05 Agency

Question 1

Define “vicarious liability.”

Answer 1

Liability of the principal for torts of an agent in a master-servant relationship when torts are committed by the agent with authorization or within the scope of employment.

Question 2

Describe the concept of respondeat superior.

Answer 2

“Let the master answer.” It is a doctrine that holds the principal liable, in certain circumstances, for the torts of the agent.

Question 3

Define “frolic and detour.”

Answer 3

Acts and conduct by the agent outside the scope of employment that are done while the agent is supposed to be working for the principal.

Question 4

Define “independent contractor.”

Answer 4

Agent who acts on behalf of a principal but who retains control over his/her schedule and is not controlled daily by the principal.

Question 5

Describe the master-servant relationship.

Answer 5

Type of relationship in which the principal controls the activities of the agent; principal has liability for the agent’s torts in this relationship.

Question 6

Does a principal have the right to control the method and manner of an agent’s work?

Answer 6

1. Yes, if a master-servant relationship exists.
2. No, if an independent contractor relationship exists.

Question 7

Define “scope of employment.”

Answer 7

Measure for determining when a principal is held liable for the torts of an agent.

Question 8

What types of authority are terminated by operation of law (i.e., death or bankruptcy)?

Answer 8

Express authority
Implied (actual) authority
Apparent authority

Question 9

What terminates actual authority?

Answer 9

When an agent is fired
When an agent quits
When an agent breaches his/her or her fiduciary duty
When an agent dies
When a principal dies (by operation of law, death terminates all other types of authority as well)

Question 10

List the requirements for the creation of an agency relationship.

Answer 10

Principal with capacity and, if the agent’s contracts must be evidenced by a record, a record of creation.

Question 11

Who owes the fiduciary duty in the principal/agent relationship?

Answer 11

The agent owes a fiduciary duty to the principal.

Question 12

What actions by a party can lead to the termination of an agency relationship?

Answer 12

Fulfillment of purpose
Lapse of time
Occurrence of a specified event
Mutual agreement
Act of one party (exception: agency coupled with an interest)

Question 13

What acts by the operation of law can lead to the termination of an agency relationship?

Answer 13

Death or insanity of the principal or agent
Bankruptcy (of the agent if it impairs his/her duties; of the principal if the agent no longer desires the relationship)
Change of law
Loss or destruction of subject matter

Question 14

List the duties of a principal to an agent.

Answer 14

To comply with the agency agreement
To reimburse reasonable expenses
To indemnify
To compensate for physical injury

Question 15

List the duties of an agent to a principal.

Answer 15

Obedience
Reasonable care
Accounting
Notification
Loyalty

Question 16

What types of authority are terminated by unilateral act, “You’re fired” or “I quit”?

Answer 16

Express authority
Implied or actual authority

Question 17

Define “disclosed principal.”

Answer 17

Contract situation in which the third party is aware of the existence and identity of a principal.

Question 18

Define “partially disclosed principal.”

Answer 18

Contract situation in which the third party is aware of the existence of a principal but not the principal’s identity.

Question 19

Define “undisclosed principal.”

Answer 19

Contract situation in which the third party only knows and believes the contract is with the agent; the third party is unaware of the existence or identity of the principal.

Question 20

Who is liable for the agent’s torts if the principal gave the instructions for the commission of the tort?

Answer 20

The principal is also liable along with the agent.

Question 21

List the situations in which the principal has liability for the torts of his or her agent.

Answer 21

Directs the tort
Fails to properly supervise
Negligent hiring and/or retention
Scope of employment

Question 22

Describe vicarious (respondeat superior) liability.

Answer 22

Principals may be liable though blameless if:
1. Master- servant relationship exists; and
2. Agent acts within the scope of employment.

Question 23

List the forms of the principal-agent relationship.

Answer 23

Master-servant (principal usually liable for agent’s torts)
Employer-independent contractor (principal usually not liable)

Question 24

List the requirements for creation of an agency relationship.

Answer 24

Principal with capacity and, if agent’s contracts must be evidenced by a record, a record of creation.

Question 25

Define “independent contractor.”

Answer 25

One who is doing work for another but whose actions and schedule are not directly controlled by that party. Example: a lawyer handling one case for a client.

Question 26

List the agent’s duties of loyalty.

Answer 26

No competition
No conflict of interest
No appropriation of business opportunities
No disclosure of confidential information

Question 27

Define “apparent authority.”

Answer 27

Authority that comes through the way an agent appears to third parties; principal holds agent out with authority.

Question 28

Define “lingering apparent authority.”

Answer 28

Authority of terminated agent to continue binding the principal through the principal’s failure to terminate the agent’s apparent authority through proper actual and constructive notice to third parties.

Question 29

Explain an agency coupled with an interest.

Answer 29

An agency coupled with an interest is one that gives the agent a property right in the subject matter of the principal’s and agent’s relationship (i.e., a book agent with a commission in the royalties from the book).

Question 30

What elements are not necessary for an agency relationship to exist?

Answer 30

Capacity and consideration

Question 31

List the three types of authority through which agency power can arise.

Answer 31

Express authority
Implied (customary, incidental, emergency) authority
Apparent authority

Question 32

List the elements of apparent authority.

Answer 32

1. Principal holds agent out.
2. Agent acts within the scope of apparent authority.
3. Third party reasonably relies.

Question 33

Define “power of attorney.”

Answer 33

A name for a written document that creates an agency relationship.

Question 34

Define “agent.”

Answer 34

One who acts on behalf of another (the principal)

Question 35

Define “principal.”

Answer 35

One who appoints an agent to act on his or her behalf

Question 36

Define “agency relationship.”

Answer 36

Legally binding arrangement in which one party (agent) acts on behalf of another (principal)

Question 37

Define “general agent.”

Answer 37

Agent who is given general authority for the principal (i.e., not limited to specific transactions)

Question 38

Define “special agent.”

Answer 38

Agent who is limited in time and/or scope of agency; could be agency for a specific task

Question 39

Define “apparent agency/ostensible agency.”

Answer 39

An agency relationship that exists by the appearance to third parties that an agency relationship exists.

Question 40

List the two types of actual authority.

Answer 40

1. Express authority
2. Implied authority