CHAPTER 35THE AGENCY RELATIONSHIP

I. OBJECTIVESThis chapter acquaints students with the formation of the agency relation, some basic agency concepts, the agent's duties to the principal, the principal's duties to the agent, and termination of the agency relation (including termination's effect on the principal's authority). Chapter 36 mainly discusses the principal's and the agent's relations with third parties.A Restatement (Third) of Agency is somewhere in the preliminary draft stage. We see no evidence that it is yet having any effect on the courts, and don't expect to see any effect for some time.

II. ANSWER TO INTRODUCTORY PROBLEMRita has breached several fiduciary duties. She has competed with her principal by providing consulting advice to her own clients and by stealing IPQ’s clients. Whether she serves the clients at night or during the day, she nonetheless competes with IPQ and breaches her duty. She also breaches a duty of confidentiality by using IPQ’s database to find clients for her own consulting business. Finally, she breaches her duties to account by working on her own business while in IPQ’s offices and using its phones and other facilities.IPQ is legally able to enjoin Rita from taking its clients while she is an employee of IPQ. After she terminates her employment with IPQ, she is able to compete with IPQ and take its clients, unless she uses IPQ’s confidential client list or has agreed not to solicit clients in a non-compete agreement.

III. SUGGESTIONS FOR LECTURE PREPARATIONA. Introduction

1. You might introduce the subject the way the chapter does: by asking, in effect, just why all kinds of business actors are often bound by the actions of their employees or representatives. The answer, of course, is agency law.

2. Then, define agency and give some examples of typical agency relationships. Students should be able to suggest additional examples.

3. Emphasize the functions served by agency law and its importance in facilitating commercial activity.

B. Creation of the Agency Relation and Related Matters1. Note that, while agency is based on consent and many agencies are contractual, no

contract is needed to create an agency. Thus consideration is unnecessary and a writing is ordinarily not required. Stress, however, that it is usually desirable to commit the agency agreement to a writing.

2. Note also that the general test for the creation of an agency is objective, and that the existence of an agency can be inferred from the parties' behavior, in light of all the surrounding facts and circumstances. Point out that a written agency contract obviously qualifies as such a manifestation of intent to create an agency.

3. Note further that there can be an agency even where the parties agree that the relation will not exist or state that they intend to create some other relationship instead. On the

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other hand, the fact that the parties call their relationship an agency does not necessarily mean that the courts will so regard it.

4. Finally, emphasize that the principal's actual control or right to control the agent's activities is a crucial element of an agency. Here, the degree of control is sometimes critical.

5. Note that the text's discussion of the principal's or the agent's incapacity is limited to incapacity at the time the agency relation is created and its effect on the relation. Other implications of incapacity are discussed later in this chapter and in Chapter 36.

6. Note that there are certain nondelegable obligations that cannot be performed by an agent. For example, one hired to paint a portrait usually cannot delegate the job to an art student.

7. Example: Problem Case #1.

C. Agency Concepts, Definitions, and Types

1. This section attempts to lay out certain basic agency types and concepts early on. In certain cases (e.g., authority and the employee/independent contractor distinction), this creates some redundancy because these subjects find their most important applications in Chapter 36. Nonetheless, we include them here because: (1) these concepts and types occasionally are discussed in this chapter, (2) doing so enables us to point out these concepts' nonagency applications (which would be hard to do in Chapter 36), and (3) doing so enables us to discuss termination's effect on an agent's authority where it probably belongs, right after termination itself. One way to handle the redundancy problem is to assign this introductory material as reading, and to lecture on the individual concepts where they assume importance.

