Agency

Question 1

Actual and Apparent Authority [MOST HIGHLY TESTED]

Answer 1

An agency is a fiduciary relationship created by express or implied contract or by law in which a party ( the agent) may act on behalf of another party ( the principal) and bind that other party by words or actions. An agent’s authority may be actual or apparent. Actual authority can be express or implied (based on principal’s conduct). Apparent authority exists when a 3rd party dealing with the agent believes the agent had authority, the belief stems from an act or neglect by the principal and the 3rd party is not negligent themselves.

Question 2

Ratification*

Answer 2

Ratification occurs when an agent does not have authority to enter into K, or exceeds actual or apparent authority, but afterwards, the principal expressedly or impliedly affirms or accepts the benefit of it. The act of the agent can bind the principal if he ratifies it.

Question 3

Torts & Vicarious Liability*

Answer 3

The law states that a Principal is vicariously liable for the acts of their agent if they occur during the course of the agency. A principal is generally not liable for the intentional torts of their agent unless the tort naturally arose due to the nature of the agency, there was a benefit to the principal or the agent had the principal’s authorization.

Question 4

Duty of Good Faith

Answer 4

An agent owes a duty of good faith to the principal and can’t act for themselves at the expense of the principal during the course of the agency.