Agency Flashcards
Requirements for an agency relationship
1) consent by both the principal and the agent that the agent will act for the principal’s benefit, and
2) that the agent is subject to the principal’s manifesting a desire to the agent to discontinue the relationship
When is a principal bound to a contract the agent enters into on P’s behalf!
The principal is bound on a contract entered into by an agent if the agent had authority to enter into the contract. Actual and apparent authority are heavily tested in agency and partnership questions.
Actual authority
Actual express authority
Actual implied authority
Actual express authority
Actual authority can be express, where the agent is expressly given authority to act for the principal.
Actual implied authority
Actual authority can also be implied. Implied authority is present when the principal’s conduct leads the agent to believe it has authority.
This authority can be implied by custom, past course of conduct by the principal, necessity, or an emergency circumstance.
This authority terminates after a reasonable time or following a change in circumstances, death, or incapacity or the principal, etc.
Apparent authority
1) the person dealing with the agent must do so with a reasonable belief in the agent’s authority and
2) the belief must be generated by some act or neglect on the part of the principal.
Ratification
Even if the agent did not have 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, so long as the principal knew the material facts and had capacity
When is the agent liable on contracts?
The agent is bound to a third party on a contract he enters into with the third party if the agent had no actual or apparent authority to enter into the contract.
The agent is also liable if the principal is undisclosed (i.e. the third party knows the agent is acting on behalf of another but does not know the identity of the principal).
The agent is bound to the principal for breach of contract if the agent acts beyond his authority.
Principal liability for agent’s actions
A principal can be vicariously or directly liable for the torts committed by his agent. The agent is always liable for his own torts.
Vicarious liability of employer (respondeat superior)
The employer is liable in tort for the acts of an agent or employee if the agent or employee SMI:
-was acting in the Scope of employment
-made a Minor deviation (detour) from employment, rather than a frolic
-or committed an intentional tort only if it was BAN:
—for the principal’s Benefit,
—because the principal Authorized it, or
—one that arose Naturally due to the nature of employment.
The agent is liable too under a theory of joint and several liability.
Indemnification
The principal can recover against the agent for indemnification if the agent acts beyond his authority.
Direct liability of principal
The principal is directly liable for his own negligence if he negligently hired the agent, failed to fire the agent, or failed to properly supervise the agent.
What duties does the agent owe the principal?
The agent owes a duty of care and a duty of loyalty (not to engage in self-dealing, not to profit without disclosure, and a duty to follow instructions).
The principal may recover losses from and profits made by the breaching agent.