2. Authority

a. Distinguish actual authority and apparent authority, noting that, in theory at least, actual authority is based on what the principal communicates to the agent, and apparent authority on what the principal communicates to the third party. Note also that there are two kinds of actual authority: express authority and implied authority.

b. Note that the scope of true express authority may be very limited. Restatement (Second) of Agency section 7, comment c, for example, states: “It is possible for a principal to specify minutely what the agent is to do. To the extent that he does this, the agent may be said to have express authority. But most authority is created by implication. Thus, in the authorization to ‘sell my automobile,’ the only fully expressed power is to transfer title in exchange for money or a promise to give money. In fact, under some circumstances, ‘sell’ may not mean ‘convey,’ and there may or may not be power to take or give possession of the automobile or to extend credit or to accept something in partial exchange. These powers are all implied or inferred from the words used, from customs and from the relations of the parties. They are described as ‘implied authority.’”

c. The language just quoted is an obvious transition to implied authority and the need for it to exist. Stress that the general test for the scope of an agent's implied authority is what the agent could reasonably have expected that the principal wanted him to do in light of all the factors known to the agent. The principal's express words are probably the most important of these factors.

d. For apparent authority, stress: 1) that it is theoretically based on whatever the principal communicates to the third party; 2) that this "communication" can take a variety of forms (including acquiescence in the agent's behavior); 3) that agents

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cannot give themselves apparent authority by claiming authority or acting as if they have it without the principal's acquiescence; and 4) that whatever the principal "communicates" to the third party must cause the agent to form a reasonable belief that the agent has authority. At some point, you should probably add that the seeming reason for apparent authority is to protect third parties who rely on a reasonable appearance of authority. The rule that such authority must be based on the principal's communications can be seen as an attempt to protect the principal from any assertion of authority that the agent might happen to make. Finally, suggest that despite seeming statements to the contrary, whatever gives rise to apparent authority can't be completely based on what the principal communicates to the third party. As discussed in Chapter 36, for example, business customs can clearly play a role in determining the reasonableness of the agent's belief.

e. Note that actual and apparent authority can both exist at the same time and often are equal to each other. Suppose that P appoints A to a position such as general sales manager that customarily carries with it certain kinds of authority.

f. Euclid Plaza Associates, LLC v. African American Law Firm, LLC (p. 786): This case addresses the issues of creation of an agency and the existence of an agent’s authority.

Points for Discussion: Why did the court find there was no agency relationship and no express, implied, or apparent authority of Del-Mar to make a contract binding Euclid? There was no evidence that Euclid gave any powers to Del-Mar, that Euclid controlled Del-Mar’s actions, or that Del-Mar acted as a fiduciary on Euclid’s behalf. This disproved not only the existence of an agency, but also the existence of express or implied authority.

Additional Point for Discussion: The court continued to determine if there was any evidence of apparent authority of Del-Mar to bind Euclid to the lease. The court found no apparent authority, because nothing that was communicated to Tenants indicated anything other than that Del-Mar was the landlord. Tenants did not even know that Euclid had bought the building. They could hardly argue that they relied on any communication by Euclid that would create apparent authority for Del-Mar to act for Euclid.

g. Additional examples: Problem Cases ##2 and 4.

3. Go over the muddy distinction between general and special agents. Probably the most important factor distinguishing these two kinds of agents is the continuity (uninterruptedness) of the agent's service. In Chapter 36, the distinction assumes importance with respect to the agent's implied and apparent authority to make warranties binding the principal.

However, it's questionable whether modern courts pay much attention to the distinction between general and special agents. Nonetheless, the Restatement, the Seavey treatise, and the Reuschlein-Gregory treatise play up the distinction, so we continue to include it. But it's probably dispensable if you want to ignore it.

4. Note that the possibility of a gratuitous agency has something to do with the fact that consideration is not needed to form an agency. Point out that the existence of a gratuitous agency may change the various principal-agent duties discussed later in the chapter.

5. Subagents

a. Define the term and emphasize that the agent must have the authority to make the

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subagent his agent in the conduct of business that the principal has entrusted to the agent.

b. Distinguish the situation where the agent appoints another agent for the principal. State why this is important: except where the appointing agent is directly liable, he is not legally responsible for the other agent's actions. An agent who appoints a true subagent, on the other hand, is a principal with respect to that agent.

c. The ABKCO case on page 789 involves a subagency.

