Agency

Question 1

Requirements for an agency relationship include

Answer 1

(1) consent by both the principal and the agent that the agent will act for the principal’s benefit and
(2) that the agent is subject to the principal’s control.

Authority to act for the principal can terminate in several ways, including the principal manifesting a desire to the agent to discontinue the relationship. (Sept 2020, Feb 2015, Feb 2006, July 2004, July 2002, Feb 1996)

Question 2

Actual authority

Answer 2

Actual authority can be express, where the agent is expressly given authority to act for the principal. It can also be implied. Implied authority is present when the principal’s conduct leads the agent to believe it has authority. This authority can be implied by custom, past course of
conduct by the principal, necessity, or an emergency circumstance.

Question 3

Actual authority terminates after:

Answer 3

a reasonable time or following a change in circumstances, death, or incapacity of the principal, etc. (Feb 2022, Oct 2020, Sept 2020, Feb 2020, Feb 2017, Feb 2009, July 2007, Feb 2005, July 2004, July 2003, July 2002, July 2001, Feb 1997, Feb 1996)

Question 4

Apparent Authority requires:

Answer 4

(1) the person dealing with the agent must do so with a reasonable belief in the agent’s authority and
(2) the belief must be generated by some act or neglect on the part of the principal.

Question 5

Ratification

Answer 5

even if the agent did not have authority to enter into a transaction, the principal can ratify the acts (and thus become liable) by expressly or impliedly affirming or accepting the benefit of the acts, so long as the principal knew the material facts and had capacity.

Question 6

The agent is bound to a third party on a contract he enters into with the third party if the

Answer 6

1. agent had no actual or apparent authority to enter into the contract.
2. the agent is also liable if the principal is undisclosed (i.e., the third party does not know the agent is acting on another’s behalf) or
3. if the principal “partially disclosed” (i.e., the third party knows the agent is acting on behalf of another but does not know the identity of the principal). The agent is bound to the principal for breach of contract if the agent
   acts beyond his authority.

Question 7

The agent is bound to the principal for breach of contract if

Answer 7

the agent acts beyond his authority.

Question 8

Vicarious liability of employer (respondeat superior): The employer is liable in tort for the acts of an agent or employee if the agent or employee (mnemonic=SMI):

Answer 8

1. was acting in the scope of employment;
2. made a minor deviation (a detour) from employment (rather than a frolic); or
3. committed an intentional tort only if it was (mnemonic=BAN) for the principal’s benefit, because the principal authorized it, or one that arose naturally due to the nature of employment.

The agent is liable too under a theory of joint and several liability. (

Question 9

The agent owes a duty of

Answer 9

1. care and a
2. duty of loyalty (not to engage in self-dealing, not to profit without disclosure, and a duty to follow instructions).

The principal may recover losses from and profits made by the breaching agent.

Question 10

Scope of Employment

Answer 10

for an act to be considered within the scope of employment if it was: (1) expressly authorized by employee or (2) of the same general nature as the employers job and motivated by a desire to serve the employer