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Agency Flashcards

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1
Q

Who may terminate the agency relationship?

A

The termination may be unilateral- the principal or agent may terminate without the other’s consent.

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2
Q

What consideration is required to form an agency relationship?

A

None. An agent need not receive consideration (a gratuitous agent).

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3
Q

What doctrine places liability on an innocent principal for acts of an agent?

A

Vicarious liability asserts that a principal is liable for acts of an agent, even though the principal is innocent of fault and not directly guilty of any tort or crime.

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4
Q

What are the seven elements that identify someone as an independent contractor rather than an employee?

A

An independent contractor is one who:
1. Bears the risk and benefits from good management

  1. Maintains a high level of independence
  2. Is free to work for others
  3. Agrees to be paid a fixed fee
  4. Receives payment based on results
  5. Is liable for work performed, and
  6. Accepts responsibility to remedy defects at her own expense
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5
Q

Can a minor serve as a principal or agent?

A

A minor may serve as an agent, but lacks the capacity to serve as principal. This is because to become a principal and be bound by an agent’s actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal.

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6
Q

What role, if any, may an incompetent play in the agency relationship?

A

A person who has a factual incapacity, such as incompetence, does not have the legal capacity to be a principal, but may be an agent.

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7
Q

What are the five “must have” duties an agent owes a principal?

A
  1. Duty of care
  2. Duty to provide information
  3. Duty of loyalty
  4. Duty of obedience
  5. Duties not to usurp a business opportunity, not to take financial gain, provide an accounting, and no commingle
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8
Q

What are the three ways to create express actual authority?

A

Express actual authority can be created via:

  1. Oral or written words
  2. Clear, direct, and definite language, or
  3. Specific detailed terms and instructions
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9
Q

What are the subjective and objective standards of intent for actual authority?

A

Subjective standard: the agent must believe that he/she is doing what the principal wants

Objective standard: the agent’s belief must be reasonable

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10
Q

What three things must an agent have or do to create an agency relationship?

A
  1. Have minimal capacity
  2. Manifest assent and consent to act on the principal’s behalf
  3. Manifest assent to be subject to the principal’s control
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11
Q

What is the difference in standard of care a compensated agent owes a principal compared with the standard of care an uncompensated agent owes?

A

Both owe the same standard of care: reasonable care

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12
Q

What are the eight ways in which an agent’s actual authority may be terminated?

A
  1. Principal’s revocation
  2. Principal’s agreement with the agent
  3. Change of circumstances
  4. Passage of time
  5. Principal’s death or suspension of powers
  6. Agent’s death or suspension of powers
  7. Principal’s loss of capacity
  8. A statutorily mandated termination
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13
Q

What are the four elements required for creating an agency relationship?

A
  1. A principal manifests assent to an agent
  2. The agent acts on the principal’s behalf
  3. The agent’s actions are subject to the principal’s control
  4. The agent manifests assent or otherwise consents
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14
Q

What is a subagent?

A

A person appointed by an agent to perform functions that the agent has agreed to perform on behalf of a principal. The agent is liable to the principal for the conduct of the subagent.

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15
Q

Does an agent have a right to be compensated if not expressly written in a contract, and if so, how much?

A

Yes, an agent has a right to receive compensation if the principal impliedly promises such. When no amount has been specified, an agent has the right to be compensated in the customary manner of the business trade.

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16
Q

What doctrine places liability on a principal for a tort committed by an agent acting within the scope of employment?

A

Respondeat superior, also known as derivative liability

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17
Q

When may a person who has not represented that an individual is authorized to act as an agent be estopped from denying the existence of the agency relationship?

A

Estoppel applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for the principal, and either the principal intentionally or recklessly caused the belief, or failed to take reasonable steps to correct such belief.

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18
Q

When is a duty non-delegable?

A

Generally, a duty is non-delegable when the responsibility is so important to the community that a person should not be permitted to transfer it to another person.

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19
Q

When an agent is contracting on behalf of a disclosed principal, what three steps must the agent take to avoid becoming a party to the contract?

A

The agent must:
1. Enter into the contract on behalf of the disclosed principal

  1. Affirmatively disclose to the third party both the existence and identity of the principal, and
  2. Not agree to become a party to the contract
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20
Q

What is a special agent?

A

Special agents generally have limited authority regarding a specific transaction or a string of repetitive acts.

Examples: real-estate agents, subagents, insurance agents, commission merchants, bailees

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21
Q

When does the election of remedies doctrine come into play?

A

When a principal is first undisclosed and the agent binds the principal to a contract with a third party, and then the third party learns of the principal’s existence, this doctrine comes into play and requires the third party to choose to hold either the agent or the principal liable and obtain a judgment against only one.

22
Q

What are three situations that would result in a principal being directly liable to a third party harmed by an agent’s conduct?

A
  1. The principal authorizes or ratifies the agent’s conduct
  2. The principal is negligent in selecting, supervising, or otherwise controlling the agent, or
  3. The principal delegates to an agent performance of a non-delegable duty to use care to protect other persons or their property, and the agent breaches the duty
23
Q

What capacity does a principal need?