6. The employee-independent contractor distinction

a. Point out that the distinction is most important for determining the principal's liability for the agent's torts, as discussed in Chapter 36. And the distinction obviously is important outside agency law and is especially important in making corporations liable for the torts of their employees.

b. Stress that the most important of the factors used to make the distinction is the principal's right to control the physical details of the work.

c. Reich v. Circle C Investments (p. 788) shows how the employee-independent contractor distinction matters outside the respondeat superior context. Here, it matters in determining the application of the Fair Labor Standards Act.

Points for Discussion: What could you argue on Circle C's behalf on the "control" issue? That Circle C can't do much to control a dancer's dance routine, which is significant in determining her success and which almost has to be fairly personal. What general factor is the court apparently too decorous to mention? That a dancer's success depends to some degree on something only she can bring to the table: her physical attractiveness. Why isn't the ability to develop and maintain rapport with customers a relevant type of "initiative?" We don't know. Legal arguments aside, what else is probably motivating the court here? Could it be a desire to extend FLSA protections to women in a marginal occupation?

d. The Restatement lists several factors for resolving the employee-independent contractor question. They are:

(1) the extent of control which, by the agreement, the master may exercise over the details of the work;

(2) whether or not the one employed is engaged in a distinct occupation or business;

(3) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

(4) the skill required in the particular occupation;

(5) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

(6) the length of time for which the person is employed;

(7) the method of payment, whether by the time or by the job;

(8) whether or not the work is part of the regular business of the employer;

(9) whether or not the parties believe that they are creating the relationship of master and servant; and

(10) whether the principal is or is not in business.

e. Example: Problem Case #3.

D. Agent's Duties to the Principal

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1. Begin by stating that, if the agency is created by contract, the contract establishes one set of duties for the agent, and that the various fiduciary duties supplement those set by contract. The parties' ability to eliminate or modify these duties by agreement (or by the principal's consent) is a subject about which few generalizations can be made. Some examples appear in the text's discussion of the specific duties.

2. With respect to the agent's duty of loyalty:

a. Loyalty is the fiduciary duty an agent owes to a principal. It can be argued that all the other fiduciary duties are encompassed within this duty. If the agent is loyally working for the principal's benefit, he will obey the principal's instructions, act with care and skill, notify the principal when necessary, and properly account for the principal's money or property. By making this point, you are able to preview all the agent's duties.

b. Competing with the principal: Explain this duty by showing that it is essential stealing, that is, the stealing of business opportunities from the principal.

Example: Problem Case #5.

c. Dealing with himself: Although an agent is ordinarily forbidden to deal with himself when conducting the principal's business, this rule often does not apply where the transaction in question is outside the subject matter of the agency.

Example: A is P's real estate broker, and, unknown to P, is also the 75% owner of a travel agency. A has not breached the duty of loyalty if A learns that P wants to tour England and has the agency contract with P for a guided tour.

d. Acting on behalf of the other party: Despite an agent's general duty not to represent both principals simultaneously, the agent may act for two principals without the consent of either if her duties are basically those of a "finder," or if her role is merely to bring suitable parties together. It should be easy to create a real estate example to illustrate the point. As soon as the agent is expected to advise or represent either party, though, conflicts of interest are likely to arise and the duty of loyalty is probably breached.

e. Restatement (Second) of Agency section 394 extends the duty not to act for the opposing party to situations where the agent acts "for persons whose interests conflict with those of the principal in matters in which the agent is employed." For example, comment a to section 394 states that an agent may not act for a competitor of the principal unless the principal consents.

f. ABKCO Music, Inc. v. Harrison’s Music, Ltd. (p. 789): This case applies the agent's duty not to use or disclose confidential information after termination of the agency. You will probably have to walk the students through the complicated facts. Note that, although the court seems to treat Klein and ABKCO interchangeably, Klein is ABKCO's agent and probably was Harrison's subagent. Klein should be liable to Harrison because the normal agency duties apply to a subagent who is aware of the original principal's existence. But the court is mainly concerned with ABKCO's liability. Still, as the text and Restatement section 406 say, the agent (ABKCO) is responsible to the principal for the conduct of the subagent.

