Agency

Question 1

What is agency?

Answer 1

A fiduciary relationship that arises when

(1) a principal appoints an agent to act on the principal’s behalf
(2) subject to his control
(3) the agent consents
- both parties must consent, and the agent must have minimal capacity (i.e., can technically be a minor, altho voidable) to consent while the principal needs contractual capacity.

Question 2

Agency creation: formalities

Answer 2

(1) consent requires
(2) need not be in writing, unless agency is into enter into contracts w/in SoF, or agency agreement itself would fall within SoF (equal dignities rule)
(3) consideration not required

Question 3

Agency creation: modes of creation

Answer 3

(1) agreement

• express
• implied by action

(2) by operation of law

• estoppel
• statute

Question 4

Duty of Care

Answer 4

An agent owes a duty to their principal to carry out their agency with reasonable care.

The degree of care is a “sliding scale” depending on any special skills that the agent may have.

Question 5

Duty of Loyalty

Answer 5

An agent may not self-deal, compete with the principal, may not deal with principal as adverse party, etc.

**duty of obedience, or to obey all reasonable directions from principal, is part of duty of loyalty

Question 6

Subagents and co-agent

Answer 6

A subagent is a person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal.

• agent has absolute liability to P for breaches by sub (this appears to be so regardless of P’s approval)
• if sub approved by principal, then sub owes duties to p. if not, just to agent
  
  • Principal never has duty to compensate a sub

An agent may also appoint a coagent (that is, another agent of the principal). In doing so, the agent does not delegate their own power to that person.

Question 7

Actual Authority

Answer 7

Actual authority is authority that the agent reasonably believes they possess based on the principal’s dealings with them.

• Express
• Implied (ex: from job title, incidental to express authority, arising out of custom known to agent, resulting from prior acquiescence by the principal, to take emergency measures, to delegate where circumstances require or performance impossible w/o delegation

Question 8

Termination of ACTUAL authority

Answer 8

(1) happening of agreed upon event
(2) lapse of a reasonable time
(3) a change in circumstances

(4) agent’s breach of FD
(5) either party’s unilateral termination

(6) operation of law (death of principal terminates agency only when agent has notice of it).

Question 9

Apparent Authority

Answer 9

Apparent authority exists when the principal

(1) “holds out” another as possessing authority and
(2) based on this holding out, a third party is reasonably led to believe that authority exists (even though as between the agent and the principal, no such authority has been granted).

Question 10

When does an agent’s apparent authority bind the principal?

Answer 10

1. When agent exceeds actual authority, P can be bound if (a) P previously allowed agent to exceed authority and knows that third party is aware of that and doesn’t correct it, or (b) A’s title or position holds them out as someone w/ authority.
2. Agent has no actual authority, but (a) P negligently permits imposter to be in position to appear to have authority (agency by estoppel), or (b) lingering apparent authority (P has to notify parties if actual authority ends, or recover written authority of agent from 3d party).

Question 11

Inherent Agency Power

Answer 11

Inherent authority is derived solely from the agency relationship and results in the principal being bound even though the agent had no actual or apparent authority to perform the particular act.

• Respondent superior
• Conduct similar to that authorized

Question 12

Ratification

Answer 12

An agency relationship is created by ratification when an “agent” purports to act on behalf of a “principal” without any authority at all, but the “principal” subsequently validates the act and becomes bound BEFORE the third party withdraws

Methods: Express or implied from conduct of principal. Implied if accepts benefits of contract

Requirements:

a. Have knowledge of (or have reason to know) all material facts regarding the contract
b. Accept the entire transaction (meaning the “principal” cannot merely ratify a portion of the transaction) AND
c. Have capacity (be competent and of legal age)

Question 13

Liability of parties

Answer 13

I. Third party v. Principal: if agent had actual, apparent, or ratified authority, P is liable.

II. Third party v. agent: if agent has any of the above authorities, P liable and agent not liable, UNLESS there was

(1) a disclosed principal and the parties to the contract intended agent to be liable

NB: third party can also sue agent for breach of warranty of authority

(2) if principal undisclosed or unidentified, then either P or A can be held liable.

III. Third party to principal and agent

(1) disclosed principal: only principal can enforce contract
(2) unidentified/undisclosed principal: either principal or agent may enforce. If agent enforces, p entitled to benefits of contract

Question 14

Principal liability for torts of independent contractor

Answer 14

A principal is liable for torts of independent contractors (A is IC when P has no control over manner of the agent’s performance) when:

The activity was:

(1) inherently dangerous
(2) the duty was non-delegable OR
(3) the principal knowingly selected an incompetent independent contractor (if the principal was merely negligent in selecting the independent contractor, the principal is liable only for negligence in selection, not for contractor’s neg).

Question 15

Principal liability for torts of employee

Answer 15

A principal is liable for the torts of an employee (the principal has control over manner and method of employment) if:

(1) the conduct was “of the kind” that the agent was hired to perform
* can be considered of the kind even if P said don’t do it
(2) agent’s act was “on the job”

• Detour: P is vicariously liable
• Frolic: p not liable

(3) A acted with motivation to serve employer
(4) P ratified tort
* must have knowledge of all material facts

Question 16

Employer Liability for intentional torts

Answer 16

Intentional torts will be viewed as within the scope of employment if the conduct is:

(1) a natural incident of the employee’s duties (as where force is authorized or the nature of the work gives rise to hostilities);
(2) where the employee is promoting the employer’s business or is motivated to serve the employer; or
(3) specifically authorized or ratified by the employer.

Also, a principal is liable for an agent’s misrepresentations (including intentional misrepresentation) if the agent had actual, apparent, or inherent authority to make statements concerning the subject matter involved.

Question 17

Liability for Acts of Borrowed Employees

Answer 17

Whoever has primary right of control over employee will be liable.

Question 18

Apparent Authority for TORT (use if respondent superior for torts doesn’t apply)

Answer 18

A principal is vicariously liable via apparent authority theory where

(1) an agent appears to deal or communicate on behalf of the principal and
(2) the agent’s apparent authority enables the agent to
(a) commit a tort or
(b) conceal its commission. This means that for the principal to be liable, there must be a close link between the agent’s tortious conduct and the agent’s apparent authority.