Agency

Question 1

What is an agency relationship?

Answer 1

Voluntary, fiduciary relationship between a principal and an agent.

Principal authorizes Agent to act on Principal’s behalf.

Question 2

Gratuitous Agency

Answer 2

Principal doesn’t compensate Agent for his work on Principal’s behalf

Question 3

Contractual Agency (examples)

Answer 3

(1) Employer-employee, or (2) employer-independent contractor

Question 4

Employer-employee relationship

Answer 4

Employer has the right to control what Employee does and how Employee does it

Question 5

Employer-independent-contractor relationship

Answer 5

Employer has the right to control only what Agent does, but not how the independent contractors does it

(I.e., the independent contractor controls the means of accomplishing the end )

Question 6

Factors to determine the employer’s right to control:

Answer 6

• Whether the work is typically performed by specialists without supervision
• Who supplies Agent with tools and a place to perform the work
• Length and exclusivity of the employment relationship
• Whether Agent was paid by the job (more likely to be an independent contractor) or at regular intervals (more likely to be an employee)
• Whether the work is part of Employer’s regular business

Question 7

Requirements for creating an agency relationship?

Answer 7

• Principal must manifest an intent to grant authority to Agent to act (1) on Principal’s behalf and (2) subject to Principal’s control
  
  • Principal’s requisite capacity = Contractual capacity (capacity to enter transactions, control one’s business affairs)
• Agent must consent to Principal’s grant of authority (i.e., act on Principal’s behalf and subject to her control)
  
  • Agent’s requisite capacity to consent = Minimum mental capacity

Principal and Agent can manifest intent and consent expressly (written or spoken words) or impliedly (by conduct)

Question 8

Agency by Ratification

Answer 8

Post hoc creation of an agency relationship

Question 9

Requirements for Agency by Ratification

Answer 9

At the time of ratification, Principal must:

• have requisite contractual capacity to authorize Agent’s actions
  
  • Principal must have had capacity only at the time of ratification, not at the time of the purported agent’s act that is being ratified
• have knowledge of all material facts concerning the transaction, and
• manifest assent (by words or conduct) that the purported agent’s unauthorized transaction is now binding on the principal

Question 10

Duties owed by Agent to Principal

Answer 10

• Duty of Care
• Duty of Loyalty
• Duty to account for money or property received on Principal’s behalf
• Duty to keep Principal’s assets separate from Agent’s assets
• Duty of Candor

Question 11

Duty of Care

Answer 11

Agent must:

• follow Principal’s instructions,
• perform duties with reasonable care, and
• indemnify Principal for loss caused by Agent’s failure to act with reasonable care

Question 12

Duty of Loyalty

Answer 12

Agent must:

• prefer Principal’s interests over Agent’s interest or the interests of others,
• avoid self-dealing, and
• neither compete with Principal nor usurp business opportunities belonging to Principal

Question 13

Duty of Candor

Answer 13

Fully disclose all relevant facts of which Principal would reasonably want to know

Question 14

Duties owed by Principal to Agent

Answer 14

• Duty of Compensation
• Duty of Reimbursement

Question 15

Duty of Compensation

Answer 15

Pay Agent the reasonable value of services rendered (unless agreed otherwise)

Question 16

Duty of Reimbursement

Answer 16

Reimburse Agent for all reasonable expenses incurred in the scope of the agency relationship

Question 17

When does an Agent’s acts have the power to bind the Principal?

Answer 17

An agent has the power to bind a principal when they act with actual or apparent authority.

Question 18

Actual Authority

Answer 18

Actual authority exists when a principal makes a manifestation that causes the agent to reasonably believe that the agent is authorized to act on the principal’s behalf.

Actual authoirty can be either express or implied.

• Express = Authorization by Principal’s oral or written words
• Implied = Authority to conduct transaction reasonably necessary to carry out Agent’s express authority

Question 19

Apparent Authority

Answer 19

Apparent authority exists when a third party reasonably relies on manifestations by the principal concerning the agent’s authority to act on his behalf.

Question 20

Undisclosed Principal

Answer 20

A principal is undisclosed if the third party has no knowledge of the principal’s existence.

An agent who enters into a contract on behalf of an undisclosed principal becomes party to that contract.

Question 21

Partially Disclosed Principal

Answer 21

A principal is partially disclosed if the third party knows of the principal’s existence but not identity.

Unless the agent and third party agree otherwise, an agent who enters into a contract on the behalf of a partially disclosed principal becomes liable on the contract.

Question 22

Requirements to Ratify Contract

Answer 22

Principal ratifies an unauthorized transaction entered into by Agent if Principal has knowledge of all material facts and:

• manifests assent to the transaction, or
• performs some conduct indicating Principal consents to the transaction

Question 23

Scope of Employment

Answer 23

(1) Tasks authorized by Employer

• Factors—The extent to which the conduct:
  
  • is the kind of work Employee was hired to perform
  • occurred within the time and space authorized by Employer
  • was intended to serve Employer’s interests

(2) acts incidental to the conduct authorized
* Acts that ordinarily accompany the authorized conduct and serve Employer’s interest

Question 24

Principal’s Contractual Liability to Third Parties

Answer 24

• Agent acts with Actual Authority
  
  • Principal is liable on contracts when Agent acts with actual authority (express or implied)
  • If Principal is undisclosed, P is liable if, after the transaction, the third party discovers Principal’s identity
• Agent acts with Apparent Authourity
  
  • A party is bound as a principal if that party’s words, acts, or failures to act cause the third party to reasonably but mistakenly believe the putative agent was authorized to act
  • NOTE: Apparent authority is created by Principal’s conduct, not Agent’s conduct
  • apparent authority can’t be applied when Principal is undisclosed

Question 25

Agent’s Tort Liability to Third Parties

Answer 25

Agent is liable to third parties for harm cause by negligence or intentionally tortious conduct (whether acting within scope of agency relationship)

Question 26

Principal’s Tort Liability to Third Parties

Answer 26

• Principal’s Negligence
• Principal’s Vicarious Liability for Agent’s Torts

Question 27

Principal’s Negligence

Answer 27

Principal is liable for harm caused by his negligence in selecting, training, retaining, supervising, or otherwise controlling Agent

Question 28

Respondeat Superior

Answer 28

Generally, Principal is vicariously liable where Principal controls Agent and Agent’s actions are within the scope of the agency relationship

Question 29

Respondeat Superior in Employer-Employee relationships

Answer 29

• Employee’s negligence = Liable for acts that occur within the scope of employment
• Employee’s intentional torts = Not liable unless the tort is accomplished:
  
  • in the course of doing work for Employer, and
  • for the purpose of accomplishing work for Employer

Question 30

Respondeat Superior in Employer/Independent contractor relationships

Answer 30

Generally, Employer isn’t liable for torts committed by independent contractor

Question 31

Fully Disclosed Principal

Answer 31

Third party knows of existence and identity of Principal

• Agent is not liable on a contract entered on behalf of a fully disclosed principal