Agency Flashcards
Agency
Agency is a consensual relationship between a principal and an agent that arises when the principal appoints the agent to act on the principal’s behalf, and the agency consents to act
Creation of the agency relationship
- Principal must have contractual capacity
- Principal and agent must manifest consent
3(a). Formation by action—> principal and agent agree to relationship (actual authority); principal can hold out another as his agent (apparent authority); or principal may agree to be bound by previously unauthorized acts (ratification)
3(b). Formation by operation of law—> principal may be stopped from denying the existence of a relationship, or an agency may be created by statute
Agent’s Duties
Duty of loyalty, care, obedience, and other contractual duties
Agent’s duty of loyalty
Agent must refrain from self dealing and can’t compete with the principal concerning the subject matter of the agency.
Agent can not use principal’s property for agent’s own purpose.
Agent’s duty of obedience
Agent must obey the lawful, reasonable directions of the principal
Agent’s duty of care
Reasonable care on a sliding scale
Agent’s contractual duties
Duties arising under the terms of the agency contract
Agent’s tort liability to the principal
Tort liability for damages resulting from the agents misuse of the principal’s property, for intentional/negligent performance, or for the failure to perform
Principal’s remedy for breach of duty of loyalty
If the breach results in profits to the agent, the principal is entitled to recover the profits
Principal’s remedies for agent’s breach of duties
May withhold agent’s compensation if the agent commits intentional tort or intentionally breaches duty
Terminate the agency
Principal’s duties to agent
Duty to compensate & reimburse;
Duty to cooperate & help agent carry out the agency;
Contractual duties
Agent’s remedies against principal
Breach of contract, but has a duty to mitigate damages
Actual authority
Authority agent reasonably believes he has based on principal’s dealings
Express actual authority
Authority principal expressly gives agent contained in the agency agreement, effective even if granted by mistake
Implied actual authority
Authority agent reasonably believes she has based on actions of principal (i.e., incidental to express authority; arising out of custom; prior acquiescence of principal; emergency; pay for goods)
Termination of actual authority
Contractual term;
Lapse of reasonable time if length unspecified;
Agent’s breach of fiduciary duty;
By unilateral termination
Apparent authority
Principal bound if:
- Held out the agent as having authority; and
- Based on holding out, 3rd party reasonably believes agent had authority
Based on the principal’s manifestations and how they affect the reasonable 3rd party (i.e., what did principal do to indicate to a 3rd party that agent had authority)
Ratification
If agent purports to act on behalf of principal without any authority, but principal subsequently validates, principal is bound
Ratification requirements
Principal must:
- Have knowledge of (or have reason to know) all material facts regarding the contract;
- Accept the entire transaction; and
- Have capacity
May an undisclosed principal ratify?
No, because agent must be purporting to act on behalf of a principal
Liability: 3rd party v. Principal
If agent had authority, principal is liable to 3rd party
Liability: 3rd party v. Agent
Disclosed principal—> agent is not liable, generally
Undisclosed principal—> principal or agent is liable at the choice of the 3rd party
Liability: Principal/agent v. 3rd party
Disclosed principal—> only principal may enforce contract
Undisclosed principal—> either principal or agent may hold 3rd party liable
Principal vicarious liability
Principals may be vicariously liable for the torts of their agents through respondent superior and apparent authority
Principal direct liability
Principals can be directly liable for their own negligence in hiring, retaining, or supervising, and can be liable for an agent’s tort if the principal gave the agent actual authority to commit, or ratified the tort.
Respondeat superior
Principal may be vicariously liable for the actions of an employee committed within the scope of employement
Employee vs. Independent contractor
Main factor is whether the principal had the right to control the manner & method of work (i.e., more control means more likely to be employee)
Factors giving rise to independent contractor include:
—more skill required
—short term employment
—basis of compensation is related to job
Principals are not liable for the actions of independent contractors unless:
- Inherently dangerous activities are involved;
- Non-delegable duties have been delegated; or
- Principal knowingly selected an incompetent contractor
Conduct within the scope of employment
Look at the nature of the work
—Was the conduct substantially removed from the authorized time & space limits of employment (i.e., frolic or detour)?
—Was conduct actuated by purpose to serve employer?
Principal tort liability under apparent authority
Principal is liable where an agent appears to deal or communicate on behalf of the principal & the agent’s apparent authority enables it to (i) commit a tort; or (ii) conceal its commission
