Agency

Question 1

Creation of an agency relationship requires:

Answer 1

1. Power to bind - may be expressed orally or in writing, implied by P’s conduct, or misinterpreted by a third party
2. Existence of a relationship - P manifests assent to A, A acts on P’s behalf, A’s actions are subject to P’s control, and A manifests assent/consents

Question 2

Principal’s control

Answer 2

P has the right to control the result or ultimate objectives of A’s work

Question 3

Types of principals

Answer 3

1. individual - a person’s status as P is established by the person’s intent to delegate an act and control the way in which an act is performed by another
2. employer - P who employs an employee to perform services and has the right to control the physical conduct of the employee’s performance (day-to-day activities, supplying tools of trade, structured pay period, specialized skill level, and P directs work to completion)
3. entrepreneurs, corporations, and partnerships

Question 4

Nature of agent relationship

Answer 4

A must have minimal capacity and must manifest assent and consent to act on P’s behalf and to be subject to P’s control

Question 5

Types of Agents

Answer 5

1. Individual
2. Employee - paid hourly or for long time periods, work is integral to that of P, and the tasks are completed under P’s direction
3. Independent Contractor - not subject to P’s control regarding the physical conduct of A’s performance
4. Gratuitous agent - does not prevent the creation of an agency relationship, but does prevent an enforceable contract
5. Trustee - subject to the control of the settlor or beneficiary
6. Subagent - a person appointed by A to perform the functions that A has agreed to perform for B

Question 6

Requirements for formation of an agency relationship

Answer 6

1. Capacity - P must consent to enter into the relationship, A just needs physical/mental capability to do whatever he has been appointed to do
2. Consent - both must consent, A can manifest consent through acting

*Consideration and writing NOT necessary

Question 7

Express actual authority

Answer 7

oral or written words; clear, direct and definite language; or specific, detailed terms and instructions

intent: P’s manifestation must cause A to believe that A is doing what P wants (subjective) and A’s belief must be reasonable (objective)
dissent: P must give clear notice if P disagrees with A’s actions

Question 8

Implied actual authority

Answer 8

Allows A to take whatever actions are properly necessary to achieve P’s objectives, based on A’s reasonable understanding of the manifestations and objectives of P

custom: absent contrary instructions, A is allowed to follow industry customs
acquiescence: if P accepts or fails to object to unauthorized actions by A, it supports A’s perceived authority to act in the future
delegate: A is prohibited from delegating without express or implied authorization from P

Question 9

apparent authority

Answer 9

P’s behavior - derives from the reasonable reliance of a third party on that party’s perception of the level of authority granted to A by P’s behavior over a period of time

third party’s reasonable belief based upon: past dealings, trade customs, industry standards, written statements of authority, transactions

A’s position - by appointing A to specific position (such as VP/GM), P makes a manifestation to the public that A has the customary level of authority of that position

Question 10

termination of authority

Answer 10

1. revocation - effective as soon as either party gives notice
2. agency agreement - P and A mutually agree or occurrence of specified circumstances in agreement
3. change of circumstances - cause A to reasonably believe that P no longer consents due to change
4. passage of time
5. P’s death/suspension of powers/loss of capacity
6. A’s death
7. A’s breach of duty

Question 11

Authority - Estoppel

Answer 11

applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for P and P failed to take reasonable steps and use extraordinary care

Question 12

ratification

Answer 12

P must ratify the entire transaction, have legal capacity, ratification must be timely, and P must have knowledge of material facts

Question 13

respondeat superior

Answer 13

respondeat superior - P is vicariously liable to a third party harmed by A who is an employee and who committed an act within the scope of employment

scope of employment: within scope when performing work assigned by employer or engaging in course of conduct subject to employer’s control; doesn’t include commuting

intentional tort falls in scope when conduct is within space and time limits of employment, employee was motivated to act for employer’s benefit, and act was of the kind employee was hired to perform

Question 14

frolic & detour

Answer 14

frolic: the employee’s personal errand involving a significant deviation from performing work is outside scope of employment
detour: travel for a personal errand may be within scope if merely a detour

Question 15

Indemnification

Answer 15

principal can recover against the agent for indemnification if the agent acts beyond his authority

Question 16

direct liability of principal

Answer 16

p is directly liable for his own negligence if he negligently hired the agent, failed to fire the agent, or failed to properly supervise the agent

Question 17

agent duties

Answer 17

agent owes a duty of care and duty of loyalty; p may recover losses from profits made by breaching agent