Agency

Question 1

What is an agency relationship?

Answer 1

An agency relationship arises when one party (agent) may act on behalf of another (principal), and bind them.

This relationship requires consent, and an agent subject to the principal’s control.

Question 2

Who is NOT an agent?

Answer 2

Independent Contractors (Factors: provision of tools, flexibility of schedule, method of payment, etc.)

Principal is only liable for an IC’s torts if:

1. Non-Delegable duty
2. Estoppel (reliance by 3rd party)

Question 3

Liability on Contracts Entered by Agents

Answer 3

Principal is liable as long as the agent has some kind of authority.

1) Actual Authority
2) Apparent Authority
3) Ratification

Question 4

Actual Authority

Answer 4

Actual authority can be express or implied.

1. Express: agent is expressly authorized to act for principal.
   This terminates with:
   A. Act of either party; or
   B. Death/incapacity of principal

2. Implied: principal's conduct led agent to believe he had authority (formed by custom, past conduct, emergency, etc.)
Terminates by:
A. After a reasonable time
B. Change in circumstances
C. Agent acquires adverse interest
D. Either party ends it
E. Death, incapacity or bankruptcy

Question 5

Apparent Authority

Answer 5

Apparent authority requires three elements:

1. Person dealing with agent reasonably believes agent has authority
2. Their belief is from an act/neglect of the principal; and
3. Person relying on the agent’s authority is not himself negligent.

Example
Barb, party planner, agrees to visit John to discuss maybe becoming his party planner. On the way, she orders a cake and balloons. There is no apparent authority, because John did not do anything to make the cake shop believe Barb had authority (they had not yet met or entered the contract).

Question 6

Ratification

Answer 6

Agent has no authority, but principal ratifies their acts by accepting its benefit.

If principal knew the material facts and did not do anything about it, he likely ratified it.

Question 7

Liability in Agency Contracts

Answer 7

1. Principal is Disclosed
   - Agent w/ authority or ratification: not liable
   - Agent w/o authority or ratification: liable
   - Principal: liable if agent had authority, but can seek indemnification from the agent.
2. Principal is Undisclosed
   - Agent is a party to the contract and therefore liable
   - Principal is not liable at all
3. Principal is Unidentified
   - Both agent and principal may be liable if agent had authority

If Agent has authority, but acts beyond its scope, the principal can sue for breach of contract.

Question 8

Liability on Torts by Agent

Answer 8

A principal will be liable for the torts of his agent on two grounds:

1. Vicarious liability
2. Direct liability

Question 9

Torts: Vicarious Liability

Answer 9

A principal is liable in tort for their agent’s tort if the agent was:

1. Acting within the scope of employment
2. Made a minor deviation (not major) from employment
3. Or committed an intentional tort that was:
   i. For principal’s benefit
   ii. Authorized by the principal
   iii. Was a foreseeable part of the employment

Examples

1. Pizza driver is in accident during delivery
2. Pizza driver stops at friend’s house and trespasses
   3i. Security guard punches customer in face
   3ii. Employer instructs guards on chokeholds
   3iii. Guard handcuffs shoplifter too tightly.

Liability
Agent: for their own torts and to principal under J&S liability.
Principal: can recover against agent and seek indemnification.

If a third-party releases the agent from liability, the principal is also released.

Question 10

Torts: Direct Liability

Answer 10

Principal is directly liable for his own negligence in failing to hire, fire, or supervise an agent.

Question 11

Duties Owed by Agent to Principal

Answer 11

1. Care
2. Loyalty
3. To Obey Instructions