Agency

Question 1

Agency

Answer 1

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

Question 2

Creation of the agency relationship

Answer 2

1. Principal must have contractual capacity
2. 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

Question 3

Agent’s Duties

Answer 3

Duty of loyalty, care, obedience, and other contractual duties

Question 4

Agent’s duty of loyalty

Answer 4

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.

Question 5

Agent’s duty of obedience

Answer 5

Agent must obey the lawful, reasonable directions of the principal

Question 6

Agent’s duty of care

Answer 6

Reasonable care on a sliding scale

Question 7

Agent’s contractual duties

Answer 7

Duties arising under the terms of the agency contract

Question 8

Agent’s tort liability to the principal

Answer 8

Tort liability for damages resulting from the agents misuse of the principal’s property, for intentional/negligent performance, or for the failure to perform

Question 9

Principal’s remedy for breach of duty of loyalty

Answer 9

If the breach results in profits to the agent, the principal is entitled to recover the profits

Question 10

Principal’s remedies for agent’s breach of duties

Answer 10

May withhold agent’s compensation if the agent commits intentional tort or intentionally breaches duty

Terminate the agency

Question 11

Principal’s duties to agent

Answer 11

Duty to compensate & reimburse;
Duty to cooperate & help agent carry out the agency;
Contractual duties

Question 12

Agent’s remedies against principal

Answer 12

Breach of contract, but has a duty to mitigate damages

Question 13

Actual authority

Answer 13

Authority agent reasonably believes he has based on principal’s dealings

Question 14

Express actual authority

Answer 14

Authority principal expressly gives agent contained in the agency agreement, effective even if granted by mistake

Question 15

Implied actual authority

Answer 15

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)

Question 16

Termination of actual authority

Answer 16

Contractual term;
Lapse of reasonable time if length unspecified;
Agent’s breach of fiduciary duty;
By unilateral termination

Question 17

Apparent authority

Answer 17

Principal bound if:

1. Held out the agent as having authority; and
2. 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)

Question 18

Ratification

Answer 18

If agent purports to act on behalf of principal without any authority, but principal subsequently validates, principal is bound

Question 19

Ratification requirements

Answer 19

Principal must:

1. Have knowledge of (or have reason to know) all material facts regarding the contract;
2. Accept the entire transaction; and
3. Have capacity

Question 20

May an undisclosed principal ratify?

Answer 20

No, because agent must be purporting to act on behalf of a principal

Question 21

Liability: 3rd party v. Principal

Answer 21

If agent had authority, principal is liable to 3rd party

Question 22

Liability: 3rd party v. Agent

Answer 22

Disclosed principal—> agent is not liable, generally

Undisclosed principal—> principal or agent is liable at the choice of the 3rd party

Question 23

Liability: Principal/agent v. 3rd party

Answer 23

Disclosed principal—> only principal may enforce contract

Undisclosed principal—> either principal or agent may hold 3rd party liable

Question 24

Principal vicarious liability

Answer 24

Principals may be vicariously liable for the torts of their agents through respondent superior and apparent authority

Question 25

Principal direct liability

Answer 25

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.

Question 26

Respondeat superior

Answer 26

Principal may be vicariously liable for the actions of an employee committed within the scope of employement

Question 27

Employee vs. Independent contractor

Answer 27

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

Question 28

Principals are not liable for the actions of independent contractors unless:

Answer 28

1. Inherently dangerous activities are involved;
2. Non-delegable duties have been delegated; or
3. Principal knowingly selected an incompetent contractor

Question 29

Conduct within the scope of employment

Answer 29

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?

Question 30

Principal tort liability under apparent authority

Answer 30

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