Class 1 Takeaways

• Agency law is the law of delegation

• Agent: The person who acts on behalf of the principal
• Principal: The person for whom the agent acts
• Agency relationship: The legal relationship between the principal and the agent
• Formation of an agency relationship
o Consent by both parties
o Action by the agent
o Control by the principal
• The agent is a fiduciary of the principal
• Agent’s duties to the principal
o Loyalty
o Care
• Agents can be divided into employees and independent contractors based on the
principal’s degree of control over the agent
o Employee: The principal has control over the agent’s means of achieving a
particular result
o Independent contractor: The principal has control over results but not means
o The principal is liable for an employee’s torts within the scope of the agency, but
not an IC’s torts
• The agent can contractually bind the principal with a third party if the agent has authority
o Actual authority: Based on the principal’s words/conduct with respect to the
agent
o Apparent authority: Based on the principal’s words/conduct with respect to the
third party
o Incidental authority: Authority to take an action that is incidental / relates to an
already authorized action
• Agency costs: The costs associated with aligning the incentives of the principal and the
agent and any costs associated with divergent interests