Agency Relationship

I. Definitions

A. Agency: a two-party relationship where one party is permitted to act on behalf of, and under the control of, another party

B. Agent: the party authorized to act on behalf of, or under the control of, someone else

C. Principal: the party who permits another to act on his or her behalf

II. Characteristics of an Agency

A. Created by the appearance of an agreement between two parties that one will act on the other’s behalf

1. The test for the existence of an agency is objective, i.e., would a reasonable person believe that a relationship exists based on the parties’ behavior and the surrounding facts and circumstances

2. Consequently, an agency may exist even if neither party knows of the existence or subjectively desires the existence

3. An agency, however, is often created by contract, which can be written or oral unless otherwise prohibited by state law

4. Euclid Plaza Associates, LLC v. African American Law Firm, LLC:

a. Creation of an agency relationship requires three characteristics:

i. Agent possesses power to alter legal relations between the principal and third parties and between the principal and him or herself

ii. Agent acts a fiduciary regarding matters within the agency’s scope

iii. Principal has the right to control the agent’s conduct

b. Court finds no agency exists because the third party did not know of the principal’s existence as apparent authority develops solely from the acts of the principal

B. If principals or agents lack the necessary mental capacity when the agency is formed, they can generally release themselves from the agency at their option

C. Some duties are nondelegable and cannot be performed...