Agency

Question 1

Agency

Answer 1

Agency is a fiduciary relationship that arises when one person (principal) appoints another (agent) to act on the principal’s behalf and the agent consents to act. Agent must act subject to principal’s control.

Question 2

Consent

Answer 2

Consent of both parties required. Consent can be established expressly or by implication from the parties’ conduct.

Principal must have contractual capacity. Agent doesn’t have to have capacity.

Question 3

On behalf of

Answer 3

Requirement is generally understood to mean that the agent must be acting primarily for the benefit of the principal rather than for the benefit of the agent or some other party.

Question 4

Control

Answer 4

Agent must act subject to the principal’s control but the degree of control exercise by the principal doesn’t have to be significant. Can be found simply by the fact that principal has specified the task to perform.

Question 5

Writing requirements

Answer 5

Generally no writing required for agency agreement but writing will be required where the agreement falls within the Statute of Frauds.

Question 6

Agents duties to principal

Answer 6

Agent is a fiduciary.

Duty of care to carry out their agency with reasonable care.

Duty of loyalty. Cannot use the agency or principal’s property to profit for themselves.

Duty of obedience. Obey all reasonable directions of their principal.

Question 7

Principal’s remedies for agent’s breach of duties

Answer 7

Contract actions, tort actions, actions for secret profits, equitable actions for accounting, imposition of constructive trust, withhold compensation.

Principal can recover the actual profits or properties held by the agent whether or not the agent’s profit has caused the principal any loss.

Question 8

Principal’s duties to agent

Answer 8

Principal is not a fiduciary of the agent. But they owe them contractual duties like reasonable compensation and reimbursement of expenses. They should generally cooperate with the agent and not unreasonably interfere with the agent’s performance.

Question 9

Actual authority

Answer 9

Authority the agent reasonably believes they possess based on the principal’s dealings with them. Can be express or implied.

Express- authority conveyed by the principal in oral or written words.

Implied authority- authority the agent reasonably believes they have as a result of the principal’s words or actions.

• things that are incidental to express authority
• custom
• prior acquiescence of principal
• take emergency measures
• delegate authority
• pay for and accept goods
• give general warranties, collect payment, and deliver with authority to sell
• manage investments as a prudent investor

Question 10

Termination of actual authority

Answer 10

• happening of an event specified in the agreement
• lapse of reasonable time
• change in circumstances
• agent’s breach of fiduciary duty
• either party’s unilateral termination
• operation of law (death or incapacity when the agent has notice of it)

Question 11

Apparent authority

Answer 11

Exists when the principal holds out another as possessing authority and based on this holding out, a third party is reasonably led to believe that authority exists.

Prior acts- principal previously permitted agent to exceed their express or implied authority and knows the third party is aware of this they are bound
Power of position- apparent authority might be established through agent’s title or position.
Imposters- if principal negligently permits an imposter to be in a position to appear to have agency authority, they will be liable for their actions.
Termination of actual authority- principal has to tell third parties that the agent dealt with that they no longer have agency otherwise apparent authority will linger

Question 12

Ratification

Answer 12

Agent purports to act on behalf of a principal without any authority at all but the principal subsequently validates the act and becomes bound. Principal can expressly ratify or impliedly ratify by accepting contract benefits.

Requirements:

• principal must have knowledge of all material facts regarding the contract
• accept the entire transaction and
• have capacity

Question 13

When is agent liable on the contract?

Answer 13

Agent will be liable if the parties to the contract intended the agent to be liable with a disclosed principal. If they didn’t have authority they can be held liable.

If the principal is unidentified or undisclosed, either the principal or the agent can be held liable on the contract if the agent had authority to enter into the contract.

Question 14

Principal’s liability for agent’s torts

Answer 14

Principal may be vicariously liable for their agent’s torts under

(1) respondeat superior
(2) apparent authority

Question 15

Respondeat superior

Answer 15

Employer liable for the torts of an employee committed within the scope of the employment. Employer generally not liable for torts of an independent contractor.

If respondeat superior applies, employer and employee will be jointly and severally liable.

Question 16

Independent contractor vs. employee

Answer 16

Employee- principal retains right to control the manner in which an employee performs their work

Independent contractor- principal does not control the manner work is performed.

Factors

• degree of skill required (greater skill more likely IC)
• tools and facilities (if principal supplies more likely E)
• period of employment
• basis of compensation (if per job, more likely IC)
• business purpose
• dstrinct business
• characterization and understanding of the parties
• customs of the locality

Question 17

Scope of employment

Answer 17

• was the conduct of the kind the agent was hired to perform?
• did the tort occur on the job?
• was the conduct actuated at least in part to benefit the principal?

Question 18

Intentional torts

Answer 18

General rule is employer is not liable for intentional torts of an employee. Exceptions:

• torts within scope of employment
  (1) natural incident of employee’s duties
  (2) employee is promoting the employer’s business or is motivated to serve the employer
  (3) specifically authorized or ratified by the employer

Question 19

Liability for acts of independent contractors

Answer 19

Principal will incur liability for the acts of an independent contractor where

(1) inherently dangerous activities like blasting are involved
(2) nondelegable duties have been delegated
(3) principal knowingly selected an incompetent independent contractor

Question 20

Apparent authority liability for tort

Answer 20

Principal is vicariously liable where agent appears to deal or communicate on behalf of principal and agent’s apparent authority enables agent to (1) commit a tort or (2) conceal its commission.