Agency Flashcards
which topic is tested every time an agency question appears on the MEE?
Agents and principals’ liability to third parties is 100% of the time
Parties’ rights and duties 43%, agency relationship 25%
what duties does an agent owe his principal? Acronym
Cunts I Lick Owe U! CILOU
Care
Information
Loyalty
Obedience
Usurpation (not to do it)
The 3(4) elements of forming an agency relationship
- Manifestations of mutual agreement that
- agent will act on principal’s behalf
- agent will action subject to principal’s control
When must an agency relationship be formed in writing?
When Ks the agent would enter would trigger the need for writing in themselves, like if they trigger the SoF
When creating power of attorney
Some state stautes
What should you almost always include in an Agency MEE?
- the 3 elements of agency and whether they are fulfilled
- If appropriate, the duties A owes to P
3.
Who can be a principal?
Any entity that has the legal capacity to act like a person
Must be an adult and have capacity to enter into Ks
Who is frequently highlighted in agency and partnership questions as a principal?
Business owners–like sole proprietors without partners
who can be an agent?
Almost anyone, including minors and incompetents, so long as they have minimal capacity. Need not be able to form contracts.
When does an agent need to be compensated
Agent has right to compensation if P implies it. If no amount specified, compensation should be in customary manner for that type of work.
Lack of compensation does not prevent agency
3 types of agents and their duties
GENERAL: variety of tasks (gen store manager, purchase agent)
SPECIAL: limited scope, like real estate agent
SUBAGENT: agent of agent, appointed to do agency tasks (see limitations)
When may an agent appoint a subagent?
Agent may appoint their own agent if they have the actual or apparent authority to do so
To whom does a duly appointed subagent owe loyalty?
Both the principal and the appointing agent
Who is liable for the conduct of the duly appointed subagent?
Both the principal and the subagent, assuming the agency is valid and acting within scope, etc.
What level of control over A’s actions is sufficient for an agency relationship?
the right to control the result or the ultimate objectives of the agent’s work–need not have the right to control the full range of an agent’s actions (professional judgment). P can fail to exercise the right to control the agent–does not eliminate the principal’s rights or affect the existence of an agency relationship.
State the definition of agency
An agent agrees to be subject to the principal’s control, and a principal agrees to be bound by the acts of its agent within the scope of the agent’s authority
When is a duty (responsibility or commitment) non-delegable?
when the responsibility is so important to the community that a person should not be permitted to transfer it to another person or agent.
What is the equal dignity rule?
generally don’t need to writing for agency relationship, but if agent is handling a transaction that requires a writing (K to sell land)
Can an agent serve multiple principals?
Yes, so long as there is no conflict between the principals
How can an agent avoid becoming a party to a contract he’s making on a P’s behalf?
When entering a K on P’s behalf:
- affirmatively disclose the existence and identity of the principal
- explicitly enter into K on principal’s behalf
- not agree to become a party to K
What creates actual authority? 2 kinds
Express actual authority: P communicates to A to do a thing, A has express actual authority to do that thing.
Implied actual authority: P communicates A to do a thing, A has implied actual authority to take any action reasonably necessary to do that thing (based on reasonable understanding of P’s objective)
Does following the normal custom of a business justify actions an A takes under implied actual authority?
Yes, following custom of that business is a justification for A’s actions being within scope of authority
Ex: –if new manager sees other manager sign for soda delivery every week without checking it, then new manager can sign for it when asked
What distinguishes the creation of apparent authority vs actual authority?
Actual authority is based on representations from P to A
Apparent authority is based on reps from P to 3P
What creates apparent authority?
P communicates to 3P
Based on P’s actions/words, 3P forms a REASONABLE belief that A is acting on behalf of P
What situations means that P is liable for A’s contracts?
- Actual authority (express or implied)
- Apparent authority (3P’s reas belief based on P’s comms)
- Ratification (accepts benefits of K to A or 3P)
- Estoppel (3P justifiable detrimental change in position)
How does ratification work?
A makes problem K on behalf of P, BUT:
- P knows of existence of K and its material terms
- Manifests acceptance of K’s benefits to 3P or A
Does ratification “fix” the undisclosed principal?
No. A could still be liable for the K or in tort, or something????
What is the effect of an undisclosed or partly disclosed principal?
- *Disclosed**: 3P knows P’s existence and identity. Normal–P is liable for A’s Ks and tort unless something else intervenes
- *Partly disclosed**: 3P knows P exists but not identity. Means A, P and 3P are all parties to the K.
- *Undisclosed**: 3P has no idea P exists. Then A and 3P are the ONLY parties to the K. P is not liable to 3P.
HAS NO AFFECT ON LIABILITY IN TORT
When does estoppel force a principal’s liability on a K?
- When a P intentionally or recklessly allows* 3P to believe that a transaction is entered into with the P AND
- 3P acts in justifiable reliance on that belief to make a detrimental change in position
*fails to take reas steps to correct mistaken belief
When is principal liable for torts of employee/servant?
- P can be innocent
- P has sufficient control over A that this is an employee or servant, NOT an IKer (exceptions)
- Tort was committed within the scope of A’s employment
When is P liable for the torts of an independent contractor? (Exceptions to the rule)
P is liable if:
- IKer’s task is inherently dangerous (uranium cleanup, hi rise blowup)
- P negligently hired IKer.
- If P retains control over SOME acts of the IKer, is liable for those acts if committed within scope of employment
What defines the scope of employment? (for P’s tort liability)
- Agent intended to benefit principal
- Conduct was of type agent hired to perform
- Occurred on the job? Frolic vs detour. Can argue detour if intent was to save time for boss! Killing time playing ball while waiting for shipment to get packed is gray area.
Is employer liable for an employee’s intentional torts, or just negligence?
Rule: not liable because intentional tort is not in scope of employment
EXCEPTION:
1. the tort occurred in space and time limits of employment
2. Agent must be acting partly to benefit principal AND
3. Agent going the kind of act hired to perform.
Ex: bodyguard commits battery while guarding. P liable.
Ex: butler frauds and says boss can pay for cigars to get cigars for boss
How to terminate agency relationship
Accomplished by:
- Principal’s revocation
- Principal’s agreement with the agent
- Change of circumstances
- Passage of time
- Principal’s death or suspension of powers
- Agent’s death or suspension of powers
- Principal’s loss of capacity
- A statutorily mandated termination
What happens when A makes a K with 3P with undisclosed P, and 3P later learns of P’s existence?
3P must choose to hold either the agent or the principal liable and obtain a judgment against only one
