The Law of Corporations and Other Business Organizations

Lecture Notes

Agency Concepts and Definitions
1. When one person acts on behalf of another
or on behalf of a business organization, an
agency relationship is formed.
2. The agent is the person acting on behalf of
the principal.
3. A general agent has authority to transact all
business of the principal, all business of a
particular kind, all business at a particular
place, or all acts connected with a particular
employment or business.
4. A special agent has authority to do one or
more specific acts in accordance with instructions
from the principal.
5. If an employer has the right to control the
manner in which an agent performs his or
her work, that agent is likely an employee
and not an independent contractor.
6. A power of attorney is created by a written
document that authorizes another (the attorney
in fact) to act as one’s agent. A
power of attorney is usually required to
transfer real estate on behalf of another.
7. A durable power of attorney provides that
the authority granted to the attorney in fact
will continue even after the incapacity of
the person granting the power of attorney.
Agency Creation
8. The elements of an agency relationship include
the following:
• Consent of the parties
• Capacity of the parties to act
• No required written agreement
• No required exchange of
consideration
• Formation of the agency for a proper
purpose
9. An agency agreement can be created by the
following:
• Express agreement (either verbal or
written)
• Implied agreement (the intent and actions
of the parties)
• The conduct of the principal and agent
• Ratification
• Estoppel
Agency Relationship
10. The agent’s authority is the agent’s power
to act on behalf of the principal in accordance
with the principal’s
consent.
11. The agent may have actual authority or
apparent authority.
12. The agent’s actual authority may be:
• Express authority
• Implied authority
• Authority incidental to express authority
• Authority implied because of emergency
13. Apparent authority to do a specific act can
be created by the actions of the principal—
either by written or spoken word, or by the
principal’s conduct.
14. The elements of apparent agency include:
(1) acts or conduct of the principal causing
a third party to believe the agent has authority
to act on behalf of the principal; (2)
reliance on that belief by a third party.
15. The agent and principal owe certain duties
to each other.
Principal’s Liability to Third Parties
16. The principal is usually liable for acts conducted
by an authorized agent.
17. The principal is liable under contracts made
on the principal’s behalf by an authorized
agent.
18. Under the doctrine of respondeat superior,
an employer is responsible for the torts
committed by his or her employee while
the employee is acting in the scope of his or
her employment by the principal.
Agent’s Liability to Third Parties
19. Agents are personally liable for their torts.
Under certain circumstances, the principal
may also be liable for torts committed by
the agent.
Agency Termination
20. The agency may be terminated pursuant to
the terms of the agency contract, the fulfillment
of the agency purpose, by the
death or bankruptcy of either the principal
or agent, or by the act of the principal and
agent or either one of them.
Agency and Business Organizations
21. A sole proprietor may hire employees to
serve as agents.
22. In a partnership, partners act as agents for
the partnership and for each other.
23. In limited partnerships, the general partners
act as agents for the partnership and the
other partners.
24. Either members or managers are agents of
limited liability companies.
25. Officers and directors act as agents of corporations.
The Paralegal’s Role
A basic understanding of agency law will benefit
paralegals who work in nearly every area of
law. An understanding of agency law will help
paralegals who need to understand contracts and
litigation that clients may be involved in. Some
specific tasks related to agency law that may be
assigned to corporate paralegals include reviewing
and drafting powers of attorney, employment
agreements, and other contracts that may
involve an agency relationship.
Resources
Important resources for paralegals who are
working in areas related to agency law include
agency treatises, especially the Restatement of
the Law—Agency 3d. There are also several
online resources that can provide valuable information
on agency law.