Agency

Question 1

An agency relationship is a voluntary, fiduciary relationship between two parties:

Answer 1

a principal and an agent.

Question 2

Gratuitous agencies:

Answer 2

The principal does not compensate the agent for the work the agent does on the principal’s behalf.

Question 3

To create an agency relationship there must be both:

Answer 3

manifestation of the principal’s intent and of the agent’s consent. In other words, there must be mutual assent by both parties—principal and agent—to the relationship.

Question 4

When a principal is an employer of the agent, the agent is either an ________ or ________ _________.

Answer 4

employee or independent contractor.

Question 5

CLIPS PTSD (agency - factors to determine whether agent is employee or independent contractor)

Answer 5

C = Control principal exerts over agent
L = Length of time agent engaged by principal
I = Intent to create employment relationship or independent contractor
P = Payment by the job or by the hour
S = Suppling tools for work and place of performance

P = Principal is in business
T = Type of work agent is doing is customarily done under the supervision of principal
S = Skill of agent
D = Distinct occupation or business of agent

Question 6

The concept of “agency by ratification” refers to the ___________creation of an agency relationship.

Answer 6

post-hoc

Question 7

T or F Only transactions entered into on behalf of another, or purportedly entered into on behalf by another, can be ratified.

Answer 7

True

Question 8

an actual principal-agent relationship is retroactively created when?

Answer 8

When a party, without authority, enters into a contract on behalf of another, and this other party thereafter affirms or ratifies this transaction on its behalf, an actual principal-agent relationship is retroactively created.

Question 9

Duties Owed by Agents to Principals

Answer 9

Duty of Care

Duty of Loyalty

Question 10

Agents owe their principals a duty of care.

Pursuant to this duty of care, an agent must:

Answer 10

follow the principal’s instructions;

indemnify the principal against loss caused

Question 11

Agents owe their principals a duty of loyalty.

Pursuant to this duty of loyalty, an agent acting on the principal’s behalf must:

Answer 11

avoid self-dealing; and

neither compete with the principal nor usurp business opportunities belong-ing to the principal.

Question 12

In determining whether an employee’s conduct is within the scope of employment, some fac-tors to be considered include:

Answer 12

(1) Is the conduct the kind of work the em-ployee was hired to perform;
(2) did the conduct occur substantially within the time and space authorized by the employer; and
(3) was the conduct was in-tended to serve the interests of the employer.

Question 13

Employee’s negligence

(a) The liability of an employer for its employee’s negligence is limited to actions that occur

Answer 13

within the employee’s scope of employment.

Question 14

To enter into an agency relationship, the would-be AGENT must have:

To enter into an agency relationship, the would-be PRINCIPAL must have:

Answer 14

at least minimum mental capacity.

the contractual capacity to effect transactions.

Question 15

An employer-employee relationship exists where the employer: has the right to

Answer 15

has the right to control, or controls the agent’s performance or the means and manner in which the sought after results are achieved.

Question 16

An employer-independent contractor relationship exists where the employer:

Answer 16

determines what services that the agent is to perform but not how the agent performs the services.

Question 17

To grant authority retroactively to a purported agent who had entered into a contract on its behalf, the would-be principal must: have knowledge at the time of ratification of all?

To ratify the actions of an agent or purported agent, the principal must manifest assent, by word or conduct, that:

Answer 17

knowledge, at the time of ratification, of all material facts concerning the transaction entered into on its behalf.

the agent’s earlier unauthorized transaction is now binding on the principal so as to impact the principal’s legal relationships.

Question 18

Ratification requires that the would-be principal have requisite capacity to author-ize the agent’s actions at the time of _________.

T or F It is not necessary for ratification that the principal have had capacity as well at the time of the act that the ratification concerns.

Answer 18

ratification.

True

Question 19

Agents owe their principals a duty of care.

Pursuant to this duty of care, an agent must:

Answer 19

follow the principal’s instructions;

perform any service or task within the scope of the agency with reasonable care;

indemnify the principal against loss caused by: the agent’s failure to act with reasonable care (when that failure occurs within the scope of the agency.)

Question 20

Agents owe their principals a duty of loyalty.

