Agency

Question 1

What type of writing is required to create an agency relationship?

Answer 1

Writing is not required! Agency can be created by agreement by parties.

Question 2

What is required for the creation of an agency relationship?

Answer 2

Creation of an agency relationship requires consent and control. Consent- parties expressly or impliedly agree to enter into an agency relationship. Control- the agent is subject to the principal’s control.

Question 3

What is an agency relationship?

Answer 3

An agency relationship is one between an agent and a principal whereby the agent acts on the principal’s behalf and is subject to the principal’s control.

Question 4

Termination of an agency relationship can end by _______ or by ____________.

Answer 4

Termination of an agency relationship can end by act or agreement of the parties or by operation of law.

Question 5

Termination of an agency relationship by operation of law can occur where:

Answer 5

1. Agent or principal dies
2. Agent or principal loses capacity
3. Agent materially breaches a fiduciary relationship to the principal.

Question 6

Termination of an agency relationship by the parties occurs when:

Answer 6

1. Party desire- either party manifests to the other the desire to terminate the agency relationship (termination effective when notice is received)
2. Expiration- express terms of the agency expire
3. Purpose fulfilled- the purpose of the agency relationship has been fulfilled

Question 7

What does the principal’s duty of reimbursement cover?

Answer 7

The principal must indemnify agent for all expenses and losses reasonably incurred in carrying out an agent’s duties. This includes legal liability incurred by agent.

Question 8

Does principal’s duty of compensation to agent mean that an agent has to be compensated?

Answer 8

Yes. Unless the agent agrees to act gratuitously, principal owes agent a duty to compensate him regularly.

Question 9

What duties does a principal owe to an agent?

Answer 9

A principal owes a duty compensation, reimbursement, cooperation.

Question 10

What is the agent’s duty to notify? What does it encompass?

Answer 10

As part of the agent’s duty of care, the agent also has a duty to notify the principal of all agency-related matters that come to agent’s attention. All such matters are imputed to the principal.

Question 11

What responsibilities are included in an agent’s duty of care? Under what standard is reasonable care viewed?

Answer 11

An agent must carry out his agency with reasonable care judged in light of local community standards. This includes the duty to notify.

Question 12

What kind of conduct by an agent would breach their duty of loyalty to the principal?

Answer 12

Agent breaches duty of loyalty if he has adverse interests and fails to disclose such interests. Agent cannot act on behalf of two different principals with adverse interests.

Question 13

What duties does an agent owe to a principal?

Answer 13

Loyalty, obedience, care

Question 14

If an agent acting under apparent authority signs a contract on behalf of the principal, how could the agent still be liable to the principal?

Answer 14

Apparent authority will still bind principal to K, but agent may be held liable to principal for acting beyond the scope of her authority.

Question 15

If an agent with actual authority signs a contract with a third party on behalf of principal, but third party doesn’t know of agent’s authority, can the principal still be bound?

Answer 15

Yes, the principal will be bound regardless of whether the third party knew of agent’s authority. Agent cannot be held liable to principal as long as agent acted within the scope of her authority.

Question 16

What are the different ways that an agent can have power to bind principal?

Answer 16

actual authority, apparent authority, or ratification authority

Question 17

When is a principal liable for acts of an agent?

Answer 17

One is generally not liable for the acts of another unless they have made the other person their representative and given the other person the power to bind them.

Question 18

In what ways can actual authority terminate?

Answer 18

Actual authority of any kind can terminate due to lapse of time (specified or unspecified), happening of an agreed-upon event, change of circumstance.

Question 19

What gives rise to an agent’s implied actual authority?

Answer 19

Implied actual authority is authority the agent reasonable believes he has based on the principal’s actions (ie words or conduct)

Question 20

When does an agent have express actual authority?

Answer 20

Expressly provided to agent by principal (ie provided in writing or orally from principal to agent)

Question 21

When does an agent have or act with actual authority?

Answer 21

An agent acts with actual authority when, at the time of taking an act having legal consequences for the principal, the agent reasonably believes that the principal wishes the agent to act.

Question 22

What is the primary difference between actual and apparent authority?

Answer 22

Apparent authority arises from the reasonable belief of third parties, whereas actual authority arises from the reasonable belief of the agent herself.

Question 23

How can inaction by principal give rise to agent’s apparent authority?

Answer 23

Where a duty to act exists that causes a third party’s reasonable believe in agent’s authority (e.g. where principal knows third party wrongly believes agent has authority to act, principal has a duty to correct).

Question 24

When will a principal have held out an agent as having authority to act on principal’s behalf?

Answer 24

“holding out”- principal must affirmatively act or fail to act in a way that causes the third party’s reasonable belief (mere assertion of authority by agent is insufficient to bind principal)

Question 25

When will an agent have apparent authority?

Answer 25

An agent acts with apparent authority if:

1. principal holds agent out as having authority to act on principal’s behalf; and
2. principal’s conduct causes a third party to reasonably rely on the agent’s appearance of authority.

