Georgetown University Law Center
Prof. James V. Feinerman
I. Agency, Partnership and Limited Liability Companies
Agency is a fiduciary partnership that results from the manifestation of consent by one person to another that the latter shall act on the former behalf & subject to his control, & consent by the latter so to act. E.g. Shareholders (principals) – officers (agencies).
Principal: Has power to dictate how the agent will perform his duties. Is liable for what the agent does, but not for what an independent contractor does.
Agent: Fiduciary of the principal – owes duties of loyalty, care, full disclosure, integrity, honesty & obedience. Agent must put interests of the principal above his own.
Agent has legal power to bind the principal in relations with third parties.
Agents aren’t guarantors of the results.
Parallel structures – e.g. independent contractor may not be P/A relationship.
Agents shall act as fiduciaries. E.g. in master / servant r/ships – master shall control & expect the servant to obey.
Fiduciaries – i.e. put the interests of the principal above of its own ones.
There shall be manifest act/inaction by the principal to create general understanding that the agent acts on the behalf of principal.
Dual agency – there must be a disclosure of possible conflicts of interest. If the principal is OK - then it’s OK (authority of ratification).
i. Agency does not depend on the intent or belief of the parties. ii. What distinguishes agency from other fiduciaries is the element of continuous subjection to the will of the principal.
Respondent superior: Wrongs committed by an agent are attributable to the principal so long as they occur w/in the scope of the agent's authority (e.g. w/in the course of employment). The principal authorizes one or more agents to do the company's business & misconduct that occurs w/in the scope of that agency is what the principal has liability for. E.g. "Scope of authority."
CEO has power to bind the company in transactions entered into during the ordinary course of business. Might be different for an extraordinary transaction, requiring special approval from the board or s/holders.
• An agent needs to make sure the grant of authority is genuine.
A. Types of agency authority
1) Actual authority
• Actual express authority: The principal expressly grants authority to the agent to act. Best one is written, then it is oral. • Actual implied authority (incidental): An agent who has actual authority to do certain acts may have the implicit authority to do certain subsidiary acts needed to accomplish the main purpose of the agency (authority is implicit in the facts). As a matter of practicality the implied is used more often. E.g. shareholder/officer relationships.
2) Apparent/Ostensible authority (by position): Not a real form of authority, it is a method of binding a purported principal for the acts of a purported agent through an estoppel-like equitable device by which the purported principal may not deny the existence of the purported agent’s authority. • Standard: When a principal, through action or inaction, creates in the mind of a third person the reasonable belief that a person (the purported agent) has authority, for the purpose of actions within the reasonable scope of that authority, the purported agent is treated as if he or she does have authority even if he or she does not actually have such authority; therefore, the principal will be bound to the third party. - Example: Letter giving authorization; while the negotiations are going on b/w bank and agent, the authorization is revoked but the bank (the third party) is not notified; the agent still has apparent authority.
3) Authority by Estoppel: Agent acted so much like an agent that he could not deny it....