A

To become a principal and be bound by an agent’s actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal.

24
Q

What is the two-factor rule for when a principal is vicariously liable to a third party harmed by the agent’s conduct?

A

A principal is vicariously liable when:

  1. The agent is a servant / employee, and
  2. The agent commits a tort while acting within the scope of employment.
25
Q

When is a principal not required to indemnify an agent’s losses?

A

A principal is not obligated to indemnify losses that result from an agent’s own negligence, illegal acts, or other wrongful conduct.

26
Q

What is it called when an employee’s personal errand involves a significant deviation from the path that otherwise would be taken for the purposes of performing work?

A

A frolic

27
Q

Under what two areas (or subjects) of law may an agent file a claim against a principal?

A

An agent might have a claim against the principal founded in contract or tort law.

28
Q

Besides contract and tort law, when else should one be on the lookout for agency issues on the exam?

A

Partnership and corporations questions. Be prepared to

  1. Identify the existence of agency relationships
  2. Discuss whether the principal is subject to liability for the agent’s actions
  3. Articulate an agent’s fiduciary duty to the principal and if there’s a breach
  4. Determine if or when an agency relationship has terminated
29
Q

When does fraudulent concealment apply?

A

For fraudulent concealment to apply, either the principal or the agent must have notice that the third party would not have dealt with the principal. Mere suspicions or doubts are not enough to give notice.

30
Q

In a partnership, who is the principal and who is the agent?

A

The partnership can be considered the principal, while partners, employees, and others, such as attorneys, can serve as agents of the partnership.

31
Q

Which type of authority results when the principal’s words or actions cause an agent to reasonably believe in the agent’s authority to act?

A

Implied authority

32
Q

What are the five types of principals?

A
  1. Individual
  2. Master / Employer
  3. Entrepreneur
  4. Corporation
  5. Partnership
33
Q

As between a principal and agent, who owes whom the duty of loyalty?

A

The agent owes the principal the duty of loyalty, the principal does not owe the agent the duty of loyalty. However, a principal does have a duty to refrain from conduct likely to injure an agent’s business reputation or reasonable self-respect.

34
Q

What is the capacity required to serve as an agent?

A

Generally, anyone with minimal capacity can serve as agent, including minors, incompetents, and entities.

35
Q

What are the seven types of agents?

A
  1. Individual
  2. Servant / Employee
  3. Independent contractor
  4. Gratuitous agent
  5. General and special agents
  6. Trustee
  7. Subagent
36
Q

What is the term for what happens when a principal affirms a prior act that was done or purported to be done on the principal’s behalf?

A

Ratification

37
Q

What makes a principal partially disclosed?

A

A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity.

38
Q

What may an agent with implied actual authority do?

A

Implied actual authority allows an agent to take whatever actions are properly necessary to achieve the principal’s objectives, based on the agent’s reasonable understanding of the manifestations and objectives of the principal.

39
Q

What is the most common method of creating an agency relationship?

A

By appointment (either oral or written)

40
Q

Label the parties involved:

Seller lists a property with a broker and a Realtor shows the property to prospective buyers.

A

Seller: Principal

Broker: Agent

Realtor: Subagent

41
Q

Must an agent consent to the agency relationship verbally, in writing, with actions, or by a combination thereof?

A

An agent does not have to verbally consent, but may manifest assent by performing acts on behalf of the principal.

42
Q

Who may be a principal?

A

Any individual or entity that has the legal capacity to possess rights and incur obligations can be a principal.

43
Q

What three situations provide the agent with power to bind the principal to a contract?

A
  1. The agent has actual authority (express or implied)
  2. The agent has apparent authority, or
  3. The principal is estopped from denying the agent’s authority
44
Q

What results when a principal’s manifestation intended for one agent is actually given to another agent in error?

A

This situation creates express authority to the agent who received the manifestation by mistake.

Note: The same result occurs when a principal’s manifestation concerning the subject matter is incorrect.

45
Q

Which type of authority results when the principal causes a third party to reasonably believe the agent has authority to act?

A

Apparent authority (also known as the doctrine of “ostensible agency”)

46
Q

What five circumstances would each count as a change in circumstance, ending the agency relationship?

A
  1. A change in a statute relating to the subject matter
  2. Insolvency of either party
  3. A dramatic change in business conditions
  4. The destruction of the subject matter of the agency relationship
  5. A disaster (natural or unnatural)
47
Q

What are common crimes that a principal could be vicariously liable for?

A

Negligence, misrepresentation, false imprisonment, battery

48
Q

Under what negligence theory can a principal be liable to a third party?

A

A principal who is negligent in selecting, supervising, or otherwise controlling an agent runs the risk of liability attaching to that negligence.

49
Q

What are an agent’s five general rights?

A
  1. To be compensated (if so promised)
  2. Allowed to work without interference
  3. Reimbursed for losses
  4. Provided a safe work environment
  5. Indemnified for working on behalf of a principal
50
Q

When should one apply tort law to an agency scenario?

A

Tort law applies when vicarious liability attaches to a principal for torts or crimes committed by an agent.

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