Agency Flashcards
***Definition of Agency
Is a fiduciary relationship, where a person or entity (agent) acts on behalf of another (principal).
***Elements of Agency Relationship
Agency Relationship Exists if:
- Assent - a formal or informal agreement;
- Benefit - the conduct mostly benefits principal; AND
- Control - principal has the right to control the agent (does not need to be significant)
*Types of Agency Relationships
- Universal Agent
- General Agent
- Special Agent
*Universal Agent
Has BROAD AUTHORITY, authorized for ALL acts the principal can perform
*General Agent
Has authority to conduct a SERIES OF TRANSACTIONS over a period of time.
*SPECIAL AGENT
Has limited authority either for a specific act/transaction OR specified period
**Termination of Agency Relationship
Agency relationship terminates by:
a) Manifestation by either party that the relationship has terminated;
b) expiration of a specified term;
c) death
OR
d) Incapacity of principal or agent - except if a durable power of attorney exists
**Death of Principal
Common Law -> Agency is terminated regardless of whether the 3rd party has notice of principal’s death
Some states -> NOT terminated until the 3rd party has notice of the death
**Agency Contracts - Principal can terminate the agent any time BUT…
principal may be liable for damages if agent is terminated prior to the expiration of a contract (unless agent materially breached contract).
***Actual Authority
A principal is bound to a contract entered into by its agent if the agent had actual authority
***Two types of Actual Authority
Express Authority
Implied Authority
***Express Authority
By principal’s explicit directions to the agent (orally or writtten)
***Implied authority
a) action is necessary to carry out the agent’s expressed authorized duties;
b) agent acted similarly in prior dealings with the principal;
OR
c) it’s customary for an agent in that position (silence/acquiescence can give rise to a reasonable belief of authority in the future)
***Apparent Authority
A principal is bound to a contract entered into by its agent if the agent had apparent authority
***Apparent authority exists when:
1) a 3rd party reasonably believes the agent has authority to act on behalf of principal
AND
2) that belief is traceable from the principal’s manifestations (principal holds the agent out as having authority)
***A principal holds the agent out as having authority when he:
a) gives a position or title indicating authority;
b) previously held the agent out and did not publish a revocation;
OR
c) cloaked the agent with the appearance of authority
-> continues until the principal communicates termination to 3rd parties
***Apparent authority is NOT applicable if:
The 3rd party had knowledge that the agent did not have actual authority
***Unidentified/Partially Disclosed Principal
Apparent authority CAN exist
***Undisclosed Principal
Apparent authority CANNOT exist
**Inherent Agency Power
Protects third-parties when dealing with agents even if there is no actual or apparent authority.
**Two Groups of Inherent Agency Power
FIRST GROUP - Subjects an employer to liability when:
1) agent acts in furtherance of employer’s business; AND
2) his conduct harms a third-party
SECOND GROUP - If an agent violate’s the principal’s orders and there is no actual/apparent authority, inherent agency applies when:
1) agency relationship exists; AND
2) agent engaged in acts that are generally of a kind that would fall within his actual authority, but for the violation of principal’s instructions.
Concept of Inherent Agency Power was…
eliminated in the Restatement (third) of Agency.
**Ratification
Makes the principal liable for an agent’s contract entered into without authority.
Ratification occurs when the Principal:**
1) Has knowledge of all the material facts or contract terms; AND
2) Assents (approves) to the same through words or conduct
*Agent also remains liable if principal was not disclosed.
