Agency Law - Ch 4

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Agency Law
Chapter 4
Agency Law
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What is an agent?
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Any individual who represents a second
individual or entity in negotiations with a third
individual or entity.
What is agency law?
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Type of law that specifically defines the rights
and responsibilities of the agent and the
principal, the authority of the agent, and the
creation of the principal-agent relationship
History of Sports Agents
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First well-known occurrence of player
hiring an agent to negotiate contract was
Red Grange in 1925
Agents didn’t begin growing until Attorney
Mark McCormack began representing
Arnold Palmer in the 1960s
In the early 1960s, Jim Ringo tried to use
an agent to renegotiate his contract with
Vince Lombardi…it didn’t work
History of Sports Agents
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Prior to 1970s, contracts held “reserve
clauses” which minimized negotiations
In the 1970s, professional sports leagues
adopted free agency, opening the flood
gates for sports agents
Currently each major professional league
has more than 100 registered agents –
See Table 4.1 on pg. 75
Role of a Sports Agent
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May work on behalf of an athlete, team, coach,
or organization/owner to:
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Negotiate contracts
Negotiate concession agreements
Negotiate with sponsors, media, and advertisers
Negotiate with endorsers
Enter into contracts with security, ushers,
merchandisers, and others
Manage the relationship with community boards,
charitable foundations, etc.
Conduct estate, tax, and financial planning for clients
Secure investment and appearance opportunities
Concepts in Agency Law
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Examples of sport agency relationships
include:
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Students selling university merchandise at a
game
Ticket sellers
Sport managers promoting a facility for an
event
Health club workers trying to recruit clients
Agency Relationship
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Parties must enter into an agreement to
establish agency relationship
Agreement can be written or oral
Must be consensual
Must be between two parties who are able to
enter into a contract
What if the relationship is disputed?
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Courts focus on whether the principal did or said
something that the agent could have reasonably
interpreted as the principal’s intent to allow the agent
to act on the principal’s behalf
Authority to Act
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If the agent does not have the authority
to act on behalf of the principal or exceeds
the authority she was given by the
principal, the agent’s actions cannot bind
the principal and the principal cannot be
held liable for the acts of the agent.
Authority can be described as:
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Actual (express or implied)
Apparent
Actual Authority
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An agent acts with actual authority when the
agent reasonably believes that his actions are
within the scope of authority given to him by the
principal.
Express authority
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Any written or oral communication that grants the
agent authority to perform an act
Example – In NFL Players’ Association’s standard
representation agreement, the agent’s express job is
to “represent, advise, counsel, and assist Player in the
negotiation, execution, and enforcement of his
playing contract”
Actual Authority
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Implied Authority
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Refers to the agent’s authority and ability to perform
incidental acts that are reasonably necessary to
accomplish the agent’s express responsibilities as
provided in the agency agreement
Must be consistent with the express authority granted
within the agency agreement
When determining whether an agent acted with
implied authority, courts will look at the agent’s
reasonable understanding at the time the agent took
action. If court finds the agent’s interpretation of the
agency relationship was unreasonable and the agent
lacked authority to perform an act, the improper act
falls outside the scope of the agent’s authority
Apparent Authority
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Arises out of a situation where, because of the
behavior of the principal, a third party may
believe that the agent is acting with actual
authority
In other words, the principal created an
appearance of authority through conduct or
behavior that misled the third party into
reasonably believing that the agent had the
authority to act on behalf of the principal.
Ratification
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As a general rule, when an agent acts
without authority, and the doctrine of
apparent authority does not apply, then
the principal is not legally bound by the
agent’s acts.
If, however, the principal would like to be
bound by it, he may ratify the act by
affirming the agent’s actions
Duties
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Duties owed by Agent to Principal
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Fiduciary duty
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Duty of Loyalty
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Duty under which the agent must act solely and completely for the
benefit of the principal.
