Agency

Question 1

Creation of Agency Relationship

Priority: High

Answer 1

An agency relationship is created when
1. there is asset between a principal and an agent
2. the agent’s conduct is intended to benefit the principal
3. the principal has the right to control the agent

• The characterization of the relationship is irrelevant if all three elements are met.
• The degree of control does not need to be significant.

Question 2

Actual Authority

Priority: High

Answer 2

A principal is bound to contracts entered into by an agent with actual authority. An agent is empowered with actual authority through the express or implied actions of the Principal. An agent has express authority when the principal explictly told the agent (orally or in writing) he/she is entitled to act. An agent has implied authority when:
1. agent believes the action is necessary;
2. agent acted similarly in prior dealings without objection; or
3. it is customary for agents to act in that way

• Agent’s reasonable understanding of his actual authority is binding, even if mistaken.
• Disclosure of principal is not required if agent is within scope of authority

Question 3

Apparent Authority

Priority: High

Answer 3

A principal is bound to contracts entered into by an agent with apparent authority. An agent is empowered with apparent authority when:
1. a third party reasonably believes the agent has actual authority; and
2. the belief is traceable to the principal’s manifestations

A principal’s manifestations of apparent authority include:
1. giving the agent a position or title indicating authority
2. previously holding an agent out as having authority and not revoking
3. cloaked the agent with teh appearance of authority

• Third-Party’s actual knowledge destroys apparent authority
• Third-Party has duty to make additional inquries when the situation suggests it may be unreasonable
• Undisclosed principal destroys apparent authority
• Partially disclosed principal may destroy apparent authority

Question 4

Ratification of Contracts without Authority

Priority: High

Answer 4

A principal may choose to be bound to the terms of a contract entered into by an agent without actual or apparent authority, if:
1. principal has knowledge of all material facts and terms; and
2. principal manifests consent through words or actions

• Without ratifciation, agent is liable for the contract entered into without authority

Question 5

Agent Liability

Priority: High

Answer 5

An agent is not liable for actions taken within the actual or apparent authority of a disclosed principal. When the principal is unidentified, or partially undisclosed, the agent may be liable. An agent may seek reimbursement for any payments made on behalf of the Principal.

Question 6

Employee vs. Independent Contractor

Priority: High

Answer 6

The distinction between an employee and independent contractor hinges on whether the principal had the right to control the manner and method in whcih teh job is performed.

Factors:
1. control over details of work
2. the distictness of the occupation or business
3. type of work
4. how paid (hourly vs per project)
5. who supplied the tools
6. degree of supervision
7. degree of skill required
8. job was part of principal’s regular business
9. length of time agent is engaged
10. subjective beliefs of agent and principal
11. whether person was hired for business purpose

Question 7

Vicarious Liability for Employees

Priority: High

Answer 7

Under the doctrine of respondeat superior, an employer is liabile for negligent acts commited by an employee within the scope of their employment. An act is considered to be within the scope of employment when:
1. the work was assigned by the employer;
2. the conduct was within the employer’s control;
3. kind of work the employee was employed to perform;
4. occurs within the authorized time and space limits; or
5. motivated to serve the employer.

• Conduct is not outside the scope of employement merely because employee distregards employer’s instructions

Question 8

Vicarious Liability for Independent Contractors

Priority: High

Answer 8

Generally, principals are not liable for the negligent acts of independent contractors, unless:
1. engaged in an inherantly hazardous activity;
2. duty owed by the principal is non-delegable; OR
3. principal holds the independant contractor out as his agent to a third-party and that party suffered harm after reasonably relying on the care and skill of the agent

Question 9

Fiduciary Duties of an Agent

Priority: High

Answer 9

An agent owes the principal the following fiduciary duties:
1. Duty of Care = use reasonable care when performing duties
2. Duty of Loyalty = act soely and loyally for the principal’s benefit
3. Duty of Obedience = obey all reasonable directions given by principal

An agent is liable to the principal for the breach of a duty.