Agency

Question 1

Agency Relationship

Answer 1

An agency relationship is created when a principal appoints an agent to act on his behalf and subject to his control, and the agent consents to do so.

Question 2

Agency duty

Answer 2

The agent owes a duty to act with reasonable care towards the principal in carrying out the agency relationship.

The agent owes a fiduciary duty towards the principal.

Question 3

Authority

Answer 3

An agent has the power to bind a principal to a contract if they act with either actual or apparent authority.

Question 4

Actual Authority

Answer 4

An agent acts with actual authority when, at the time of the action, the agent reasonably believes, based on the principal’s manifestations, that the principal wishes the agent to act. This may be express, or implied (because this action must be done to complete the expressly authorized actions, is according to industry custom, results from prior permission).

Question 5

Apparent Authority

Answer 5

An agent acts with apparent authority when a third party involved in the transaction reasonably believes that the agent has authority to act on behalf of the principal based on the principal’s own manifestations to the third party. Apparent authority does not arise out of the agent’s manifestations to the third party.

Question 6

Ratification

Answer 6

A principal can ratify an agent’s act even if the agent acted with no actual or apparent authority. The principal must have knowledge of all material facts regarding the contract, accept the entire transaction and have capacity.

Question 7

Employees’ Torts

Answer 7

A principal is liable for torts committed by the agent if there was sufficient control to establish an employer-employee relationship, as this would trigger vicarious liability for all torts committed within the agent’s scope of employment. A principal is generally not liable for independent contractors’ torts. Whether the agent is an employee or an independent contractor depends on the level of control exerted by the principal, the nature and length of the employment, and business purpose, among other things.

Question 8

Independent contractors Torts

Answer 8

A principal is liable for independent contractors’ torts if the activity involved is inherently dangerous, the duty is nondelegable or the principal knowingly selected an incompetent independent contractor.

Question 9

Scope of Employment

Answer 9

An act will be considered to have been within the scope of the employment if it was 1) expressly authorized by the employer and 2) of the same general nature as the employee’s job and motivated by a desire to serve the employer