Restatement of the Law, Third, Agency
Copyright (c) 2006, The American Law Institute

Restatement of the Law, Agency 3d - Official Text

• 1.01 Agency Defined

Agency is the 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.

• 2.01 Actual Authority

An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act.

• 2.03 Apparent Authority

Apparent authority is the power held by an agent or other actor to affect a principal's legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal's manifestations.

• 2.04 Respondeat Superior

An employer is subject to liability for torts committed by employees while acting within the scope of their employment.

• 2.05 Estoppel to Deny Existence of Agency Relationship

A person who has not made a manifestation that an actor has authority as an agent and who is not otherwise liable as a party to a transaction purportedly done by the actor on that person's account is subject to liability to a third party who justifiably is induced to make a detrimental change in position because the transaction is believed to be on the person's account, if

(1) the person intentionally or carelessly caused such belief, or

(2) having notice of such belief and that it might induce others to change their positions, the person did not take reasonable steps to notify them of the facts.

• 2.06 Liability of Undisclosed Principal

(1) An undisclosed principal is subject to liability to a third party who is justifiably induced to make a detrimental change in position by an agent acting on the principal's behalf and without actual authority if the principal, having notice of the agent's conduct and that it might induce others to change their positions, did not take reasonable steps to notify them of the facts.

(2) An undisclosed principal may not rely on instructions given an agent that qualify or reduce the agent's authority to less than the authority a third party would reasonably believe the agent to have under the same circumstances if the principal had been disclosed.

• 3.01 Creation of Actual Authority

Actual authority, as defined in § 2.01, is created by a principal's manifestation to an agent that, as reasonably understood by the agent, expresses the principal's assent that the agent take action on the principal's behalf

• 3.02 Formal Requirements

If the law requires a writing or record signed by the principal to evidence an agent's authority to bind a principal to a contract or other transaction, the principal is not bound in the absence of such a writing or record. A principal may be estopped to assert the lack of such a writing or record when a third party has been induced to make a detrimental change in position by the reasonable belief that an agent has authority to bind the principal that is traceable to a manifestation made by the principal.

• 3.03 Creation of Apparent Authority

Apparent authority, as defined in § 2.03, is created by a person's manifestation that another has authority to act with legal consequences for the person who makes the manifestation, when a third party reasonably believes the actor to be authorized and the belief is traceable to the manifestation

• 3.04 Capacity to Act as Principal

(1) An individual has capacity to act as principal in a relationship of agency as defined in § 1.01 if, at the time the agent takes action, the individual would have capacity if acting in person.

(2) The law applicable to a person that is not an individual governs whether the person has capacity to be a principal in a relationship of agency as defined in § 1.01, as well as the effect of the person's lack or loss of capacity on those who interact with it.

(3) If performance of an act is not delegable, its performance by an agent does not constitute performance by the principal.

• 3.05 Capacity to Act as Agent

Any person may ordinarily be empowered to act so as to affect the legal relations of another. The actor's capacity governs the extent to which, by so acting, the actor becomes subject to duties and liabilities to the person whose legal relations are affected or to third parties.

• 3.06 Termination of Actual Authority--In General

An agent's actual authority may be terminated by:

(1) the agent's death, cessation of existence, or suspension of powers as stated in § 3.07(1) and (3); or

(2) the principal's death, cessation of existence, or suspension of powers as stated in § 3.07(2) and (4); or

(3) the principal's loss of capacity, as stated in § 3.08(1) and (3); or

(4) an agreement between the agent and the principal or the occurrence of circumstances on the basis of which the agent should reasonably conclude that the principal no longer would assent to the agent's taking action on the principal's behalf, as stated in § 3.09; or

(5) a manifestation of revocation by the principal to the agent, or of renunciation by the agent to the principal, as stated in § 3.10(1); or

(6) the occurrence of circumstances specified by statute.

• 3.07 Death, Cessation of Existence, and Suspension of Powers

(1) The death of an individual agent terminates the agent's actual authority.

(2) The death of an individual principal terminates the agent's actual authority. The termination is effective only when the agent has notice of the principal's death. The termination is also effective as against a third party with whom the agent deals when the third party has notice of the principal's death.

(3) When an agent that is not an individual ceases to exist or commences a process that will lead to cessation of existence or when its powers are suspended, the agent's actual authority terminates except as provided by law.

(4) When a principal that is not an individual ceases to exist or commences a process that will lead to cessation of its existence or when its powers are suspended, the agent's actual authority terminates except as provided by law.

• 3.08 Loss of Capacity

(1) An individual principal's loss of capacity to do an act terminates the agent's actual authority to do the act. The termination is effective only when the agent has notice that the principal's loss of capacity is permanent or that the principal has been adjudicated to lack capacity. The termination is also effective as against a third party with whom the agent deals when the third party has notice that the principal's loss of capacity is permanent or that the principal has been adjudicated to lack capacity.

(2) A written instrument may make an agent's actual authority effective upon a principal's loss of capacity, or confer it irrevocably regardless of such loss.

(3) If a principal that is not an individual loses capacity to do an act, its agent's actual authority to do the act is terminated.

• 3.09 Termination by Agreement or by Occurrence of Changed Circumstances

An agent's actual authority terminates (1) as agreed by the agent and the principal, subject to the provisions of § 3.10; or (2) upon the occurrence of circumstances on the basis of which the agent should reasonably conclude that the principal no longer would assent to the agent's taking action on the principal's behalf.

• 3.10 Manifestation Terminating Actual Authority

(1) Notwithstanding any agreement between principal and agent, an agent's actual authority terminates if the agent renounces it by a manifestation to the principal or if the principal revokes the agent's actual authority by a manifestation to the agent. A revocation or a renunciation is effective when the other party has notice of it.