Prohibits agent from competing with the principal in anything
related to the subject matter of the agency unless the principal has
expressly agreed
Duty of Obedience
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duty to act for the benefit of someone else while subordinating
one’s own personal interests
duty to follow all reasonable instructions given by the principal
Does not extend beyond agency relationship
Includes responsibility to follow instructions that may have negative
results, but does not include illegal actions
Conflict of Interest
Duties
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Duties owed by Principal to Agent
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Duty of compensation
Includes paying them for their work
 Includes reimbursement for expenses incurred on
behalf of principal
 Includes compensation for any losses suffered
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Duty of good conduct
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Principal should not do anything to demean the
agent or damage his reputation
Contract Liability
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If agent negotiates a contract and principal doesn’t
perform, who is liable?
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Disclosed Principal
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Partially Disclosed Principal
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3rd Party knows agent is working on behalf of _________ (specific
principal)
Principal is fully liable
3rd Party knows agent is working on behalf of principal, but doesn’t
know who principal is
Principal is liable – some states, agent is also liable
Undisclosed Principal
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3rd Party has no knowledge that agent is acting on behalf of
anybody else
Both principal and agent are liable, though agent may seek
reimbursement compensation from principal
Tort Liability
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Principal may be liable for tort claim which arises out of
agent actions occurring within the scope of his
employment
Doctrine of respondeat superior
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Holds people and organizations high in the chain of command
(employers/principals) liable for the negligent acts of those lower
in the chain of command (employees/agents)
Liability depends on:
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Whether tortious act was authorized by principal
The time, place, and purpose of act
Whether act is part of normal scope of employment
Whether principal benefited from act or furnished means to allow
act to occur
Whether principal had reason to know act would occur
Whether act involved commission of a serious crime
Athlete Agents and Regulations
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Some agents work alone to represent athletes
(Scott Boras or Drew Rosenhaus)
Some agents are part of big companies
(Octagon or IMG)
Most have advanced degrees (primarily law
and/or business)
Many professional sports unions require
certification of agent’s skills and registration
State and federal regulations, as well as
professional union regulations, exist to regulate
agents who represent athletes.
Athlete Agents and Regulations
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Under NCAA rules, an eligible studentathlete cannot receive benefits from or
enter into a verbal or written agreement
with an agent even if the agreement is
related to working with the athlete after
his eligibility to participate has expired
Who gets hurt when an agent and/or
athlete violate this regulation?
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THE SCHOOL!!!
Athlete Agents and Regulations
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Prior to 2000, most regulations were created at
the state level
Became problematic for agents living in one
state, working with players living in another
state and playing all over – whose laws are to
be followed
In 2000, the Uniform Athletes Agent Act was
developed – as of May, 2008, 35 states (plus
D.C.) had adopted the act.
Athlete Agents and Regulations
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Uniform Athlete Agents Act
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Requires annual registration (application and fee are
transferable to all states recognizing Act)
Defines student-athlete as: “an individual who
engages in, is eligible to engage in, or may be eligible
in the future to engage in, any intercollegiate sport”
Provides that athlete agents who sign contracts with
student-athletes must provide notice to the particular
university and must make clear to the studentathletes that the agency agreement may affect their
eligibility to participate in athletics while in university
Provides civil remedies for institutions when agents
and athletes sign these contracts and the school
eventually suffers NCAA sanctions
Athlete Agents and Regulations
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Federal Law
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Sports Agent Responsibility and Trust Act
(SPARTA) was passed in 2004
Virtually mirrors Uniform Athlete Agents Act
Requires student-athletes be provided with
written disclosures, AD’s must be notified
within 72 hours, and allows for civil remedies
and fines in the event of violation
Does not require any kind of registration
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How do you enforce????
Athlete Agents and Regulations
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Union Regulations
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All four major professional sports leagues have
players’ associations which regulate agents
In order to represent NFL Player, you must register
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$1,650 application fee
Undergraduate and post-graduate degree – from an
accredited university – required
Background investigation
Annual seminar attendance
Written exam re: collective bargaining agreement, salary
caps, NFLPA Regulations, etc.
Athlete Agents and Regulations
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Union Regulations (cont’d.)
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NFL Player Agents must
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Enter into only Standard Representation Agreement with
Player
Submit all contracts between player and team to union for
review
Submit itemized statement of all fees charged
Allow for audits
Comply with all applicable state and federal regulations
“The maximum fee which may be charged or collected by a
Contract Advisor shall be three percent (3%) of the
‘compensation’ . . . received by the player in each playing
season covered by the contract negotiated by the Contract
Advisor”

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