Pursuant to this duty of loyalty, an agent acting on the principal’s behalf must:

Answer 20

prefer the interests of the principal over those of the agent or others

avoid self-dealing; and

Not compete with the principal nor usurp business opportunities belong-ing to the principal.

Question 21

Agents have a duty to account for:

b. Agents have a duty to keep separate the:
c. Agents have a duty of candor, which requires them to:

Answer 21

a. money or property received on behalf of a principal
b. principal’s assets from their own assets.
c. fully disclose to a principal relevant to a transaction that the principal would reasonably want to know.

Question 22

Duties Owed by Principals to Agents

1. Duty of Compensation
   a. RULE: Even if the agency agreement does not specifically provide for compensation for the agent, the principal has a quasi contract duty to:
2. Duty of Reimbursement
   a. RULE: The principal is obligated to reimburse the agent for:

Answer 22

pay the agent the reasonable value of services rendered.
- allows agent to seek restitution

all reasonable expenses incurred in the scope of agency

Question 23

under what circumstances can an agent bind the principal to contracts he enters into on the principal’s behalf?

Answer 23

: When an agent acts within the scope of his authorized power he has the power to bind the principal

Question 24

An agent’s actual authority can be express or implied.

Actual express authority is the authority of the agent to:

Actual implied authority includes the authority of the agent to:

Answer 24

actual authority: do those things that the principal has in an express communication directly authorize the agent to do.

actual implied authority: conduct transactions that are reasonably necessary to fulfill the broader responsibilities given to him by the principal including those incidental to the main business at hand.

Question 25

T or F An agent has no power to bind the principal beyond the actual authority granted the agent granted by the agency relationship.

Answer 25

True

Question 26

By ratifying a transaction entered into on its behalf, a principal retroactively grants the agent the authority to act on the principal’s behalf and effectively agrees to be bound by the contract.
Provided that the principal has knowledge of all material facts, a principal ratifies the otherwise unauthorized transaction entered into by its agent by either:

Answer 26

manifesting assent that the transaction shall affect the principal’s legal relations; or

performing some conduct that is justifiable only on the assumption that the principal consents to be bound.

Question 27

The ______ of __________concept distinguishes between those actions of the employee/agent that are acts authorized by the employer/principal and those acts that are not so authorized.

NOTE: The distinction is important because questions concerning a principal’s potential liability to third parties will often turn on whether the agent’s actions were or were not authorized by the principal.

Answer 27

Scope of Employment

Question 28

An employee acts within the scope of employment when the employee: per-forms tasks authorized by the employer or any acts that are incidental to the conduct authorized

Acts that are incidental to the conduct authorized—and so, within the scope of employment—are acts that:

Answer 28

might ordinarily accompany the authorized con-duct and even if disobedient serve the purposes of the employer.

Question 29

In determining whether an employee’s conduct is within the scope of employment, some factors to be considered include:

Answer 29

(1) the extent to which the conduct is the kind of work the employee was hired to perform;
(2) the extent to which the conduct occurred substantially within the time and space authorized by the employer; and
(3) the extent to which the conduct was in-tended to serve the interests of the employer.

Question 30

Agent’s Tort Liability to Third Parties
a. Agents will be liable to third parties for harm caused by their negligence or by their intentionally tortious conduct: whether or not they are?

Answer 30

whether or not they are acting within the scope of the agency

Question 31

1. A fully disclosed principal is a principal whose existence and identity are known to the third party. In general, if an agent enters into a contract on behalf of a fully disclosed principal will the agent be personally liable?
2. RULE: In general, if an agent enters into a contract on behalf of a partially disclosed or undisclosed principal will their agent be personally liable?

Answer 31

1. No, the agent will NOT be personally liable on the contract. Note: the principal would be liable
2. Yes, their agent will be personally liable on the contract (along with the principal).

Question 32

How is a principal liable for their agent as an employee?

Answer 32

A principal is liable to a third party for harm caused by the principal’s negligence in selecting, training, retaining, supervising, or otherwise controlling the agent

Question 33

Under the doctrine of respondeat superior, vicarious liability generally attaches where:

NOTE: remember respondeat superior is a strict liability doctrine. the principal’s due diligence is not a defense.

Answer 33

the principal has a right to control the agent and the agent’s actions are within the scope of the agency.

