Agency Flashcards
What is the definition of agency?
the fiduciary relationship that arises when one person (a Principal) manifests assent to another person (an Agent) that the A shall act on the P’s behalf and subject to the P’s control, and the A manifests assent or otherwise consents so to act
What does mutual consent mean in the context of agency?
if two parties agree that one will act on another’s behalf and subject to the other’s control, their relationship constitutes an agency relationship regardless of their understanding of the legal terminology or legal consequences.
Must be consensual, but doesn’t have to be contractual
Consent is measured by an objective standard
Does an agency relationship need to be in writing?
No! But, in some jurisdictions, the agent’s authorization must be in writing where the authorized transaction is is subject to the statute of frauds.
Texas does not follow this rule except in in the conveyance of real property! So if selling real property in TX, agent relationship authorizing the transaction must be in writing.
What does it mean for the agent to be subject to the principle’s control?
The Agent is duty-bound to act in accordance with the Principal’s wishes and obey the Principal’s lawful instructions
The extent to which the principal has the right to control the physical details or conduct of the work will determine whether one is a special type of agent called “servant” or employee” for the purposes of respondeat superior.
The principal’s control distinguishes the agency relationship from certain other fiduciary relationships
What is a co-agent?
There are multiple agents for the same principal
What is a sub-agent?
When an agent has their own agent
What is actual authority?
Actual authority is a question of fact. Context is important.
There is actual authority when, at the time of taking action that has legal consequences for the Principle, the Agent reasonably believes, in accordance with the Principal’s manifestations to the Agent, that the Principal wishes the Agent so to act
Agent has power AND the right to affect Principle’s legal relations.
Not what the principal ACTUALLY wanted, but what the agent reasonably believed the principal wanted based on the principal’s manifestation
Actual authority includes incidental authority
What is incidental authority?
Part of actual authority
Authority to do what is reasonably necessary to carry out the express grant of authority
A may reasonably assume that the P wishes that the A take the steps necessary to achieve the P’s objective and that the A proceed in the usual and ordinary way
What is apparent authority?
Substitute for actual authority
the power (not necessarily the right) held by an A or other actor to affect a P’s legal relations with third parties when a thrid party reasonably believes the A has authority to act on behalf of the P and that belief is traceable to the P’s manifestations
Different than actual authority because not looking at A’s reasonable belief but a third party’s reasonable belief based on P’s manifestations!
What is agency by estoppel?
Another substitute for actual authority.
Estoppel requires detrimental reliance, rather than just mere reliance.
Estoppel precludes the Principal from escaping the contract (unlike apparent authority which results in a binding contract that can be enforced by either P or T.) So the T can choose to enforce it.
Still requires manifestation, but the manifestation can be the P knowingly or negligently allowing the T to change their position.
What is agency by ratification?
Another substitute for actual authority.
the affirmance of a prior act done by another (may not even be technically an agent), whereby the act is given effect as if done by an A acting with actual authority
Results in a binding contract that relates back to the time of the transaction and is the equivalent of there having been authority at the time
Principal must exist at the time of the act and at the time of ratification!
How can the agency relationship AND actual authority be terminated?
- Expiration of a term
- Purpose of the agency is completed by the A
- Occurrence of specified event or fulfillment of condition
- Mutual consent of P and A
- Revocation by P or renunciation by A
- Death or incapacity of P or A
- Destruction of subject of the agency or other change in circumstances from which A would reasonably infer that P no longer consents to exercise of the A’s authority
How can an agent’s apparent authority terminate?
Only when the T’s reasonable belief in the A’s authority is terminated. Not necessarily when the relationship ends.
If the T learns from the P or someone else that the agent is not authorized to act.
Can linger even after agency relationship and actual authority is terminated
What is a disclosed principal?
When, at the time of contracting, an Agent and a Third-party interact, the Third-party has notice that the Agent is acting for a Principal and has notice of the Princpal’s identity
What is an undisclosed principal?
When, at the time of contracting, an Agent and a Third-party interact, the Third-party has no notice that the Agent is acting for a Principal, let alone the principal’s identity
What is a partially disclosed principal?
When, at the time of contracting, an Agent and a Third-party interact, the Third-party has notice that the Agent is acting for a Principal but does not have notice of the Princpal’s identity
(A’s representative capacity is made clear)
When can the Third-party hold the principal liable on a contract entered into by an Agent?
Regardless of the type of principal, the Principal is bound to a contract with Third-party if the Agent acted with actual authority or if there is an applicable substitute for authority!
If A did not have authority and therefore there is no contract, T can go against P in restitution
When can the principal hold the Third-party liable on a contract entered into by the Agent?
If the Agent acted with actual authority or there is an applicable substitute.
Exceptions (UP or PDP)
1. Contract expressly excludes liability to that particular P or any PDP or UP
2. Fraud by A in failing to disclose P
3. Identity of UP materially changes the terms of the contract
4. UP takes subject to defenses available to T against A
If there is no contract then principal can go against T for restitution
When can a third-party hold the Agent liable on a contract entered by Agent on the Principal’s behalf?
If DP, A has no liability because they are not a party to the contract. (But remember T could go against A for misrepresentation or breach of implied warranty of authority)
If PDP: If A is acting with actual or apparent authority, A is liable on the contract unless they can show that the T agreed that the A would not be liable
If UP: If UP: If A is acting with actual authority (or a substitute other than apparent), A is liable on the contract.
If P is non-existent: A is liable on the contract
If the principal uses an assumed name, when is P disclosed to T?
An assumed name certificate is public knowledge, but does not result in constructive knowledge to the public or T
But, the T could have actual knowledge (or should have known… like previous email with signature that said full legal name, but still argument) , then P would be a DP and A would not be liable on the contract.
If the Third-party successfully convinces a court that both the Principal and Agent are liable, can the thrid-party recover from both?
No! If T wants to preserve option to elect, should sue both or else the other party is discharged, but if successful in their claim against both, must elect.
Different if the agent individually guarantees or co-signs the contract.
If UP or PDP, can the agent use parol evidence to show they signed on behalf of the Principal?
If the agency is not fully disclosed in a contract that A signs on behalf of P, but the contract is ambiguous, the A has an opportunity to establish through parol evidence that his representative capacity and the identity of the P were known to T at the time the contract was entered into
If the contract is unambiguous, no parol evidence is allowed.
When is the principal imputed with the agent’s knowledge?
General rule: the knowledge of A will be imputed to P
Exceptions:
1. When A and T work together to conceal information from the P, P is not bound by A’s knowledge!
2. When A is acting adversely to P’s interest
3. Where A clearly could not be expected to communicate information to P
When can the agent hold the third-party liable on the contract?
If DP, A has no right to enforce the contract because A is not a party
If UP or PDP, A can enforce the contract because A is a party to the contract
If A recovers on a contract entered into on behalf of P, does P have any rights against A? Yes. P can likely get a constructive trust because A would be unjustly enriched.
