Agency Flashcards
creating an agency relationship
(ABC)
- assent: both parties manifest assent to work with one another (range from formal letter to spoken words to physical actions)
- benefit: the agent agrees to work for the principal’s benefit
- control: the agent agrees to work subject to the control of the principal
*there is no consideration required
principal
any person or entity that has legal capacity can be a principal
-excludes minors & those incapacitated by illness/intoxication
entities that can be principals: employer, corporation, LLC, partnership, LLP
employers exert day-to-day control over employees:
-giving them tools, paying them on pay period, and directing how they should perform tasks
*unincorporated associations cannot be principals bc they lack legal capacity
agent
any person or entity who has minimal capacity
-including a minor
must be able to:
- assent to agency relationship
- perform tasks on behalf of principal, and
- be subject to the principal’s control
servants/employees: employer has the right to control agent’s physical conduct of work
independent contractor: principal does not control/have right to control agent’s physical conduct of work
- maintain high level of independence
- free to work for others
- paid fixed fee
- typically owns tools
terminating agency relationship
either party can terminate it unilaterally
contract liability overview
principal is bound on a contact agent enters into when:
-principal authorized the agent to enter into the contract & agent acted with legal authority
- actual express authority
- actual implied authority
- apparent authority
- estoppel
- ratification
actual express authority
principal uses words, written or spoken, to convey authority to agent
requisite intent:
- subjective intent: agent must believe he’s doing what principal wants him to
- objective intent: the belief must be objectively reasonable
termination by death:
- when principal dies, actual express authority terminates when agent has ACTUAL KNOWLEDGE of principal’s death
- when agent ties, actual express authority terminates IMMEDIATELY
actual implied authority
principal uses words, written or spoken, or other conduct to convey authority to agent to take whatever steps are necessary to achieve principal’s objectives
agent has implied authority to act within the accepted business custom or general trade usage
apparent authority
*look to communication btw principal & 3rd party
principal uses words, written or spoken, that cause the 3rd party to reasonable believe that the principal consents to have acts done on the principal’s behalf by the agent
-is the third party’s belief reasonable? have the principal and third party had similar dealings before?
*If the principal is undisclosed, there cannot be apparent authority.
If there is apparent authority, the principal is a party to the contract
Estoppel
Principal is prevented from denying liability if he failed to take reasonable steps and use ordinary care to inform a third party of the lack of authority
e.g. P has two co-agents, A and B. P learns that B, acting without actual or apparent authority, is informing P’s neighbors that A has the authority to sell P’s ring, which P has specifically forbidden A from doing. P’s next-door neighbor purchases P’s ring from A, in justifiable reliance on B’s representation as to A’s authority. P, in her suit to rescind the sale, may be estopped (prevented) from denying B’s authority to make the representation as to A’s authority.
An undisclosed principal may not rely on instructions given to an agent that qualify or reduce the agent’s authority to less than the authority a third party would reasonably believe the agent to have under the same circumstances if the principal would have been disclosed.
E.g. Scott’s limiting instruction reduced Ruth’s authority, as restaurant manager, to less than the authority Wholesale could reasonably believe Ruth to have under the same circumstances if the principal had been disclosed. It was reasonable for Wholesale to believe Ruth was authorized to make the contracts in her capacity as restaurant manager. Therefore, Scott might be held liable on the contract based on an estoppel of undisclosed principal theory.
Termination of Authority
Principal has the power to terminate the agency relationship at any time
- Actual authority: simply tell the agent that authority is revoked
- Apparent authority: must tell the third party that authority is revoked
ratification
*no pre-act communication to consider
ratification requires that:
- the principal has knowledge of the material terms of the contract, &
- the principal then accepts the contract’s benefits
*note: regardless of whether principal is liable, agent may still be liable for violating K or committing a tort
disclosure of principals & effect on agent’s liability
three types of principles:
1. disclosed principals: third party knows agent is acting on behalf of principal, & principal’s identity
- partially disclosed principal: third party knows agent is working on behalf of principal, but not identity of principal
- undisclosed principal: third party knows neither agent’s status as agent nor principal’s identity
*A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity. Unless the agent and the third party agree otherwise, an agent who enters into a contract on behalf of a partially disclosed principal becomes a party to the contract.
*An agent is not a party to a contract if the agent discloses the existence and identity of the principal. However, an agent purporting to be acting for a principal gives an implied warranty of authority to the third party. If the agent lacks the power to bind the principal, then a breach of the implied warranty has occurred, and the agent is liable to the third party UNLESS the agent acted with apparent authority.
*A principal is undisclosed if the third party has no notice of the principal’s existence. An agent who enters into a contract on behalf of an undisclosed principal becomes a party to the contract. If the agent had the authority to bind the principal to the contract, then both the principal and the agent are parties to the contract with the third person (both liable but other party to contract can only recover against one).
tort liability overview
- vicarious liability
- intentional torts
- *and perhaps apparent authority
vicarious liability (respondeat superior)
a principal may be liable for the tortious acts of his agent
- principal has sufficient control over agent’s conduct such that agency relationship is employer-employee
- tort committed by agent was committed while agent was acting within the scope of his employment
sufficient control: principal who controls (or has right to control) the physical conduct of the agent’s performance of work is employer-employee status
principal does NOT have vicarious liability for torts committed by independent contractor, UNLESS:
- task is inherently dangerous
- principal was negligent in hiring IC
- principal retains control over certain tasks & tort occurs within those tasks
scope of employment:
- agent intends to benefit principal
- agent’s conduct was of kind he was hired to perform
- tort occurred “on the job”
- frolic (significant deviation) is outside scope of employment, but detour (slight deviation) is within scope of employment (*the injury must occur while participating in the frolic for the principal to escape liability, not after the frolic is over)
*quick note on apparent authority: A principal is liable for a tort committed by an agent with apparent authority when the agent’s appearance of authority enables him to commit a tort or conceal its commission. For apparent authority to exist, a third person must believe that the agent acted with actual authority, and such belief must be reasonable and be traceable to a manifestation by the principal.
***The question of whether the principal is liable for independent contractor’s negligence and injuries caused a reslt of neglice are different
-A principal can be vicariously liable when an agent is acting with apparent authority and commits a tort and their appearance of authority allowed them to do so. The third party must believe that the agent was acting with actual authority and that belief must be reasonable and traceable to a manifestation made by the principal.
-A principal is directly liable to a third person harmed by an agent’s conduct when the principal is negligent in selecting, supervising, or controlling the agent.
*An employee who disregards an employer’s instructions or violates a generally applicable law, such as a speed limit, is not necessarily acting outside the scope of employment.
intentional torts
generally, intentional torts are outside the scope of employment, so no liability for principal, UNLESS:
- conduct occurred within the general space & time limits of employment
- agent was motivated in some part to benefit the principal, or
- the act is of a kind that the agent was hired to perform
