law of agency

Definition of agency
Principal—the party who employs another person to act on his or her behalf Agent—the party who agrees to act on behalf of another Agency—the principal/agent relationship

Any person with the capacity to contract can appoint an agent to act or his or her behalf. An agency relationship can only be created to accomplish a lawful purpose.
Kinds of employment relationships
Employer/employee—a relationship that results when an employer hires an employee to perform some form of physical service.
Principal/agent—an employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf.
Principal/independent contractor—a relationship that results when a person or business that is not an employee is employed by a principal to perform a certain task on his or her behalf. Critical factors in determining independent contractor status include:

• Whether the worker is engaged in a distinct occupation or an independently established business.
• The length of time the agent has been employed by the principal.
• The amount of time the agent works for the principal.
• Whether the principal supplies the tools and equipment used in the work.
• The method of payment, whether by time or by the job.
• The degree of skill necessary to complete the task.
• Whether the worker hires employees to assist him or her.
• Whether the employer has the right to control the manner and means of accomplishing the desired result.

When is a principal liable for actions of independent contractors?
The crucial factor in determining whether a person is an employee or an independent contractor is the degree of control that the principal has over that person. If the principal has substantial control, there is an employer/employee relationship, and the principal can be held liable for actions of the independent contractor.
Types of agency

• Express agency-an agency that occurs when a principal and an agent expressly agree to enter into an agency agreement with each other.
• Implied agency-an agency that occurs when a principal and an agent do not expressly create an agency, but it is inferred from the conduct of the parties.
• Apparent agency-an agency that arises when a principal creates the appearance of an agency that in actuality does not exist; the principal's actions, not the agent's, create the agency.
• Agency by ratification-an agency that occurs when a person misrepresents him or herself as another's agent when in fact he or she is not and the purported principal ratifies the agency.

Termination of agency by acts of the parties
An agency may be terminated by the following acts of the parties:

• Mutual agreement
• Lapse of time
• Purpose achieved
• Occurrence of a specified event

Termination of agency by operation of law
An agency is terminated by operation of law if there is:

• Death of the principal or agent
• Insanity of the principal or agent
• Bankruptcy of the principal
• Impossibility of performance
• Change in circumstances
• War between the principal's and agent's countries

Notification when an agency is terminated
If an agency is terminated by agreement of the parties, the principal is under a duty to give certain third parties notification of the termination.
Wrongful termination of an agency contract
Wrongful termination is the termination of an agency in violation of the terms of the agency contract. The nonbreaching party may recover damages from the breaching party.
Irrevocable agency
An agency coupled with an interest is a special type of agency relationship that is created for the agent's benefit. It is irrevocable by the principal. This type of agency is commonly used in security agreements to secure loans.
Terms

• agency by ratification—An agency that occurs when (1) a person misrepresents him- or herself as another's agent when in fact he or she is not and (2) the purported principal ratifies the unauthorized act.
• agency—The principal-agent relationship: the fiduciary relationship "which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act."
• agency law—The large body of common law that governs agency; a mixture of contract law and tort law.
• agent—The party who agrees to act on behalf of another.
• apparent agency—Agency that arises when a principal creates the appearance of an agency that in actuality does not exist.
• employer-employee relationship—A relationship that results when an employer hires an employee to perform some form of physical service.
• employment relationships—(1) Employer-employee, (2) principal-agent, and (3) principal-independent contractor.
• exclusive agency contract—A contract a principal and agent enter into that says the principal cannot employ any agent other than the exclusive agent.
• express agency—An agency that occurs when a principal and an agent expressly agree to enter into an agency agreement with each other.
• implied agency—An agency that occurs when a principal and an agent do not expressly create an agency, but it is inferred from the conduct of the parties.
• independent contractor—"A person who contracts with another to do something for him who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking." [Restatement (Second) of Agency].
• independent contractor—A person or business who is not an employee who is employed by a principal to perform a certain task on his behalf.
• power of attorney—An express agency agreement that is often used to give an agent the power to sign legal documents on behalf of the principal.
• principal-agent relationship—An employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf.
• principal—The party who employs another person to act on his or her behalf.
• termination by acts of the parties—An agency may be terminated by the following acts of the parties: (1) mutual agreement, (2) lapse of time, (3) purpose achieved, and (4) occurrence of a specified event.
• termination by operation of law—An agency is terminated by operation of law, including: (1) death of the principal or agent, (2) insanity of the principal or agent, (3) bankruptcy of the principal, (4) impossibility of performance, (5) changed circumstances, and (6) war between the principal's and agent's countries.
• wrongful termination—The termination of an agency contract in violation of the terms of the agency contract. The nonbreaching party may recover damages from the breaching party.