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principal and agent (agency law)

In a principal-agent relationship, the principal gives the agent authority to act on behalf of the principal, and to bind or obligate the principal to contracts and other legal obligations, as permitted by the scope of the agency (authority). An agent’s authority may be sufficient to bind or obligate the principal if the authority was expressly given to the agent (actual authority), or if it was implied to other persons that the agent had authority to act on behalf of the principal (apparent authority)—such as by the principal’s adoption of the agent’s prior actions on behalf of the principal.

In Texas, the principal-agent relationship is governed by principles of agency law, which dictate that a principal can authorize an agent to act on their behalf and enter into binding agreements within the scope of the granted authority. This authority can be 'actual authority,' explicitly given by the principal to the agent, or 'apparent authority,' where the principal's conduct suggests to third parties that the agent is authorized to act. Actual authority is the direct power the agent has been given by the principal either orally or in writing. Apparent authority arises when a principal's actions lead a third party to reasonably believe that the agent is authorized to act, even if the agent does not have the actual authority. This can occur through the principal's previous acceptance of the agent's actions or by setting up a situation where the agent appears to have certain powers. In Texas, as in other jurisdictions, for an agent to bind the principal, the third party must also act in good faith and have a reasonable belief in the agent's authority.


Texas Statutes & Rules

Federal Statutes & Rules

Restatement (Third) of Agency
While not a federal statute, the Restatement (Third) of Agency is a highly regarded legal treatise that summarizes common law principles related to agency, which are often adopted by federal courts in the absence of specific statutes.

The Restatement (Third) of Agency provides a comprehensive framework for understanding the law of agency in the United States. It defines agency as a fiduciary relationship that arises when one person (a 'principal') manifests assent to another person (an 'agent') that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act. The Restatement further distinguishes between actual authority (both express and implied) and apparent authority. Actual authority is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal's manifestations of consent to the agent. Apparent authority, on the other hand, is the power to affect the principal’s legal relations with third parties when a third party reasonably believes the agent has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations.

Uniform Commercial Code (UCC) - Article 2
The UCC governs commercial transactions and includes provisions that address the authority of agents in the context of the sale of goods.

Article 2 of the Uniform Commercial Code (UCC) applies to transactions in goods and includes sections that may be relevant to the authority of agents. It provides rules for the creation of contracts for the sale of goods, and by extension, the actions of agents in making these contracts. Under the UCC, an agent has the power to bind the principal in a contract for the sale of goods if the agent has the authority to do so. This authority can be actual, implied, or apparent, depending on the circumstances and the conduct of the principal. The UCC is adopted at the state level, and while it is not a federal statute, it provides a uniform set of rules that may be relevant in federal courts when dealing with commercial transactions that cross state lines.

Federal Rules of Civil Procedure (FRCP) - Rule 17(b)
The FRCP governs civil procedure in U.S. federal courts and includes provisions on the capacity to sue or be sued, which can be relevant in cases involving agency relationships.

Rule 17(b) of the Federal Rules of Civil Procedure addresses the capacity to sue or be sued in federal court. It states that capacity to sue or be sued is determined by the law of the individual's domicile or by the law of the state where the court is located, for all entities other than individuals or corporations. This can be relevant in agency relationships where questions arise about whether an agent has the capacity to enter into a contract or legal obligation on behalf of the principal. If an agent acts within the scope of their authority, the principal may be bound by the agent's actions and may have the capacity to sue or be sued based on those actions.

Sarbanes-Oxley Act of 2002 - Section 307
This federal statute addresses the conduct of attorneys acting as agents for corporations in federal securities law matters.

Section 307 of the Sarbanes-Oxley Act of 2002 establishes rules for attorneys who act as agents for corporations in matters related to federal securities laws. It requires attorneys to report evidence of a material violation of securities law or breach of fiduciary duty by the company or any agent thereof to the chief legal counsel or the CEO of the company. If they do not respond appropriately, the attorney must report the evidence to the audit committee, another committee of independent directors, or the full board of directors. This statute is relevant to the principal-agent relationship as it outlines specific obligations for agents (in this case, attorneys) who have the authority to act on behalf of a principal (the corporation) in legal matters.