Agency

Question 1

What two elements must be met for a principal (P) to be liable for the torts of his agent (A)?

Answer 1

1. Principal-Agent relationship (assent, benefit, control), AND
2. A committed the tort while acting in the scope of that relationship.

Question 2

What is the test for whether there is a principal-agent relationship?

Answer 2

Assent: informal agreement between P and A, and A has capacity.

Benefit: A acts for P’s benefit

Control: P has right to supervise/manage the manner of A’s performance

Question 3

When is a P liable for a sub-A’s torts?

Answer 3

When the ABC test is met.
Assent, Benefit, and Control
(typically see a problem with Assent)

Question 4

When is a P liable for a borrowed A’s torts?

Answer 4

When the ABC test is met.
Assent, Benefit, and Control
(typically see a problem with Control)

Question 5

In general, is a P liable for the torts of independent contractors?

Answer 5

No.

typically see a problem with the control element

Question 6

What are the exceptions to the general rule that Ps are not liable for the torts of independent contractors?

Answer 6

(1) IC was hired to do an inherently dangerous activity (more broad than ultrahazardous activity in tort)
(2) Agency by estoppel - P has held the IC out as his agent, and a third party relied on that representation.

Question 7

What is the three-part balancing test used to determine the scope of a P-A relationship?

Answer 7

1. Is the conduct of the kind A was hired to perform?
2. Did the conduct occur “on the job”?
   - Frolic = outside scope
   - Detour = in scope
3. Was the conduct done with the intent to benefit P?

Question 8

When are P’s liable for the intentional torts of As?

Answer 8

(1) P authorized A’s conduct
(2) A’s conduct was a natural extension of his duties (e.g. he’s a bouncer/battery charge)
(3) A’s conduct was motivated by a desire to serve P (even if misguided)

Question 9

When is P liable for the contracts entered into by A on P’s behalf?

Answer 9

P is liable only for the contracts he has authorized.

Question 10

What are the four types of authorization?

Answer 10

1. Actual Express Authority
2. Actual Implied Authority
3. Apparent Authority
4. Ratification

Question 11

How does P grant Actual Express Authority?

Answer 11

With words orally or in writing.

Note: if the contract must be in writing, so must P’s authority to A regarding that contract (Statute of Frauds)

Question 12

When is Actual Express Authority revoked?

Answer 12

1. By the unilateral act of either P or A
2. Upon P’s death (unless power of attorney expressly says it survives death).

In NY: power of attorney will survive P’s incapacity by default.

Question 13

How does P grant Actual Implied Authority?

Answer 13

Through conduct or circumstances - by necessity, custom, or prior dealings.

Question 14

Define actual implied authority by necessity.

Answer 14

A is authorized to do anything that is necessary for him to carry out his expressly authorized tasks.

Question 15

Define actual implied authority by custom.

Answer 15

A is authorized to do those things that people with A’s title/position are customarily expected to do.

Question 16

Define actual implied authority by prior dealings.

Answer 16

A is authorized to do something because in the past, P has either expressly authorized A to do it, or P has acquiesced to A doing it.

Question 17

When does an A have apparent authority to act?

Answer 17

(1) P cloaked A in the appearance of authority, and
(2) A third party reasonably relied on that appearance.

Note: this means P can be liable on a contract that he expressly prohibited A from entering into.

Question 18

When is A’s action authorized by ratification?

Answer 18

When:
(1) P has knowledge of the contract, and
(2) P accepts the benefits of the contract.
In NY: ratification only happens when P accepts the terms exactly.

Question 19

What happens if A enters into a contract that is authorized by actual express, actual implied, apparent authority, or ratification?

Answer 19

P will be liable on the contract.

A will not be liable on the contract.

Question 20

What happens if the fact of P’s existence is undisclosed to the third party in a contract deal? (i.e. third party think’s he’s dealing with A alone)

Answer 20

P will be liable on the contract.

A can be held liable at third party’s election.

Question 21

What happens if the third party to a contract knows that A is acting on behalf of P, but P’s identity is hidden?

Answer 21

P will be liable on the contract.

A is also liable at the third party’s election.

Question 22

What duties does A owe P?

Answer 22

1. duty of care
2. duty to obey reasonable instructions
3. duty of loyalty

Question 23

What does A’s duty of loyalty to P encompass?

Answer 23

1. no self-dealing
2. no usurping opportunities
3. no secret profits

Question 24

What are P’s remedies when A breaches the duty of care, to obey reasonable instructions, or the duty of loyalty?

Answer 24

1. P can recover losses caused by A’s breach

2. P can disgorge A’s profits