Question 34

The liability of an employer for its employee’s negligence is limited to actions that occur

Answer 34

within the scope of employment

Question 35

Employers will not be held liable for the ________torts of an employee.

Answer 35

intentional

Question 36

As an exception to the general rule, Employers will be held liable for the intentional tort of an employee if the employee’s intentional tort is accomplished:

If the employer instructs the employee NOT to use force is that a defense?

Answer 36

in the course of doing the employer’s work and for the purpose of accomplishing such work.

Generally no defense that the employer that instructed the employee not to use force.

Question 37

T or F A principal is not liable for damages resulting from the tortious conduct of an inde-pendent contractor.

Answer 37

True

Question 38

Generally a principal is liable to contracts with third parties entered into by agent when their agents act with _______ __________ to enter those contracts on their behalf.

Answer 38

actual authority (express or implied)

Question 39

Principals will be liable on a contract when an authorized agent enters into a contract on the principal’s behalf WITHOUT DISCLOSING the PRINCIPAL. In this circumstance, the principal’s liability comes into play if,

Answer 39

after the transaction, the third party discovers the identity of the undisclosed principal.

Question 40

When no agency relationship has been created by the mutual consent of an agent and principal or where an agent acts beyond the scope of his actual authority, a court may use the doctrine of “_________ ________” to hold a person liable to a third party for the acts of another as if this person were a principal to an agent who acted with actual authority

Answer 40

“apparent authority”

Question 41

A party will be bound as if it were a principal to an agent who acted with actual authority, when: that party’s words, actions, or failure to act causes

Answer 41

a third party to reasonably but mistakenly believe that another acts as its authorized agent.

Question 42

The “apparent authority” of an agent is created by:

Answer 42

the supposed principal’s conduct—not the conduct or representations of the supposed agent alone.

Question 43

What are the elements of apparent authority:

Answer 43

(1) the person (3rd party) dealing with the agent must do so with a reasonable belief that the agent had actual authority to enter into the contract and
(2) the belief must be generated by some act or neglect on the part of the principal

Question 44

explain ratification and its effect

Answer 44

even if the agent did not have authority to enter into a transaction, the principal can ratify the acts (and thus become liable) by expressly or impliedly affirming or accepting the benefit of the acts, so long as the principal knew the material facts and had capacity.

Question 45

If an agent enters into a contract with a 3rd party with no actual or apparent authority, what is the legal effect?

What is the legal effect if the agent enters into a contract with a 3rd party when the principal is undisclosed?

What is the agent’s liability if he acts beyond this authority?

Answer 45

The agent is bound to a third party on a contract he enters into with the third party if the agent had no actual or apparent authority to enter into the contract.

The agent is also liable if the principal is undisclosed (i.e., the third party does not know the agent is acting on another’s behalf) or if the principal is “partially disclosed” (i.e., the third party knows the agent is acting on behalf of another but does not know the identity of the principal).

The agent is bound to the principal for breach of contract if the agent acts beyond his authority

Question 46

Vicarious liability of employer (respondeat superior): The employer is liable in tort for the acts of an agent or employee if the agent or employee (mnemonic=SMI)

Answer 46

S- was acting in the Scope of employment;

M- made a minor deviation (a detour) from employment (rather than a frolic);or

I- committed an intentional tort only if it was (mnemonic=BAN) for the principal’s Benefit,
because the principal Authorized it, or one that arose Naturally due to the nature of employment. The agent is liable too under a theory of joint and several liability.

Question 47

Indemnification: the principal can recover against the agent for ______________ if the agent acts beyond his authority

Answer 47

indemnification

Question 48

Direct liability of principal: the principal is directly liable for his own negligence if he negligently

Answer 48

hired the agent, failed to fire the agent, or failed to properly supervise the agent.

Question 49

The agent owes a duty of care and a duty of loyalty (not to engage in self-dealing, not to profit without disclosure, and a duty to follow instructions). The principal may recover

Answer 49

losses from and profits made by the breaching agent

Question 50

OATS (agency - differentiating between frolic and detour)

Answer 50

O = Occurred before or after the employer's objective was served
A = Advancement of employer's interests
T = Type of employment
S = Scope of deviation in terms of time and distance