Agency

Question 1

What is the definition of agency?

Answer 1

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

Question 2

What does mutual consent mean in the context of agency?

Answer 2

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

Question 3

Does an agency relationship need to be in writing?

Answer 3

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.

Question 4

What does it mean for the agent to be subject to the principle’s control?

Answer 4

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

Question 5

What is a co-agent?

Answer 5

There are multiple agents for the same principal

Question 6

What is a sub-agent?

Answer 6

When an agent has their own agent

Question 7

What is actual authority?

Answer 7

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

Question 8

What is incidental authority?

Answer 8

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

Question 9

What is apparent authority?

Answer 9

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!

Question 10

What is agency by estoppel?

Answer 10

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.

Question 11

What is agency by ratification?

Answer 11

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!

Question 12

How can the agency relationship AND actual authority be terminated?

Answer 12

1. Expiration of a term
2. Purpose of the agency is completed by the A
3. Occurrence of specified event or fulfillment of condition
4. Mutual consent of P and A
5. Revocation by P or renunciation by A
6. Death or incapacity of P or A
7. 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

Question 13

How can an agent’s apparent authority terminate?

Answer 13

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

Question 14

What is a disclosed principal?

Answer 14

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

Question 15

What is an undisclosed principal?

Answer 15

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

Question 16

What is a partially disclosed principal?

Answer 16

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)

Question 17

When can the Third-party hold the principal liable on a contract entered into by an Agent?

Answer 17

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

Question 18

When can the principal hold the Third-party liable on a contract entered into by the Agent?

Answer 18

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

Question 19

When can a third-party hold the Agent liable on a contract entered by Agent on the Principal’s behalf?

Answer 19

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

Question 20

If the principal uses an assumed name, when is P disclosed to T?

Answer 20

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.

Question 21

If the Third-party successfully convinces a court that both the Principal and Agent are liable, can the thrid-party recover from both?

Answer 21

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.

Question 22

If UP or PDP, can the agent use parol evidence to show they signed on behalf of the Principal?

Answer 22

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.

Question 23

When is the principal imputed with the agent’s knowledge?

Answer 23

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

Question 24

When can the agent hold the third-party liable on the contract?

Answer 24

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.

Question 25

When can the principal hold the agent liable?

Answer 25

IF the P-A relationship is contractual, A has any duties imposed by contact.

A is a fiduciary and owes fiduciary duties to P (duty of care, obedience, loyalty)

Question 26

If the principal wants to hold the agent liable, what are the elements of a breach of fiduciary duty claim?

Answer 26

Existence of fiduciary duty
Breach
Injury to plaintiff or benefit to defendant

Question 27

When can an agent hold a principal liable?

Answer 27

The principal is not a fiduciary of the agent.

The only common law obligations imposed on the principal are indemnity and reimbursement for liabilities rightfully incurred.

If the P-A relationship is contraction, can be breach of contract.

Question 28

Is the fact that Agent may not have disclosed Principal a defense for the principal?

Answer 28

No, although A has duty to disclose, P cannot use that as a defense and will need to indemnify A if they are stuck on the contract.

Question 29

What is respondeat superior?

Answer 29

A doctrine of vicarious liability under which an employer may be held liable for the torts of an employee.

The tortious conduct must occur within the scope of employment and the tortfeasor must be an employee.

Question 30

What is the analysis for respondeat superior?

Answer 30

1. Are they an employee (servent) or independent contractor?
   (If IC, the employer is not liable unless there is an exception)
2. Was there actually a tort?
3. Did the tortious conduct occur within the scope of employment?
   (Scope is always fact based)

Question 31

What does it mean for the tortious conduct to be within the scope of employment for respondeat superior?

Answer 31

An employee acts within the scope of employment when performing work assigned by the employer or engaging in a course of conduct subject to the employer’s control

An employee’s act is not within the scope of employment if they are engaging in an independent course of conduct not intended by the employee to serve any purpose of the employer

Question 32

Who is considered an employee for respondeat superior?

Answer 32

An Agent whose Principal controls or has the right to control the manner and means of the Agent’s performance of work

Question 33

When IS an employer liable for the torts of an independent contractor (i.e. what are the exceptions for the general rule that employers are not liable for ICs)

Answer 33

1. The employer was negligent in hiring the independent contractor
2. The independent contractor is retained to perform a non-delegable duty of the employer
3. One other than an employee of the independent contractor is injured by the independent contractor’s negligent performance of work constituting an inherently dangerous activity
4. The employer is negligent with respect to an aspect of the independent contractor’s work over which the employer retained “some control”
5. There appears to be, but may not necessarily be, an agency relationship between the employer and the independent contractor

Question 34

When is an employer liable for the intentional torts of their employee?

Answer 34

Intentional torts are less likely to be within the scope of employment, but if it is within, may still impute the tort to the employer.

Question 35

Can an employer be liable for punitive damages?

Answer 35

Only for gross negligence or intentional or criminal conduct of an employee AND

Majority: if the employee acted within the scope of their employment

Substantial Minority (TX) Only if:
1. P authorized the act,
2. P recklessly employed an unfit A,
3. The A was a vice principal who acted within the scope of employment, or
4. If the P/manager ratified or approved the act

Question 36

Principal’s liability for Agent’s Torts Based on Apparent Authority

Answer 36

A Principal is subject to vicarious liability for a tort committed by an A in dealing or communicating with T on or purportedly on behalf of the P when actions taken by the A with apparent authority constitute the tort or enable the A to conceal its commission