Question 26

Can a principal still be liable for agent’s acts if the agent lacks actual authority?

Answer 26

Even when an agent lacks actual authority, principal can be held liable for agent’s acts if agent acted with apparent authority.

Question 27

If a third party knows that an agent lacks actual authority regarding transaction, can the agent have apparent authority?

Answer 27

if a third party knows that the agent does not have actual authority, apparent authority does not exist

Question 28

What are the requirements for a principal to ratify an agent’s act?

Answer 28

1. Agent purported to act on principal’s behalf
   E.g., entered into K with third party without authority to do so
2. Principal has knowledge of material facts of the act (e.g., K terms)
   Principal must know or reasonably should know of material facts when agent’s act is affirmed/ratified
3. Principal affirmed (i.e., ratified) agent’s conduct
   Affirmance can be express or implied (i.e., conduct by principal consistent with approval of the otherwise unauthorized act)
   If principal accepts benefits of the agent’s act when it is still possible to decline, principal will be deemed to have ratified agent’s act

Question 29

Can a principal ratify an agent’s act without having any knowledge of material facts of the act?

Answer 29

Affirmation can be express of implied (ie conduct by principal consistent with approval of the otherwise unauthorized act)

Question 30

Can a principal ratify an agent’s act without explicitly stating that they authorize or affirm agent’s act?

Answer 30

Affirmance can be express or implied (i.e., conduct by principal consistent with approval of the otherwise unauthorized act)

Question 31

If a principal accepts benefits of an agent’s unauthorized act, will principal have ratified the act?

Answer 31

If principal accepts benefits of the agent’s act when it is still possible to decline, principal will be deemed to have ratified agent’s act

Question 32

If a principal ratifies an agent’s act, what liability does principal accept?

Answer 32

Effect of ratification — principal who ratifies an agent’s unauthorized act becomes liable to third parties for those acts

Question 33

What is the primary factor that determines principal’s and agent’s liability to a third party with whom agent enters into a K on principal’s behalf?

Answer 33

Upon establishment of a valid K entered by agent with a third party on principal’s behalf, the liabilities of principal and agent to third party depend on whether principal was disclosed to the third party

Question 34

Where agent enters into a K on behalf of a principal who was disclosed to third party, are principal and agent both liable to third party?

Answer 34

Disclosed principal — where third party knows of principal’s existence and identity

• Principal is liable, agent is not liable
• Only principal, not the agent, can enforce the K

Question 35

If an agent enters a K with a third party on behalf of a disclosed principal, what powers does agent have to enforce the K?

Answer 35

Only principal, not the agent, can enforce the K

Question 36

If an agent enters a K on behalf of an undisclosed or unidentified principal, is agent or principal liable on the K? Can either enforce it?

Answer 36

both agent and principal are liable to third party and either can enforce the K

Question 37

If an agent enforces a K entered with a third party on behalf of principal, who is entitled to the K’s rights and benefits?

Answer 37

if agent enforces the K, principal is entitled to all rights and benefits under the K

Question 38

What is the difference between an undisclosed and unidentified principal?

Answer 38

Undisclosed principal = third party does not know of principal’s existence or identity

Unidentified principal = third party knows that a principal exists, but does not know her identity

Question 39

Under what doctrine may principals be held liable to third parties for torts committed by agents or employees?

Answer 39

Respondeat superior — doctrine under which principal liability arises for torts committed within the scope of agency/employment

Question 40

Can a principal ever be liable for a tort committed by an employee outside the scope of their employment?

Answer 40

For torts committed outside that scope (i.e., respondeat superior does not apply) principal can be liable if agent acted with authority

Question 41

What must be established for a principal to be held liable for employee’s torts?

Answer 41

Principal will be liable where:

1. employer-employee relationship exists between principal and party who caused the injury
2. tortious conduct was committed within the scope of employment

Question 42

When is a tort committed by an agent or employee considered within the scope of their agency/employment?

Answer 42

Tort is within the scope of employment if:
Conduct was the same or similar in nature to that which the employee was hired to perform, and/or
Tort was committed in service of employer and/or to further employer’s goals

Question 43

Can employers ever be liable for intentional torts committed by employees? If so, when?

Answer 43

Intentional torts — employer is usually not liable b/c intentional torts are usually outside the scope of employment
Exception — employer can be held liable where intentional tort occurs as a natural incident to carrying out employer’s business

Question 44

Are principals usually held liable for acts committed by independent contractors? Why or why not?

Answer 44

Principals are generally not liable for acts committed by independent contractors (“ICs”) b/c their work is outside the scope of an employment/servant-type agency relationship

Question 45

When does an agent have a reasonable belief that she has implied authority?

Answer 45

PANCake tasks- Prior Acceptance, Necessity or Custom

Question 46

When is something in the scope of employment?

Answer 46

Absolutely Terrific Professional Person- act, time, place, purpose