Agency

Question 1

Definition of Agency

Answer 1

Agency is a fiduciary relationship, where a person or entity (the agent) acts on behalf of another (the principal).

Question 2

Elements – An agency relationship exists if there is:

Answer 2

1) Assent – a formal or informal agreement;
2) Benefit – the conduct primarily benefits the principal; AND
3) Control – the principal has the right to control the agent (control doesn’t need to be significant).

Question 3

Types of Agency Relationships

Answer 3

− Universal Agent – has broad authority,
authorized for ALL acts the principal can perform.

− General Agent – has authority to conduct a series of transactions over a period of time.

− Special Agent – has limited authority either for a specific act/transaction OR a specified period of time.

Question 4

Termination of Agency Relationship

Answer 4

An agency relationship terminates by:
a) A manifestation by either party that the relationship is terminated;
b) Expiration of a specified term of authority;
c) Death of principal or agent (by operation of law); OR
d) Incapacity of the principal or agent (by operation of law) – except if a durable power of attorney exists.

Question 5

Actual Authority

Answer 5

A principal is bound to a contract entered into by its agent if the agent had actual authority.

2 types of actual authority
Express Authority→by principal’s explicit directions to the agent (either orally or in writing).

Implied Authority→either:
a) Action is necessary to carry out the agent’s express authorized duties;
b) Agent acted similarly in prior dealings with the principal; OR
c) It’s customary for an agent in that position (silence/acquiescence can give rise to a reasonable belief of authority in the future).

Question 6

Apparent Authority

Answer 6

A principal is bound to a contract entered into by its agent if the agent had apparent authority.

Apparent Authority exists when:
1) A third-party reasonably believes the agent has authority to act on behalf of the principal; AND
2) That belief is traceable from the principal’s manifestations (principal holds the agent out as having authority).

Question 7

A principal holds the agent out as having authority when he:

Answer 7

a) gives a position or title indicating authority;
b) previously held the agent out and did not published a revocation; OR
c) cloaked the agent with the appearance of authority.
*Continues until the principal communicates termination to third-parties.

Question 8

Apparent Authority is NOT applicable if:

Answer 8

a) the third-party had knowledge that the agent did not have actual authority;
b) the transaction was not within the ordinary usages of business; or
c) there is an undisclosed principal.

Question 9

Ratification

Answer 9

Makes the principal liable for an agent’s contract entered into without authority.

Ratification occurs when the Principal:
1) Has knowledge of all material facts or contract terms; AND
2) Assents (approves) to the same through words or conduct.
*Agent also remains liable if principal was not disclosed.

Question 10

Agent’s Contractual Liability

Answer 10

Generally, an agent has NO liability if they:
1. Fully disclose the principal to a third-party; AND
2. Have actual or apparent authority.

Question 11

Employee vs. Independent Contractor

Answer 11

Primary focus is whether the principal had the right to control the manner and method in which the job was performed.

Question 12

Factors→courts analyze the following to determine if a person is an employee or independent contractor:

Answer 12

1) type of work;
2) pay (hourly vs. per project);
3) who supplied the equipment/tools;
4) degree of supervision;
5) degree of skill required;
6) if the work benefits the employer’s business;
7) extent of principal’s control over work details;
8) whether agent/contractor is engaged in a distinct business;
9) length of time employed/engaged;
10) characterization & belief of relationship; and
11) whether agent was hired for a business purpose.

Question 13

Respondeat Superior Doctrine

Answer 13

An employer is liable for an employee’s negligent acts if the employee was acting within the scope of the employment.

Question 14

Employee acts within Scope of Employment when:

Answer 14

a) Performing work assigned by the employer; OR
b) Engaging in a course of conduct subject to the employer’s control.

Question 15

Time, Place, & Purpose Test

Answer 15

To determine the scope of employment, courts analyze whether the conduct:
i) Is of the kind the employee is employed to perform;
ii) Occurs substantially within the authorized time and space limits; and
iii) Is motivated (in whole or part) to serve the employer.

Question 16

Intentional Torts – are generally outside the scope. EXCEPTIONS:

Answer 16

a) Act was specifically authorized by employer;
b) Act was driven by a desire to serve employer; OR
c) Act was the result of naturally occurring friction from the type of employment.

Question 17

Not Within Scope of Employment

Answer 17

Conduct is NOT within the scope if it’s unrelated and not intended to serve any purpose of the employer.

Question 18

Liability if Respondeat Superior Doctrine is Inapplicable

Answer 18

A principal / employer will be liable for an agent’s acts outside the respondeat superior doctrine if:
a) Principal intended the conduct / consequences;

b) Principal was negligent or reckless in selecting, training, supervising, or controlling the agent;

c) It is a non-delegable duty; OR

d) Agent had apparent authority, the agent’s actions taken with apparent authority constitute the tort (or enable it to be concealed), and the third-party reasonably relied on such authority.

Question 19

Liability for Independent Contractors

Answer 19

Generally, an employer/principal has NO liability for an Independent Contractor’s torts.
Exceptions:
1) Inherently Dangerous Activities.
2) Non-delegable duty owed by principal.
3) Estoppel – the principal holds out the contractor as his agent, third-party reasonably relied on contractor’s skill, and the third-party suffered harm.

Question 20

Duties Owed by Agent to the Principal:

Answer 20

1) Duty of Care→duty to use reasonable care when performing agent’s duties.
2) Duty of Loyalty→duty to act solely and loyally for the principal’s benefit.
3) Duty of Obedience→duty to obey all reasonable directions of the principal.

Question 21

Duties Owed by Principal to the Agent

Answer 21

1) Duty to compensate;
2) Duty to reimburse; and
3) Duty to indemnify.