Points for Discussion: Is it clear that Klein's breach really hurt Harrison by torpedoing the settlement of the suit against him? This is the apparent basis for a causation argument toward the end of the court's opinion (which has been deleted from our excerpt of the case). Basically, the court said that liability for breach of duty is based on a prophylactic rule that applies irrespective of the breach's

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consequences. The court's apparent aim is to punish and deter misbehavior, irrespective of its tangible consequences.

g. There is no breach of duty where the agent discloses that the principal has committed or is about to commit a crime. Thus, an employee who acts as a whistleblower ordinarily will not breach the duty of loyalty if the behavior disclosed is criminal. Actually, Restatement section 395, comment f states that the agent has a privilege to disclose confidential information "in the protection of a superior interest of himself or of a third person." But the only example given involves the principal's actual or incipient crime.

3. Duty to obey instructionsa. The text's statement that the agent need not obey an order to behave unethically and

the examples illustrating that duty are derived from Restatement (Second) of Agency section 385, comment a. Of course, the agent is under no duty to obey a command to engage in criminal or tortuous behavior.Example: Problem Case #7.

b. Note that a gratuitous agent is usually not bound to perform for the principal at all, or to obey an order to continue his agency duties.

c. What happens when the principal's instructions are unclear or materially changed circumstances make it doubtful that following the principal's instructions would really advance the principal's interests? If possible, the agent should query the principal about his wishes. If not, the agent will usually not be liable if he acts reasonably on the basis of known facts. This is especially true when following instructions would obviously cause injury to the principal's interests. Suppose that the manager of a retail store is told to make no expenditures while the owner is on an African safari. If a storm damages the store's roof and threatens further water damage to the interior, the manager would not violate the duty of obedience by paying for temporary repairs.

4. Duty to act with care and skill

a. The rule regarding the gratuitous agent's lower duty of care and skill comes from Restatement section 379(2). Comment e to that section provides only two examples: gratuitous bailees and hosts who render services to guests.

b. Example: Problem Case #8.

5. Duty to notify the principal:

a. Discuss the basic notification rule stated in the text.

Example: P appoints A to sell certain property at a stated price to a specified person, and A learns that another suitable buyer is willing to pay a higher price for the property. Also, note that an agent is not required to notify the principal of every fact or possible future event that might conceivably affect the agency business.

Additional Example: Problem Case #6.

c. You might want to note that there is usually no duty to disclose relevant information learned after the agency has terminated. However, there may be a duty to notify after termination if the information was learned before the agency terminated.

d. The rule that there is no duty to notify where the agent has received confidential or privileged information can be described as a situation where two of the agent's duties conflict. On the one hand, we have the agent's duty not to disclose confidential information obtained during a past or present agency. On the other, there is the

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agent's duty to disclose information reasonably relevant to the business of the second agency.

e. Olsen v. Vail Associates Real Estate (p. 791): The Colorado Supreme Court rejected three breach-of-fiduciary duty claims by a seller against her real estate broker: (1) failure to disclose that the buyer was negotiating with a third party to buy adjoining land, (2) failure to disclose the price paid on the sale of that adjoining land, and (3) creating a dual agency by acting for the other party to the transaction. The first two claims failed largely on materiality grounds. Regarding the third claim, note that the court discussed Vail Associates' relations with Lindholm on both the sale of the estate property and the sale of the Rickstrew property.Point for Discussion: Look at the disparity between the price the Olsens received and the price Rickstrew received. What can justify this 15-to-1 disparity? Is it the importance of Rickstrew's land to the development of the area?Additional Points for Discussion: Does this whole situation seem suspicious? Could Vail Associates possibly have been as ignorant as the court claims? Was it willing to sacrifice the Olsens to curry favor with Lindholm for the future? Would you want Vail Associates as your broker? In a footnote, the court noted that by failing to disclose the sale price on the Rickstrew property even after learning of it, Vail Associates may have violated rules and standards promulgated by the Colorado Real Estate Commission.

