Agency Flashcards
What is agency?
A relationship where the agent represents and acts on behalf of the principal, having the power to bind the principal to contracts
What kind of relationship is agency?
Fiduciary relationship – involves trust, confidence, and dependence
Can corporations and partnerships appoint agents?
Yes – corporations cannot act but through agents, and partnerships can either appoint agents or act through partners
Unincorporated businesses cannot appoint agents
Can infants/minors appoint agents?
Yes, and such appointments are voidable, unless the agents acts to provide necessities
Can insane people appoint agents?
If an insane person appoints an agent before being judicially declared insane, it is voidable; if after, it is void
Can married couples enter into an agency relationship?
Yes
Does an agent need to have the legal capacity to enter into contracts?
No, since he is only entering into contracts on behalf of the principal – anyone who can follow orders can be an agent
What are the principal’s duties towards his agent?
- paying for services
- reimbursing expenses
- indemnification for actions performed at the principal’s orders
- compensating for injury
What are the agent’s duties towards his principal?
- being loyal (not acting against his interests)
- following instructions
- communicating material facts
- keeping track of property
Can an agent act for two principals at once?
Yes, so long as it does not constitute a conflict of interest – but even that is permitted if the principals consent
What is an agent’s “actual” authority?
The authority delegated to the agent, contractually, by the principal
Can be express or implied
How can an agent’s authority be implied?
If it is customary, or if it is reasonably needed to perform what the agent is authorized to do
What happens if an agent acts with apparent/ostensible authority?
If the principal acts in such a way that an agent appears to have more authority than he does, then a third party can rely on this, but the principal can hold the agent responsible for any losses he incurs from it
What is the difference between a general agent and a special agent?
General = has wide authority to act in different circumstances and transactions
Special = has authority limited to a certain specific transaction(s)
What is a sub-agent, a co-agent, and an agent’s agent?
sub-agent = an agent appointed by another agent, with the authority from the principal to appoint other agents; responsible to both principal and agent
co-agent = an agent hired (but not appointed) by another agent to act alongside him; responsible only to principal
agent’s agent = an agent appointed by another agent, WITHOUT authority from the principal to appoint other agents; responsible only to the agent
What is a gratuitous agent?
An agent who acts for free
Not legally bound to perform, but cannot act negligently if he does perform
When is an agency irrevocable?
If the principal gives the agent a property interest (or security interest) in whatever he gives the agent power over
This is NOT the same as agreeing to pay the agent a commission on a sale
What is a del credere agent?
An agent who also acts as a surety in case the principal’s customers do not pay, usually to get a higher commission
This is an example of a surety with a primary promise (rather than collateral) – acting for his own benefit – and thus does not fall within the Statute of Frauds
What is an exclusive agent?
The only agent a principal will interact with for a particular purpose
E.g. after hiring a real estate agent, a principal may be forbidden to take a buyer gotten from a different agent
What is a factor?
An agent who has possession of the principal’s property in the aims of selling it for a commission (or factorage)
The title remains with the principal, but a factor can sell in his own name, and he can transfer title to a good-faith buyer even if such a sale is beyond the factor’s authority
How are an express agency and implied agency formed?
Express = by written or oral contract
Implied = by behavior
What is not needed to form an agency relationship?
Consideration
What is a written instrument by which a principal can appoint an agent?
Power of attorney
When do agency relationships need to be in writing?
Generally, when the agent has the power to write contracts that must themselves be in writing (i.e. governed by the Statute of Frauds)
For what purposes can an agent NOT be appointed?
to perform something…
- only the principal can do
- prohibited by statute
- which the principal cannot do
What is ratification?
Approval by a principal of an action done by a non-agent (or of an unauthorized action done by an agent)
Can be express or implied
Can transactions be ratified only in part?
No, individual transactions must be ratified as a whole or not at all
Can crimes be ratified?
No, but torts can
Can a person (e.g. a corporation) ratify actions done before it came into existence?
No, the person must exist at the time of the actions in order to ratify them
If a potential agent contracts with a third party, is that party at liberty to revoke its agreement prior to ratification?
Yes, it can withdraw before there is ratification
Further, the principal can lose power to ratify if he waits too long (and thus hurts the third party)
What effectively occurs once ratification has been done?
It is exactly as if the principal had first performed the action himself
Thus the principal and the third party cannot hold the agent liable for anything (e.g. breach of authority), and the principal cannot withdraw his ratification
What is respondeat superior?
Doctrine that the principal can be liable for the torts (not crimes) of his agent performed in the scope of his employment, even if the principal did nothing wrong
How does a principal-agent relation differ from a master-servant relation?
A servant’s conduct is controlled by a master (which is the same as an agent and principal), but the servant lacks any authority to bind his master legally as a representative
Respondeat superior applies to both relations
How does an agent differ from an independent contractor?
An independent contractor is not controlled by his employer except regarding his results, and thus respondeat superior does not apply to such a relationship
Does respondeat superior apply if the agent, in committing a tort, disregards his principal’s instructions?
Yes, it still applies, unless the agent entirely departs from performing his own duties to act independently
E.g. an intentional tort is usually outside the scope of employment, because for the agent’s benefit
If an agent commits a tort within the scope of his employment, can the injured party collect from the agent?
Yes, respondeat superior enables the injured party to choose to collect from either principal or agent (but not both)
Under what circumstances would a contract between an agent and a third party bind only the principal?
If the third party knows of the agency relationship and the identity of the principal
Under what circumstances would a contract between an agent and a third party bind both principal and agent?
If the third party knows of the agency relationship but not the principal’s identity
Under what circumstances would a contract between an agent and a third party bind only the agent?
If the third party is unaware of the agency relationship
The principal can still enforce the contract against the third party, however
What can a third party do if he discovers a principal’s identity after having contracted with his agent?
He can hold him liable unless
- the contract is a negotiable or sealed instrument
- the agent already performed
- the contract forbids it
What is the difference between crimes and torts?
Crimes are offenses against society that punish, imprison, or fine criminals for the sake of retribution or rehabilitation; these cases are initiated by the state
Torts are offenses against individuals that seek damages for the sake of restitution; these cases are initiated by private individuals
If the third party knows the principal, when is the agent personally liable?
If the agent signs the contract with his own name, guarantees performance, or otherwise includes himself as a party
If the third party knows of the agency relationship but not the principal’s identity, when is the agent personally liable?
Always, unless the agent and third party agree not to bind the agent
For what is an agent liable if he acts beyond his authority in such a way that the principal is not bound?
Can be liable to the third party for breaching an implied warranty of authority – the party could get damages for what he would have gotten if the principal were actually bound
Can be liable in tort for fraud
Can an agent simply renounce his agency?
Yes, unless he was given consideration to be an agent (i.e. as a contract)
When can a principal not revoke agency?
If it is an agency coupled with a property/security interest (which is irrevocable), or if he contracted to the relationship
Principals (and agents) can still revoke/renounce the relationship if the other party breaches
If an agency relationship ends, does notice have to be given?
If it not ended by operation of law (e.g. the principal goes bankrupt or dies), then yes
Otherwise actions of the agent can still bind the principal
