Agency

Question 1

Requirements for an enforceable Agency relationship?

Answer 1

There must be:

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

Question 2

Actual Authority

Answer 2

Actual Express: agent is expressly given authority to act for the principal

Actual Implied: when the principal’s conduct leads the agent to believe it has authority (can be implied by custom, past course of conduct by principal, necessity or emergency)

• subjective good faith
• objective reasonable person

Termination - reasonable time, change in circumstances, death, or incapacity of the principal

Question 3

Apparent Authority

Answer 3

Third-party’s reasonable understanding of an agent’s authority

1. requires an objective reasonable belief in agent’s authority and
2. belief must arise out of principal’s action or omission

Question 4

Ratification

Answer 4

even if the agent lacked 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 and principal knew the material facts and had capacity

Question 5

Binding Effect of Authority

Answer 5

On Principal - If agent possessed actual or apparent authority, principal is liable for contracts entered into on its behalf

On Agent - if agent lacked actual and apparent authority, agent is liable to a third party and principal is not. Or, if principal is undisclosed or partially disclosed, agent is also liable to third-party.

Agent is always liable to principal for breach of contract for exceeding scope of authority

Partnership / Partners - Partners generally have actual and apparent authority to bind the partnership in the ordinary course of the partnership’s business

LLC / Members - Same as Partnerships

Question 6

Tort liability in Agency

Answer 6

Principal can be vicariously or directly liable

Vicarious Liability (respondeat superior) - Employer is liable in tort for the actions of his agent if the agent or employee was (pneumonic SMI) 1) acting within the scope of employment 2) made a minor deviation (detour rather than frolic,

OR 3) committed an intentional tort only if it was (BAN) for the principal’s Benefit, because the principal authorized it, or arose naturally due to the nature of employment

Direct Liability - negligent hiring

Agent always liable for his own torts under a theory of joint and several liability

Question 7

Indemnification

Answer 7

The principal can recover against the agent for indemnification if the agent acts beyond his authority

Question 8

Direct Liability of the Principal

Answer 8

Principal’s own negligence if he negligently hired the agent, failed to fire the agent, or failed to properly supervise the agent