Agency

Question 1

When is an agency relationship created?

Answer 1

Generally, an agency relationship is created when one person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement.

Question 2

When is a principal bound by an agent’s acts?

Answer 2

A principal is contractually bound to the acts of the agent if the agent acted with actual or apparent authority.

Question 3

Actual authority

Answer 3

Actual authority is authority that the agent reasonably thinks he possesses based on the principal’s dealings with him. Actual authority can be express (i.e., contained within the agreement between the parties) or implied from the actions of the principal.

Question 4

Apparent authority

Answer 4

Apparent authority arises when the principal “holds out” the agent as having certain authority, causing third parties to reasonably believe the agent has such authority.

Question 5

How to determine whether an individual is an independent contractor or an employee

Answer 5

The primary factor in determining whether an individual is an employee or independent contractor or employee is whether the principal has a right to control the method and manner of the individual’s work

Question 6

What factors are used to determine whether an individual is an independent contractor or an employee? (helps determine primary factor)

Answer 6

1. Degree of skill required on the job
2. Whose tools and facilities are used
3. The period of employment
4. The basis of compensation
5. The business purpose
6. Whether the person has a distinct business
7. The characterization and understanding of the parties
8. The customs of the locality regarding supervision of work

Question 7

When is a principal liable in contract to a third party?

Answer 7

For a principal to be liable in contract to a third party, the agent must have had authority to enter into the disputed contract or the principal must ratify the contract

Question 8

Is a principal liable for an independent contractor’s torts?

Answer 8

Ordinarily, a principal is not liable for an independent contractor’s torts. However, estoppel can be raised when the principal creates the appearance that an employer-employee relationship exists, and a third party relies on that relationship