The law of agency is a legal principle that governs the relationship between a principal and an agent. In this context, the principal is the person or entity that hires the agent to act on their behalf, while the agent is the person who is hired to carry out the actions on behalf of the principal.
The basic elements of an agency relationship include:
Authority: The principal must grant the agent the authority to act on their behalf. This authority can be express (explicitly stated) or implied (inferred from the actions of the parties).
Control: The principal has the right to control the actions of the agent and can give them instructions and guidelines on how to perform the job.
Duty of loyalty: The agent has a duty to act in the best interests of the principal and must not engage in any activities that would be considered a conflict of interest.
Compensation: The agent is typically compensated for their services, either through a salary or commission.
The law of agency is important in many different contexts, including business, real estate, and employment. In business, an agent can be hired to sell products or negotiate contracts on behalf of a company. In real estate, an agent can be hired to represent a buyer or seller in the purchase or sale of a property. In employment, an employer can be considered the principal, and the employee is the agent.
The law of agency also has important legal implications, as an agent’s actions can bind the principal to legal obligations. For example, if an agent enters into a contract on behalf of a principal, the principal
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Sample Assignment:
Please post your responses to the four problems at the end of this week’s reading assignment (Chapter 1: The Law of Agency). They are provided below for your convenience.
Problem 1
GoodBurger, Inc., is a company that operates fast-food restaurants in the United States. It has about 500 outlets. Two hundred
of those are owned by Goodburger itself; the other 300 are franchised restaurants that are actually owned by local business people. Leona owns a GoodBurger franchise in a middle-class suburb. To get the franchise, she paid GoodBurger a “franchise fee” of $75,000, and makes annual payments to GoodBurger amounting to 3 percent of sales. She is responsible for all costs relating to building, operating, and managing the restaurant, including rent, wages, utilities, and taxes. The restaurant design plans are drawn up by GoodBurger’s architectural team, and Leona is required to follow those plans. The plans specify all
of the public signage at the restaurant, including the large sign with the famous black-gold-teal GoodBurger logo. Customers cannot tell the difference between company-owned and franchised stores.
GoodBurger stores—whether company-owned or franchised—must all be strictly operated under terms of the 500-page “Operations Manual,” which is informally known as “the GoodBurger Bible.” As with company-owned stores, all of Leona’s employees are required to wear uniforms with the GoodBurger logo and may wear no other identification. The Operations Manual specifies in detail the job of each category of employee, the correct way to make each of the company’s 100-plus menu items (e.g., exactly how many pickle chips should be placed on each of thee company’s ten signature burgers), and such
details as how and how often restrooms must be cleaned. Failure to follow these guidelines may result in a loss of Leona’s the franchise. Under the franchise agreement, GoodBurger is responsible for providing bookkeeping and accounting services to Leona, and is responsible for designing, managing, and placing all national and regional advertising.
Leona has some discretion in the operation of the store. She is responsible for deciding which (and how many) employees to hire, so long as she meets the “minimum staffing” guidelines in the Operations Manual. The store must be open from 6:30 a.m. to 11:00 p.m., but Leona can set longer hours if she chooses. She is required to set prices at the levels specified by GoodBurger, but may vary those prices in special cases with approval of the GoodBurger regional office. When GoodBurger offers regional or national promotions, she can elect whether to opt out of the promotion. She is also authorized to advertise locally, provided her ads are approved by the regional office.
Is Leona an agent of GoodBurger? Explain.
Problem 2
Based on his experience working for the CIA, a former CIA agent published a book about certain CIA activities in South Vietnam. The CIA did not approve of the publication of the book although, as a condition of his employment, the agent had signed an agreement not to publish any information relating to the CIA without specific approval of the agency. The government brought suit against the agent, claiming that all the agent’s profits from publishing the book should go to the government.
Assuming that the government suffered only nominal damages because the agent published no classified information, will the government prevail? Why or why not?
Problem 3
The Spiders (owned by Pat) and the Hornets (owned by Dana) are two independent minor-league baseball teams. During a game at the Spiders’ home field, members of the Spiders repeatedly taunt Joe, the pitcher for the Hornets, from the bench. Finally infuriated, Joe retaliates by firing a 98 mph fastball at the dugout. In fact, the pitch goes over the dugout and hits Ann, who is sitting in the first row. The Spiders’ manager, Lefty, in violation of team and league rules, charges out of the dugout at Joe, tackling him and bringing him to the ground, where he proceeds to pummel him. The benches empty, and many of the
Hornets players surround Lefty, kicking him repeatedly. Ann (concussion), Lefty (concussion and broken hand), and Joe (torn
meniscus) are all taken to the hospital with injuries.
Is Dana liable to Ann for her injury? Is Pat liable to Joe for his injury? Are Lefty and Joe entitled to workers’ compensation?
Problem 4
Alphonse is a sales professional who goes to work for Zambuco Beverages Group, a company that manufactures a range of distilled spirits, including bourbon, gin, vodka, rum, and various specialty liqueurs. Zambuco has a sales force that sells to independent liquor retailers, and whose members are paid largely on commission. At the time Alphonse is hired, Zambuco’s standard commission paid to the sales professionals is 6 percent.
On his first day, Alphonse is welcomed by Hairston, the company’s Vice President for Sales & Marketing. Hairston tells Alphonse that the Sales Manager, Boyle, will give him all the details about his new job. Alphonse subsequently goes to Boyle’s office, where Boyle tells him all about the job. When they get to the discussion of commissions, Boyle tells Alphonse that in one region, Zambuco has had trouble penetrating the market, and that while the standard commission is 6 percent, Alphonse will get 7.5 percent commission on all sales within that region.
Time goes by, and Alphonse is successful selling, but Zambuco pays him only 6 percent on all his sales, including those in the region that Boyle mentioned. Alphonse later quits and sues for the extra commission he claims he should have been paid.
What result? Outline each and every theory on which Alphones may be able to recover from Zambuco.
