Concepts of Agency and Authority | Brian JM Quinn | November 15, 2013

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Concepts of Agency and Authority

Original Creator: Brian JM Quinn Current Version: 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. The materials in this chapter should be read in conjunction with accomplishing the online Agency module, which is available on the course website (bc.edu/lms). The Agency module will provide you with an overview of the most important concepts of agency. The module consists of material from the Restatement (3rd) of Agency along with lecture sequences and review questions. Once you have completed the module, there is an online quiz that is intended to reinforce and extend the lessons of agency learned in the module.

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 you have mastered the concepts of agency 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 Current Version: 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 Who is an Agent?
    Original Creator: Brian JM Quinn Current Version: Brian JM Quinn

    Often the question of who is an agent is contentious. This is because when an agent takes an action in connection with the agency, that act has legal consequences for the principal. 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.

    1. 2.1 Show/Hide More Dweck v. Nasser (I)
      Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
      In the case that follows, a purported principal challenges a settlement undertaken by his lawyer on his behalf. The court is asked to determine whether for the purposes of a settlement, the lawyer was in fact the purported principal's agent.
    2. 2.2 Show/Hide More Smith v. Hansen Hansen & Johnson
      Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
      Sometimes 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 Show/Hide More Agency by Estoppel
    Original Creator: Brian JM Quinn Current Version: 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.
  4. 4 Show/Hide More Obligations of Agents to Principals
    Original Creator: Brian JM Quinn Current Version: 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. 4.1 Show/Hide More Agent's Duty of Care
      Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
      1. 4.1.1 Show/Hide More Carrier v. McLlarky
        Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
        What does an agent's duty of care require?
    2. 4.2 Show/Hide More Agent's Duty of Loyalty
      Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
      1. 4.2.1 Show/Hide More King v. Bankerd
        Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
        General fiduciary principles and the limits of authority
      2. 4.2.3 Show/Hide More Gelfand v. Horizon Corp.
        Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
      3. 4.2.4 Show/Hide More Opportunities
        Original Creator: Brian JM Quinn Current Version: 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?
  5. 5 Show/Hide More Obligations of Principals to Agents
    Original Creator: Brian JM Quinn Current Version: 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?
    1. 5.1 Show/Hide More Indemnification
      Original Creator: Brian JM Quinn Current Version: Brian JM Quinn
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August 04, 2014

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