(2) A principal's manifestation of revocation is, unless otherwise agreed, ineffective to terminate a power given as security or to terminate a proxy to vote securities or other membership or ownership interests that is made irrevocable in compliance with applicable legislation. See §§ 3.12-3.13.

• 3.11 Termination of Apparent Authority

(1) The termination of actual authority does not by itself end any apparent authority held by an agent.

(2) Apparent authority ends when it is no longer reasonable for the third party with whom an agent deals to believe that the agent continues to act with actual authority.

• 3.12 Power Given as Security; Irrevocable Proxy

(1) A power given as security is a power to affect the legal relations of its creator that is created in the form of a manifestation of actual authority and held for the benefit of the holder or a third person. This power is given to protect a legal or equitable title or to secure the performance of a duty apart from any duties owed the holder of the power by its creator that are incident to a relationship of agency under § 1.01. It is given upon the creation of the duty or title or for consideration. It is distinct from actual authority that the holder may exercise if the holder is an agent of the creator of the power.

(2) A power to exercise voting rights associated with securities or a membership interest may be conferred on a proxy through a manifestation of actual authority. The power may be given as security under (1) and may be made irrevocable in compliance with applicable legislation.

• 3.13 Termination of Power Given as Security or Irrevocable Proxy

(1) A power given as security or an irrevocable proxy is terminated by an event that

(a) discharges the obligation secured by the power or terminates the interest secured or supported by the proxy, or

(b) makes its execution illegal or impossible, or

(c) constitutes an effective surrender of the power or proxy by the person for whose benefit it was created or conferred.

(2) Unless otherwise agreed, neither a power given as security nor a proxy made irrevocable as provided in § 3.12(2) is terminated by:

(a) a manifestation revoking the power or proxy made by the person who created it; or

(b) surrender of the power or proxy by its holder if it is held for the benefit of another person, unless that person consents; or

(c) loss of capacity by the creator or the holder of the power or proxy; or

(d) death of the holder of the power or proxy, unless the holder's death terminates the interest secured or supported by the power or proxy; or

(e) death of the creator of the power or proxy, if the power or proxy is given as security for the performance of a duty that does not terminate with the death of its creator.

• 3.14 Agents with Multiple Principals

An agent acting in the same transaction or matter on behalf of more than one principal may be one or both of the following:

(a) a subagent, as stated in § 3.15; or

(b) an agent for coprincipals, as stated in § 3.16.

• 3.15 Subagency

(1) A subagent is a person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent's principal and for whose conduct the appointing agent is responsible to the principal. The relationships between a subagent and the appointing agent and between the subagent and the appointing agent's principal are relationships of agency as stated in § 1.01.

(2) An agent may appoint a subagent only if the agent has actual or apparent authority to do so.

• 3.16 Agent for Coprincipals

Two or more persons may as coprincipals appoint an agent to act for them in the same transaction or matter.

• 7.07 Employee Acting Within Scope of Employment

(1) An employer is subject to vicarious liability for a tort committed by its employee acting within the scope of employment.

(2) An employee acts within the scope of employment when performing work assigned by the employer or engaging in a course of conduct subject to the employer's control. An employee's act is not within the scope of employment when it occurs within an independent course of conduct not intended by the employee to serve any purpose of the employer.

(3) For purposes of this section,

(a) an employee is an agent whose principal controls or has the right to control the manner and means of the agent's performance of work, and

(b) the fact that work is performed gratuitously does not relieve a principal of liability.

• 8.01 General Fiduciary Principle

An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship.

• 8.02 Material Benefit Arising Out of Position

An agent has a duty not to acquire a material benefit from a third party in connection with transactions conducted or other actions taken on behalf of the principal or otherwise through the agent’s use of the agent’s position.

• 8.03 Acting as or on Behalf of an Adverse Party

An agent has a duty not to deal with the principal as or on behalf of an adverse party in a transaction connected with the agency relationship.

• 8.04 Competition

• 8.05 Use of Principal's Property; Use of Confidential Information

• 8.06 Principal’s Consent

(1) Conduct by an agent that would otherwise constitute a breach of duty as stated in §§ 8.01, 8.02, 8.03, 8.04, and 8.05 does not constitute a breach of duty if the principal consents to the conduct, provided that

(a) in obtaining the principal’s consent, the agent

(i) acts in good faith,

(ii) discloses all material facts that the agent knows, has reason to know, or should know would reasonably affect the principal’s judgment unless the principal has manifested that such facts are already known by the principal or that the principal does not wish to know them, and

(iii) otherwise deals fairly with the principal; and

(b) the principal’s consent concerns either a specific act or transaction, or acts or transactions of a specified type that could reasonably be expected to occur in the ordinary course of the agency relationship.

(2) An agent who acts for more than one principal in a transaction between or among them has a duty

(a) to deal in good faith with each principal,

(b) to disclose to each principal

(i) the fact that the agent acts for the other principal or principals, and

(ii) all other facts that the agent knows, has reason to know, or should know would reasonably affect the principal’s judgment unless the principal has manifested that such facts are already known by the principal or that the principal does not wish to know them, and

(c) otherwise to deal fairly with each principal.

• 8.09 Duty to Act Only Within Scope of Actual Authority and to Comply with Principal’s Lawful Instructions

(1) An agent has a duty to take action only within the scope of the agent’s actual authority.

(2) An agent has a duty to comply with all lawful instructions received from the principal and persons designated by the principal concerning the agent’s actions on behalf of the principal.