Question

Background Facts You Need To Know: Clean owners recognize the importance of effective recruitment and hiring. They feel competent about recruiting and hiring new Clean management but want to hire an expert to recruit and hire employees to develop and manage their website, internal computer systems, and IT support.  

They agree to hire a recognized expert in this area, George Tacy, to act as GC’s agent in hiring website/computer/IT employees. The owners want to give full authority to Tacy to direct every aspect of recruitment and hiring of these employees, from the initial recruitment of applicants to the final hiring process.

Clean owners want to ensure that their agreement with Tacy will be valid and include all important terms. They have requested a meeting with TLG to discuss agency agreements.  

Winnie and Ralph have asked you to join the meeting and respond to some of Clean's owners' questions about agency law.

Instructions

Winnie and Ralph direct you to draft responses to several questions for Clean owners' meeting.

1. Analyze and explain the rights of Clean under the agency agreement with Tacy.

2. Analyze and explain two specific duties Tacy must perform under the agency agreement with Clean.

3. Analyze and explain two potential liabilities Clean could face under the agency agreement with Tacy.

Answer 1

1. Some possible risks and liabilities that GC could face that would be associated with the agency contract between GC and George Tacy:A. GC could be held at risk for any wrongdoing on part of Tracy since the law has arrangement for the specialist to consider the foremost responsible for any mishap penning between the twogatherings. B. Failing in the performance of the contract: GC could conceivably be affected if any time amid Tracy's agreement if George fail to conduct the job. Money related misfortune emerging out of this can't be put on George Tracy and GC bear the lost.C. Vicarious liability: GC could be held liable for any of Tracy actions that could be committed during recruitment and hiring of employees. Lets assume that George did not hire a person because of their race and they decide to sue, GC would be the one at risk Instead of George.

2. Because the principal cannot be every place at once—that is why agents are hired, after all—much that is vital to the principal’s business first comes to the attention of agents. If the agent has actual notice or reason to know of information that is relevant to matters entrusted to him, he has a duty to inform the principal. This duty is especially critical because information in the hands of an agent is, under most circumstances, imputed to the principal, whose legal liabilities to third persons may hinge on receiving information in timely fashion. Service of process, for example, requires a defendant to answer within a certain number of days; an agent’s failure to communicate to the principal that a summons has been served may bar the principal’s right to defend a lawsuit. The imputation to the principal of knowledge possessed by the agent is strict: even where the agent is acting adversely to the principal’s interests—for example, by trying to defraud his employer—a third party may still rely on notification to the agent, unless the third party knows the agent is acting adversely.

3. An agency agreement is formed when one person, called the agent, is authorized by another person, called the principal, to act on the principal's behalf. A principal who assigns agency to an agent is creating a legal relationship with the agent. Agency agreements are important for businesses to understand because you may encounter them whenever you ask a vendor, accountant, lawyer or another third-party to conduct business on your behalf.

Benefits of Agency Agreements

Agency agreements can have many benefits for the principal, especially when that principal happens to be a small-business owner. Few people have all of the specialized skills needed to run a business, so asking a professional to act on your behalf as an agent saves you time and helps you conduct business in a more efficient way. Using an advertising agency is one example, or outsourcing human resources functions.

Besides the convenience of having someone act on your behalf, an agency agreement can also arise out of necessity. If you're facing a legal matter, for instance, you will likely need to have a qualified attorney represent you. Hiring that attorney constitutes an agency agreement between you and the attorney, and it authorizes the attorney to act on your behalf.

Risks of Agency Agreements

For all the convenience and necessity of agency agreements, there can also be some drawbacks. The main risk in the legal relationship between the principal and the agent is that the principal can be held liable for misconduct on the part of the agent. If an agent makes a mistake or performs an illegal activity while representing the principal, the principal may be technically considered to have committed the act, since the agent was essentially acting "as" the principal.

If, for example, you ask an agent to sign a contract on your business's behalf, and you haven't first read the contract, you will still be held liable for all the terms and conditions of the contract. The principal authorizes the agent's acts, and therefore holds ultimate responsibility. The agency agreement between a principal and the agent must always be in writing with clear terms and conditions with explicit language limiting the principal's liability if the agent does something that wasn't authorized. This protects you personally and professionally.