Agency contracts are requested because they allow businesses and individuals to hire agents who will act on their behalf. The following information will consider the details of the agency agreement between GC and George Tacy.
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In some cases, it is inconvenient for businesses or individuals to perform particular actions. A possible solution to the given case is to hire an agent who will act on their behalf. According to Müller-Freienfels (n.d.), the situation above refers to “the relationship that exists when one person or party (the principal) engages another (the agent) to act for him” (para. 1). This relationship can be useful for both parties under various conditions. For example, an agency agreement is justified when the principal wants to sell a house that is on the other side of the country and hires the agent to do it.
When it comes to an agency agreement between GC and George Tacy, it is reasonable to comment on GC’s rights. In this case, GC is the principal because it has the legal capacity to define its recruiting and hiring policies. That is why the company has the right to hire an agent, Tacy, to make him find the computer, website, and IT employees. Furthermore, GC has the right to believe that the agent will express obedience and loyalty. GC’s other right is to expect Tacy not to follow his self-interest in the matters that are directly connected to the agency agreement between the parties (Sherman, 2018). Finally, GC has the right to terminate the agency contract when the company needs it (Chapter 21 Liability of Principal and Agent; Termination of Agency, n.d.).
The agency agreement provides Tacy with specific duties, and the given section will explain two of them. Firstly, it refers to a fiduciary duty that is unique to agency law. According to this duty, the agent’s “responsibility is to subordinate his self-interest to that of his principal” (Chapter 20 Relationships between Principal and Agent, n.d., para. 31). It is different from general rule regulations when a party’s responsibilities and obligations are only limited by the terms that are mentioned in a contract. In agency law, however, a fiduciary duty is obligatory for Tacy to follow even if the agreement with GC does not have a specific clause that addresses the commitment.
Secondly, Tacy is also subject to general duties under the given contract. They are typical for all employer/employee contracts, and the duty of skill and care is among them. According to Restatement (Second) of Agency, Section 379, it is the agent’s legal obligation to perform their work with sufficient care and skill (Chapter 20 Relationships between Principal and Agent, n.d.). In other words, if Tacy does a sloppy job, it will mean that he violates his duty to the principal.
At the same time, it is rational to comment on what potential liabilities GC could face under the agency agreement with Tacy. On the one hand, it refers to contract liability when GC is held liable for contracts that have been made by its agent. However, this liability only emerges when the agent was adequately authorized to close these deals. There exist three types of authority, including express, implied, and apparent ones (Chapter 21 Liability of Principal and Agent; Termination of Agency, n.d.). If Tacy is given one of these types of authority, his legal actions can result in the GC’s contract liability.
On the other hand, criminal law is another source of potential liability that GC can face. In general, GC cannot be held liable for Tacy’s unauthorized criminal acts (Chapter 21 Liability of Principal and Agent; Termination of Agency, n.d.). However, appropriate liability will emerge when GC “directed, approved, or participated in the crime” (Chapter 21 Liability of Principal and Agent; Termination of Agency, n.d., para. 37). There are some exceptions to this rule, including the use of child labor, offering low wages, exceeding maximum hour legislation, and others (Chapter 21 Liability of Principal and Agent; Termination of Agency, n.d.). If Tacy participates in any of such cases, GC will bear criminal liability.
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The information above has explained that Tacy can deal with a fiduciary duty and the duty of skill and care, while GC can face contract and criminal liabilities under the agency agreement between the parties.
This part will address the differences between employees and individual contractors.
When it comes to hiring George Tacy, it is reasonable to comment on whether he should be an employee or an individual contractor. It is mentioned that “an independent contractor is a person who contracts with another to do something for him but who is not controlled by the other” (Chapter 20 Relationships between Principal and Agent, n.d.). That is why it is possible to state that an employee is a more suitable option for GC. It is because the company has the right to control its employees’ physical conduct, performance, and obligations. If Tacy is an independent contractor, he will be able to set his own working conditions and requirements, which will not always be convenient to GC.
This information has demonstrated that it will be better if Tacy is a GC’s employee.
Chapter 20 Relationships between Principal and Agent. (n.d.) Chapter 20 relationships between principal and agent. Web.
Chapter 21 Liability of Principal and Agent; Termination of Agency. (n.d.). Chapter 21 liability of principal and agent; Termination of agency. Web.
Müller-Freienfels, W. (n.d.). Agency. Web.
Sherman, F. (2018). The definition of principal vs. agent. Web.