6. Duty to account: Note that the text discusses two distinct "duties to account." The first is basically a duty to account for any unbargained-for profits received by the agent as part of the agency business. It is one aspect of the agent's duties of loyalty and care. The second is basically a duty to report the agency's financial affairs fully and accurately.a. Note that the rule requiring the agent to return bribes and kickbacks is based on the

fact that these inducements may affect the agent's judgment and loyalty toward the principal.

b. Note that the parties' agreement that the agent may retain benefits need not be express. It can be implied from the principal's knowledge that the agent is receiving benefits and her failure to object to this. It may also arise from custom. For example, it may be customary in the trade for sellers to give the buyer's purchasing agent a bottle of whiskey after the consummation of a deal.

c. Example: Ethics in Action (p. 793): Note how a firm like Lockheed Martin attempts to reduce the risk of its employees violating this part of the duty to account by having a concrete policy on accepting gifts and other valuable items from those with whom employees deal on behalf of Lockheed Martin.

d. Note that the duty to report the agency’s financial affairs arises both when the principal makes a reasonable demand for an accounting, and also at the termination of the agency.

e. In order to maximize their chances of escaping liability under this duty, agents might be advised to do one or more of the following: (1) keep complete and accurate records of all relevant dealings; (2) submit all relevant records to the principal and try to get the principal's written agreement that they are correct; (3) ask the principal to inspect the records at regular intervals, and try to get the principal's written agreement that they are in order; (4) have a mutually agreed-upon CPA inspect the records. Of course, none of these steps will avail the agent if the principal is later able to prove embezzlement or falsification to the court's satisfaction.

f. Example: Problem Case #9.

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7. The material on the principal's remedies for an agent's breach of fiduciary duty has been eliminated. Here is the text from the 9th edition:

Many claims and remedies are possible when an agent breaches a duty to her principal. If the agency was created by contract, for example, the agent's wrongdoing may breach that contract and may enable the principal to obtain the various kinds of contract damages. Also, a principal may obtain injunctive relief where, for instance, an agent discloses or threatens to disclose confidential information, or misappropriates or threatens to misappropriate the principal's property. In addition, a principal may rescind contracts made by an agent who has represented two principals without the knowledge of one or both, has dealt with himself, or has failed to disclose relevant facts. Finally, agents who retain money or property due the principal (including bribes or gifts), or who profit from the breach of duty, may be liable for the amount of their unjust enrichment.

Tort claims are possible when the agent has misbehaved. A principal may recover for losses caused by his agent's negligent failure to follow instructions, to notify, or to perform with appropriate skill and care. The tort of conversion is available where an agent has unjustifiably retained, stolen, transferred, destroyed, failed to separate, or otherwise misappropriated the principal's property.

8. Chapter Introductory Problem (p. 784): This is a good capstone question on agents’ fiduciary duties.

9. The Global Business Environment (p. 793): At the website cited here, students can find examples of ethics codes and legal duties that exist in the real estate agency industry worldwide.

E. Duties of Principal to Agent

1. Duty to compensate

a. Besides the examples in the text, the principal is ordinarily not bound to compensate close family members.

b. Regarding contingent compensation, consider a manufacturer who agrees to pay a sales agent a commission on all orders that the principal accepts and approves. The principal will be obligated to pay the commission once it accepts and approves an order, even if later developments make it impossible to ship the goods specified in the order. But no matter how hard the agent works, the commission will not be payable if her efforts fail to produce suitable orders--unless the principal's failure to accept and approve is so arbitrary that it amounts to a failure to cooperate.

c. You might note that it is often desirable to have a written agency contract that clearly states the basis on which the agent is to be compensated. This is especially true if the compensation is contingent.

2. Duties of reimbursement and indemnity: These duties are difficult to distinguish, and it may not be worth the effort to try. Restatement (Second) of Agency section 438, comment b treats reimbursement as a special case of the principal's general duty to indemnify.

Example: Problem Case #10.

3. The material on the agent's remedies for breach of the principal's duty has been eliminated. Here is what a previous edition said on the subject:

An agent's claim for breach of the duties just discussed often is contractual, and normal contract remedies--except specific performance--are available. In some cases, a principal's failure to pay, indemnify, or reimburse an agent enables the agent to acquire a

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lien on property or funds of the principal that are in the agent's possession. This usually allows the agent to hold the property or funds until the principal pays his obligation. Also, an agent whose principal violates the duties to pay, indemnify, or reimburse can refuse to render further services to the principal.

