Agency Flashcards
Agency
is the fiduciary relation which results from the manifestation of consent by one party to another that the other shall act on his behalf and subject to his control and consent by the other so to act.
Formation of principal-agency relationship requires:
- Agreement between both parties that the agent’s conduct must be for the principal’s Benefit, and the principal has the right to Control the agent (ABC)
- Agent must have capacity to contract.
- All contract formalities are not required. An agency relationship does not require consideration or a writing unless SOF requires a writing (land sale contract).
Capacity for Agency relationship
Principal must have capacity to contract (not be a minor) and must be mentally competent.
Agent must have minimal capacity, so an agent must be mentally competent but can be a minor.
Principal Duties
- Principal owes the agent all duties imposed by their contract such as consideration, cooperation, indemnity, and reimbursement (CCIR), and any other contractual duties imposed.
Agent’s remedies for breach by principal
Agent may do any of the following:
- Terminate the agency and refuse to perform further.
- Seek contract damages and/or accounting
- Seek a possessory lien for money due.
Agent Duties
The agent owes the principle:
- Duty of care to act as reasonably prudent person
- Duty of loyalty
- Duty of obedience
- Duty to communicate
- Any other express contractual duties
Principal’s Remedies for Breach by Agent
Where the agent is in breach, a principal may do any of the following:
- Discharge the agent
- Withhold compensation from the agent
- Seek accounting or contract remedies
- Seek tort damages
- Seek indemnity for liability to third parties occasioned by the agent’s wrongful actions beyond the agency scope.
Subagent Duties
Depend on whether or not the subagent is acting with authority
- Acting w/authority: The subagent owes the principal the same duties owed by an agent.
- Acting w/o authority: The subagent owes only duties to the agent.
- The agent is liable to the principal for subagent’s breach
Agent is Liable for Contracts with 3rd Parties when
- The agent is acting with no authority from the principal
- Principal’s identity is not revealed (partial disclosure)
- Principal’s existence and identity is undisclosed.
Principal’s liability for agent’s contracts
The agent’s actions will bind the principal if the agent was acting under the actual or apparent authority to act for the principal.
Actual express authority
specifically granted to the agent by the principal. It may be oral, but a writing is required if SOF applies.
Actual implied authority
The agent reasonably believes the principal gave him authority because of necessity (task reasonably necessary to accomplish agency goals), custom or prior dealings.
Termination of Agency Relationship
Actual express or implied authority may be terminated by any of the following:
1. Breach of agent’s fiduciary duty
2. Lapse of states period of time (reasonable if none stated)
3. Operation of law: By the death or incapacity if none is stated (unless durable power of attorney exists) or bankruptcy of the principal
4. Changed circumstances where it is clear the agent’s services are no longer needed, such as a significant change in the market, law, or subject matter
5. Happening of a specified event.
6. Unilateral termination by either party since agency is usually terminable at will without notice.
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Apparent Authority
The agent’s actions will bind the principal when the principal has provided the agent with the appearance of authority, on which a 3rd party reasonably relies. The analysis centers on what occurred between the principal and the 3rd party.
Notice Requirement for 3rd Parities
Where an agent’s actual authority has terminated (unless by death or incapacity), she continues to have apparent authority to transact with known third parties with whom she previously transacted on the principal’s behalf until the 3rd parties receive actual or constructive notice of the termination.
