chapter

4

Agency Law

Chapter Objectives

After reading this chapter, you will know the following:

• How agency relationship work and the authority that agents have

• The function of a sport agent• The duties of agents and principals within

the agency relationship• The many ways in which athlete agents are

regulated

Definition

• Law that governs the relationship between a principal and agent

• A legal relationship that is essential to business function (e.g., entering into contracts)

Roles of Sport Agents

• Negotiate employment contracts• Negotiate concession agreements• Represent organizations in negotiations

with sponsors, advertisers, and media• Enter team or organization into events

(continued)

Roles of Sport Agents (continued)

• Enter into contracts with entities that run events

• Conduct estate and financial planning• Secure investment and appearance

opportunities• Assist in developing Web presence or

marketing campaigns

Agency Formation

• By agreement: By contract• By ratification: Principal accepts the acts of

a person who has no authority• Agency by estoppel (apparent authority):

Third party reasonably believes agency exists

Agency Relationship

• Both agent and principal must agree to be part of relationship

• Can be oral or written agreement• Both parties must have legal capacity to

enter into relationship

Authority

• Actual authority• Apparent authority

Actual Authority

• Express: Authority specifically granted in agency agreement

• Implied: Authority that is reasonably necessary to carry out express authority (e.g., agent has express authority to negotiate contracts; has implied authority to travel, hire employees to aid him or her)

Apparent Authority

• Where a third party reasonably believes (incorrectly) that the agent is acting with actual authority

• Principal held liable, even though no actual authority was given

Duties

• Agent to principal• Principal to agent

Agent to Principal

• Fiduciary duty: Agent must act for the benefit of the principal– Cannot engage in double-dealing (working for principal and

third party)– Cannot take personal advantage of a business opportunity

• Fiduciary duties– Duty of loyalty– Duty of obedience

Principal to Agent

• Fair compensation• Reimbursement of expenses• Compensate for losses (indemnification)• Duty of good conduct

Liability: Contracts

• Contract: Key is whether agent is within authority

• If so:– Principal is liable on the contract– Agent is not liable, unless agent acts for undisclosed

or partially disclosed principal– If apparent authority is present, principal is liable and

so is agent (who must reimburse principal for damages)

Liability: Torts

• Key is scope of employment• Factors include the following:

– Whether the agent committed an act (resulting in injury to another) that was authorized by the principal

– The time, place, and purpose of the act – Whether act was commonly performed by employees

on behalf of their employers

(continued)

Liability: Torts (continued)

– Whether the employer’s interest was enhanced by the act

– The extent of involvement of employee’s private interests

– Whether the employer furnished the means by which the injury was inflicted

– Whether the employer had reason to know that the employee would perform the act in question

Liability: Definitions of Torts

• Scope of employment is the realm of activities engaged in by an agent when acting on behalf of a principal.

• Respondeat superior is a legal doctrine that holds people and organizations high in the chain of command (principals) liable for the negligent acts of those lower in the chain of command (agents).

Regulation of Athlete Agents

• The need: Agent abuses in the past required more regulation.

• Negative impact on athletes: In some cases, athletes lost money due to agent’s actions.

(continued)

Regulation of Athlete Agents (continued)

• State laws and the Uniform Athlete Agents Act– Many states had their own statutes requiring

registration and licensing– UAAA (adopted by 35 states)

• Provides for uniformity in registration and certification of athletes’ agents among the states.

• Provides that agents who sign contracts with student-athletes must provide notice to the particular university and must make clear to the student-athletes that their eligibility is affected. Notice must be given in the contract

Regulation of Athlete Agents: Federal Law

• SPARTA (15 U.S.C. §§ 7801-7807, 2008) • Sports Agent Responsibility and Trust Act

– Prohibits agents from making false or misleading promises or providing gifts, cash to student-athletes and those associated with student-athletes

– Similar to the Uniform Athlete Agents Act, SPARTA requires written disclosures informing students they could lose their eligibility to play university sports if they sign an agency contract. Violators face fines.

– No registration required.

Professional League Unions

• Each of the major league players’ associations requires agents to register with the appropriate union.

• Standards vary, but NFLPA’s is the most stringent: Annual classes, passing exam, upholding code of conduct.

Disputes

• Breach of contract• Tort law issues: Fraud, misrepresentation