Of course, an agent's own breach of duty--especially the duties of loyalty and obedience--may defeat his claim against the principal. Where the breach is not serious enough to give the principal a complete defense, the principal may still set off losses caused by the breach against the agent's recovery.

F. Termination of Agency

1. Distinguish termination by acts of the parties and termination by operation of law.

2. Go through the various examples of termination by acts of the parties. In this regard, note that:

a. The "reasonable time" after which an agency for an indefinite period will terminate is sometimes quite long. It may include periods when the agent continues to act and the principal knowingly acquiesces in the agent's activity.

b. An agency to accomplish a specific result terminates when the result is accomplished by the agent or by another.

c. Unilateral termination of the agency is called revocation when done by the principal, and renunciation when done by the agent. Each can occur through express statements or by conduct inconsistent with the continuance of the agency. Be sure to go over the text's discussion of the effect of revocation or renunciation.

d. You might note that the rules regarding revocation and renunciation closely parallel the traditional doctrine of employment at will discussed in Chapter 51.

3. Review the various bases for termination by operation of law. The scope of some of these bases is uncertain and you might note this. In particular:

a. Another example of termination caused by the agent's loss of capacity might be the disbarring of an attorney.

b. Restatement section 120 provides two exceptions to the rule that termination by the principal's death terminates the agent's authority without notice: (1) where a bank pays checks drawn by the principal or by his authorized agent before death, and (2) where a depository bank or a bank in the check collection process goes forward with the process of collecting a check deposited by a holder who later dies. In each case, the authority ends once notice is received.

c. Termination of agency powers given as security is optional.

Example: P borrows money from A, giving A and his attorney the right to confess judgment against P in case the debt is not paid. Later, P tries to revoke this power to confess judgment. The revocation is ineffective. Thus, if the debt is not paid, A or his attorney can confess judgment against P.

d. Trepanier v. Bankers Life & Casualty Co. (p. 795): The court discusses what counts as the principal's permanent loss of capacity, when it is urged that such loss of capacity terminates the agency by operation of law.

Points for Discussion: Why would the plaintiff want to argue that she had an agency coupled with an interest? Because such an "agency" is not terminated by the principal's permanent loss of capacity. Did she have such an agency? It is hard to see why. What does the court mean when it says that Mrs. Trepanier's acceptance was at most voidable rather than void? The acceptance is valid, unless later avoided

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either by her husband or by his estate.

4. Effect of Termination on Agent's Authority

a. First, get the easy rule out of the way: termination by any of the means just discussed eliminates the agent's express and implied authority. Both, after all, are based on what the principal communicates to the agent.

b. Then, note that apparent authority may persist after the agency is terminated and explain why.

c. Note, however, that apparent authority will automatically end in certain situations involving termination by operation of law: principal’s death, principal’s incapacity, or impossibility.

What is so special about these particular categories of termination? In the cases of death and permanent insanity, the termination of apparent authority might be justified by the principal's inability to end it by notice to third parties. In the case of impossibility, the rule might be justified by the fact that many forms of impossibility provide a kind of notice.

d. Finally, state that the safest course for the principal is to notify third parties himself and discuss the situations where personal communication is needed and where constructive notification should suffice. Restatement section 136 also requires a personal communication by direct statement or by an appropriate writing where the agent has been specially accredited to the third party by the principal, and where the third party relies on indicia of authority entrusted to the agent by the principal. Comment b to the section also states that the personal communication requirement is not met merely by mailing a letter to the third person; instead, it must reach the required place and if it is delivered to someone other than the third party at that place, this delivery must be to a person with actual or apparent authority to receive it.

5. Example: Problem Case #11.

G. Log On (p. 797): Some students, especially those interested in the business of music, motion pictures, and sports, may contemplate a career as an agent. Direct students to websites maintained by companies like the William Morris Agency and sports industry heavyweight IMG. IMG’s website is www.imgworld.com.

