JM Quinn
    A principal may give an appearance of agency relationship by, for example, furnishing his or her firm's call cards, or an email address to the purported agent. Or, more often, the principal may simply stand by and do nothing as an agent purports to act on behalf of the principal. In such cases, rather than permit the principal to disavow the agency ex post, the existence of an agency may be presumed, and the principal may be bound by the acts of the agent performed on the principal's behalf. This agency by estoppel creates incentives for the principal to monitor the actions of purported agents.
  5. 5 Show/Hide More Obligations of Agents to Principals
    Original Creator: Brian JM Quinn
    Agents stand in fiduciary relation to their principals. As such, agents have fiduciary obligations to the principal. The Restatement outlines a s series of fiduciary obligations that an agent has with respect to the principal. The most important of these are the duty of care and the duty of loyalty. The fiduciary obligations of agents with respect to principals can be understood as an analogue to fiduciary obligations of corporate directors in the the corporate law context.
      1. 5.1.1 Show/Hide More Carrier v. McLlarky
        Original Creator: Brian JM Quinn
        What does an agent's duty of care require?
      1. 5.2.4 Show/Hide More King v. Bankerd
        Original Creator: Brian JM Quinn
        General fiduciary principles and the limits of authority
      2. 5.2.5 Show/Hide More Opportunities
        Original Creator: Brian JM Quinn
        Agents will often find themselves presented with opportunities to make a financial gain. The question is to whom do those opportunities belong? The principal or the agent?
      3. 5.2.6 [This resource no longer exists on H2O because its owner deleted it.]
  6. 6 Show/Hide More Obligations of Principals to Agents
    Original Creator: Brian JM Quinn
    So far, it's been all about what obligations agents owe to their principals. Do principals owe any obligations to their agents?

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June 02, 2014

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