AGENCY

Question 1

Creation of Agency

Answer 1

Creation of an agency relationship requires that

(1) both agent and principal manifest assent to work together
(2) the agent agrees to work to benefit the principal, and
(3) the agent agrees to work subject to the principal’s control

Question 2

Principal

Answer 2

A principal is typically an employer, such as a corporation or other business entity.

The principal controls the objective or result of the agent’s work.

However, the principal does not control the means by which the agent achieves such as result or objective

Question 3

Agents

Answer 3

Within a corporation, directors, officers, or other employees are agents.

Within a partnership, partners or employees are agents

Question 4

Independent Contractor

Answer 4

Independent contractors can also be agents if their physical conduct is subject to the principal’s control

Question 5

Principal’s Contractual Liability

Answer 5

A principal may be liable for a contract entered into by his agent if the agent had either the actual or apparent authority to bind the principal to the contract

Question 6

Authority (3)

Answer 6

• Express Actual Authority
• Implied Actual Authority
• Apparent Authority

Talk about all 3

Question 7

Express Actual Authority

Answer 7

Express actual authority can be created through oral or written* words, or clear, definite, and direct language or instruction

*Pursuant to the Equal Dignities Rule, if a contract must be in writing, then the creation of express authority must also be in writing

Question 8

Implied Actual Authority

Answer 8

With implied actual authority, an agent may take whatever actions are necessary to achieve the principal’s goals.

To establish if implied actual authority has been created, courts look to the agent’s reasonable understanding* of his principal’s objective.

*based on custom, previous business dealings, necessity, or industry standards

Question 9

Implied Actual Authority - Implied by Position

Answer 9

When an agent has a specific job title or position, then the agent has the implied authority to carry out the duties associated with that position

Question 10

Apparent Authority

Answer 10

Apparent authority exists when a principal causes a third party to reasonably believe that the agent has been authorized to act on his behalf.

A court will look to trade customs, industry standards, and the agent’s poison to determine if the third party’s belief is reasonable.

Question 11

Ratification

Answer 11

A principal can ratify an agent’s actions after-the-fact even if the agent did not originally have authority to act.

Ratification occurs when

1. the principal expressly or impliedly demonstrates assent to the contract
2. the ratification is timely (prior to third party’s withdrawal)
3. both parties to the transaction have the capacity, and
4. the principal knows the material facts of the original contract or transaction.

Question 12

Agency by Estoppel

Answer 12

Agency by estoppel occurs when the principal

1. makes a false representation or conceals a material fact
2. with intent to create reliance in the third party,
3. the third party actually relied to his detriment, and
4. the reliance was reasonably based on the principal’s false representation

Question 13

Disclosed Principal

Answer 13

A principal is disclosed when the third party knows the agent is working for a principal and the identity of the principal.

When the principal is disclosed, the parties to the contract are the principal and the third party.

Therefore, the third party can only sue the principal

Question 14

Partially Disclosed Principal

Answer 14

A principal is partially disclosed when the third party knows the agent is working for a principal but does not know the identity of the principal.

When the principal is partially disclosed, the parties to the contract are the third party, the principal, and the agent.

Therefore, the third party can sue the principal or the agent.

Question 15

Undisclosed Principal

Answer 15

A principal is undisclosed when the third party knows neither that the agent is working for a principal nor the identity of the principal.

When the principal is undisclosed, the parties to the contract are the third party and the agent.

Therefore, the third party can only sue the agent

Question 16

Vicarious Liability

Answer 16

A principal is vicariously liable for torts committed by his employees within the scope of employment but generally not for those committed by independent contractors,

(unless the act is inherently dangerous, principal was negligent in hiring the independent contractor, the principal retains control over certain tasks and the tort occurs within those tasks, or estoppel occurs)

Question 17

Scope of Employment

Answer 17

An employee is acting within the scope of employment if

(1) the conduct occurred within the general limitations of employment
(2) the agent was motivated to act for the principal’s benefit, and
(3) the act was within her assigned duties.

A principal may generally be liable for a detour, but not a frolic

Question 18

Principal’s Liability - Intentional Torts

Answer 18

A principal may be liable for his employee’s intentional tortious acts committed within the scope of employment.

Work-Related Travel - Commuting for business objectives falls within the scope of employment. Generally, the commute between work and home does NOT fall within the scope of employment

Question 19

Direct Liability

Answer 19

If a third party is harmed by an employee’s tortious conduct, a principal may be directly liable if he

(i) consented to or approved the agent’s actions

(ii) negligently hired or managed the agent or

(iii) assigned a non-delegable duty to the agent

Question 20

Agent’s Tort Liability

Answer 20

If an agent commits a negligence tort, he can be directly liable in addition to the principal being vicariously liable.

However, if the agent committed a negligence tort within the scope of employment, the principal can seek indemnification from the agent.

Question 21

Agent’s Duties Owed to Principals

Answer 21

An agent has a number of duties to the principal, including the

1. duty of loyalty
2. duty to obey the contract
3. duty of reasonable care in following instructions and performing duties
4. duty to preserve trade secrets
5. duty to provide information
6. duty to act within the scope of authority and
7. indemnity for the agent’s own tortious acts

Question 21

Agent’s Duties Owed to Principals

Answer 21

An agent has a number of duties to the principal, including the

1. duty of loyalty
2. duty to obey the contract
3. duty of reasonable care in following instructions and performing duties
4. duty to preserve trade secrets
5. duty to provide information
6. duty to act within the scope of authority and
7. indemnity for the agent’s own tortious acts

Question 22

Duty of Loyalty

Answer 22

Under the duty of loyalty, an agent cannot

(i) usurp a business opportunity

(ii) collect secret profits

(iii) compete against his principal

Question 23

Agent’s Rights

Answer 23

An agent is entitled to

(i) compensation

(ii) reimbursement

(iii) indemnity

(iv) his principal’s good faith and cooperation, and

(v) his principal taking measures to prevent harm to the agent