IV. RECOMMENDED REFERENCESA. Lakin & Schiff, The Law of Agency (1984).B. Reuschlein & Gregory, Handbook on the Law of Agency and Partnership (1979).C. Seavey, Handbook on the Law of Agency (1964).D. Restatement (Second) of Agency (1959).

V. ANSWERS TO PROBLEMS AND PROBLEM CASES1. The court accepted the IRS’s argument that proceeds from the sale of cotton by the cotton

gins were taxable income for the year the proceeds were received by the gins, because the gins were agents of the Warrens. The Warrens controlled when the proceeds would be paid to them by their agents, and thus were not permitted to delay the imposition of tax liability by directly their agent to delay payment to them. Warren v. United States, 613 F.2d 591 (5th Cir. 1980).

2. Stieger was held liable for the 13 charges for which Garrett signed Stieger’s name. Although Garrett had no actual authority to make these 13 charges, she did have apparent authority, because by giving her the card, Stieger had put her in a position to mislead third parties as to

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her authority to use the credit card. Steiger was not liable for the two charges for which Garrett signed her own name. The court held that it was not reasonable to believe that she had authority to use the card when the signatures didn’t match. Stieger v. Chevy Chase Savings Bank, 666 A.2d 479 (D.C.Cir. 1995).

3. Hoogland was an independent contractor. First and most importantly, VIP had no right of control over the tour guides other than to require them to show up at a particular place at a particular time wearing the VIP uniform and to travel in VIP transportation. VIP had little interest in the details of the guides' work; for example, the guides controlled the number of hours spent at a particular attraction and the nature of the tour at each exhibit. In addition, the guides were free to contract with other tour companies, as Hoogland did, and could accept or reject any assignment. Turning to other factors, the tour guides were engaged in a distinct occupation. They worked and were paid on a per-job basis. Both VIP and Hoogland considered the guides to be independent contractors. VIP Tours, Inc. v. Florida, 449 So. 2d 1307 (Fla. Ct. App. 1984).

4. No. The assertions of an agent or alleged agent, standing alone, are insufficient to create apparent authority. In order to create apparent authority, the principal must manifest something to the third party, and it is not obvious how Lest manifested anything to Killinger. Agents normally cannot give themselves apparent authority. Tadlock's mere assertion of authority, standing alone, does not create a reasonable appearance of authority. Killinger v. Lest, 428 P.2d 490 (Idaho 1967).

5. Yes. An agent has a duty not to compete with the principal concerning the subject matter of his agency. Comment e to section 393 of the Restatement( Second) of Agency states:

. . . [B]efore the end of his employment, [the agent] can properly purchase a rival business and upon termination of employment immediately compete. He is not, however, entitled to solicit customers for such rival business before the end of his employment nor can he properly do other similar acts in direct competition with the employer's business [emphasis added].

The court added that this prohibition is not limited to a diversion of an employer's customers. It extends to pursuing and transacting business within the larger pool of potential customers who might have been solicited by the employer. Chernow v. Reyes, 570 A.2d 1282 (N.J. Ct. App. 1990).

6 Yes. This liability is in accord with the expanding role of the travel agent to provide all relevant and necessary information to the consumer who reasonably relies on the agent's expertise. Here, it was reasonable to expect Kasmir to alert its principal to important changes in the visa requirements of foreign nations. It was also reasonable for Mrs. Levin to rely on Kasmir to supply this information. The travel agency was clearly in a position to assemble and disseminate this basic and significant type of travel information. All this is true even though Kasmir was merely a ticketing agent. Information concerning entry or visa requirements into foreign lands is so basic to the purchase or sale of the ticket that the seller must be obliged to furnish it to all affected consumers. Levin v. Kasmir World Travel, 540 N.Y.S.2d 639 (N.Y. Civ. Ct. 1989).

7. CDM breached the duty to follow instructions. As GMAC’s attorney, CDM was GMAC’s agent and was required to obey the instruction to obtain a conflict-of-interest waiver from the Roses. GMAC expected that waiver to be valid and enforceable. By failing to obtain a valid waiver, CDM failed to follow GMAC’s instructions. General Motors Acceptance Corp. v. Crenshaw, Dupree & Milam, LLP, 986 S.W.2d 632 (Tex. Ct. App. 1998).

