Agency

Question 1

***Definition of Agency

Answer 1

Is a fiduciary relationship, where a person or entity (agent) acts on behalf of another (principal).

Question 2

***Elements of Agency Relationship

Answer 2

Agency Relationship Exists if:

1. Assent - a formal or informal agreement;
2. Benefit - the conduct mostly benefits principal; AND
3. Control - principal has the right to control the agent (does not need to be significant)

Question 3

*Types of Agency Relationships

Answer 3

• Universal Agent
• General Agent
• Special Agent

Question 4

*Universal Agent

Answer 4

Has BROAD AUTHORITY, authorized for ALL acts the principal can perform

Question 5

*General Agent

Answer 5

Has authority to conduct a SERIES OF TRANSACTIONS over a period of time.

Question 6

*SPECIAL AGENT

Answer 6

Has limited authority either for a specific act/transaction OR specified period

Question 7

**Termination of Agency Relationship

Agency relationship terminates by:

Answer 7

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

Question 8

**Death of Principal

Answer 8

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

Question 9

**Agency Contracts - Principal can terminate the agent any time BUT…

Answer 9

principal may be liable for damages if agent is terminated prior to the expiration of a contract (unless agent materially breached contract).

Question 10

***Actual Authority

Answer 10

A principal is bound to a contract entered into by its agent if the agent had actual authority

Question 11

***Two types of Actual Authority

Answer 11

Express Authority

Implied Authority

Question 12

***Express Authority

Answer 12

By principal’s explicit directions to the agent (orally or writtten)

Question 13

***Implied authority

Answer 13

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)

Question 14

***Apparent Authority

Answer 14

A principal is bound to a contract entered into by its agent if the agent had apparent authority

Question 15

***Apparent authority exists when:

Answer 15

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)

Question 16

***A principal holds the agent out as having authority when he:

Answer 16

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

Question 17

***Apparent authority is NOT applicable if:

Answer 17

The 3rd party had knowledge that the agent did not have actual authority

Question 18

***Unidentified/Partially Disclosed Principal

Answer 18

Apparent authority CAN exist

Question 19

***Undisclosed Principal

Answer 19

Apparent authority CANNOT exist

Question 20

**Inherent Agency Power

Answer 20

Protects third-parties when dealing with agents even if there is no actual or apparent authority.

Question 21

**Two Groups of Inherent Agency Power

Answer 21

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.

Question 22

Concept of Inherent Agency Power was…

Answer 22

eliminated in the Restatement (third) of Agency.

Question 23

**Ratification

Answer 23

Makes the principal liable for an agent’s contract entered into without authority.

Question 24

Ratification occurs when the Principal:**

Answer 24

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.