8. Lawyers Title argued that Groff was liable on the ground of negligence and breach of

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fiduciary by failing to exercise due care. The court found that Groff was not negligent in his decision to use an independent abstractor, his selection of the independent abstractor, or his review of the abstractor’s work. Also, Lawyers Title claimed that Groff delegated a nondelegable duty to the title abstractor. The court disagreed, noting that it was common and accepted practice for New Hampshire attorneys to commission independent contractors to search titles.

Alleging facts not in this problem case, Lawyers Title also argued that Groff was liable for the negligence of his subagent, the title abstractor. The court found that the title abstractor was not Groff’s subagent. A subagent is a person the agent appoints to perform functions undertaken by the agent for the principal, but for whose conduct the agent agrees with the principal to be liable. Since Groff’s agreement with Lawyers Title was for Groff to be liable only for his own acts and omissions, the title abstractor was not Groff’s subagent. Lawyers Title Ins. Corp. v.Groff, 808 A.2d 44 (N.H. S.Ct. 2002).

9. Yes, Cloyd breached his duty to account. Apparently the contractors were willing to buy and to pay early with only a 5% discount. Cloyd should have negotiated a better deal for his principal instead of pocketing the extra 5% the contractors were willing to pay. The general rule is that the agent must give back to the principal any gains he makes during the course of the agency business. Among other things, this rule tends to make agents serve their principals in a less biased fashion. Wormhoudt Lumber Co. v. Cloyd, 219 N.W.2d 543 (Iowa Sup. Ct. 1974).

10. Johnson Realty is seeking indemnification from the Benders for its litigation expenses. Generally, an agent is entitled to reimbursement of expenses incurred in successfully defending a lawsuit brought by third persons because of the agent’s authorized conduct on behalf of the principal.

The court noted that there were two qualifications to that right in this case. First, an agent must give the principal timely notice and an opportunity to provide the agent with a defense. The court found that Johnson Realty had not given timely notice to the Benders, but remanded the case to determine whether that caused harm to the Benders, such as depriving them of the opportunity to settle the case or mitigate defense costs. Second, when agent and principal are co-defendants represented by separate legal counsel, the agent may not be reimbursed for his separate defense costs unless joint representation would have left the agent’s interests unprotected. Since the trial court did not consider that issue, the case was remanded on that ground as well. Johnson Realty v. Bender, 39 P.3d 1215 (Colo. Ct. App. 2001).

11. No, Goldsman did not have authority to accept Cumberland's offer. Goldsman's agency immediately ceased when his client died. A general principle of agency is that the death of the principal terminates the authority of the agent.

However, an agency coupled with an interest survives the principal, even after notice of his death. This requires that the agent have some interest, such as a security interest, in the subject-matter of the agency independent of the power conferred upon him by the principal. An interest merely in the proceeds that will arise from the exercise of the power of the agency is not sufficient for this purpose. Goldsman's agency was controlled by an agreement which provided that "the law firm will protect your legal rights and do all necessary legal work to represent you in this matter" in exchange for a percentage contingency fee. This created an interest in the proceeds of a successful exercise of the powers of the agency, not in its subject-matter. An attorney's contingent fee contract creates an agency which is not coupled with an interest and which terminates upon the death of the principal. Smith v. Cynfax Corp., 618 A.2d 937 (N.J. Super. Ct. 1992).

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VI. ONLINE RESEARCH: CHANGING AGENCY LAW

As Ralph Nader points out, the Connecticut bill contradicts the common law of agency by permitting two agents in the same real estate firm to represents clients that are on opposite sides of a real estate transaction. Nader and others believe that the bill, by creating “designated agents” within the same firm, removes the traditional fiduciary duty that agents owe their clients. Nader and other critics of the bill are not persuaded that Chinese walls can effectively be erected in a firm and that therefore two designated agents in the same firm cannot realistically be prevented from conversing, colluding, and serving the interests of the firm at the expense of the clients.

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