Agency Flashcards
What is agency?
a legal relationship where one entity (principal) has another entity (agent) act on their behalf
a written agreement is only required if the agent is buying/selling an interest in land for the principal or if the agency agreement can’t be performed in one year
only the principal needs to be competent (agent can be a minor or mentally incompetent) and consideration is not required to form an agency
What is power of attorney?
a written authorization of agency where the agent’s authority is limited to specific transactions; the agent doesn’t have to be a lawyer (agent referred to as “attorney in fact”); generally only the principal is required to sign the power of attorney
What are certain duties that are implied in every agency relationship?
duty of loyalty, duty of obedience, duty of reasonable care, duty to account, and subagent (where the agent can hire an agent; the subagent owes duty of care to both the agent and principal)
If an agent breaches the duties they owe to the principal, the principal can recover damages from the agent in what ways?
tort damages, contract damages, recovery of secret profits, and withhold compensation
In addition to any duties expressed in the agency agreement, the principal owes the agent what else?
compensation, reimbursement/indemnification, and remedies of the agent (agent can bring action if the principal breaches their duties; however, if the relationship is not contractual, the agent can’t seek the contract remedy for specific performance)
T/F: either party has the power to terminate the relationship, but the parties don’t necessarily have the right to terminate at any time
True
What is agency coupled with an interest?
the agent has an interest in the subject matter of the agency; in effect, the agent has paid for the right to be appointed as the agent
only the agent can terminate this; death, incapacity, or bankruptcy of the principal will not end this either
3 ways an agent’s power can bind a principal
a grant of actual authority, apparent authority or estoppel and ratification
What is actual authority?
the authority the agent reasonably believes they possess because of what was communicated to them by the principal; an agent can bind the principal to contracts with third parties; this can be express or implied
express - includes all powers granted by the principal
implied - the authority to do things reasonably necessary to carry out the agency (ex. hired to manage a business, they can hire/fire, buy inventory, etc.)
How can actual authority be terminated?
act of the parties (revocation = by the principal / renunciation = by the agent); damages could be available
accomplishment of objective or expiration of stated period
automatic termination of actual authority by operation of law in the following circumstances: death of either principal or agent (death of principal does not terminate the agency until the agent has notice), incapacity of principal, discharge in bankruptcy of principal, failure to acquire a necessary license, destruction of the subject matter of the agency, or subsequent illegality
What is apparent authority?
the principal’s conduct has caused third parties to reasonably believe that the agent has authority; the agent has the power but not the right
the principal will still be bound to the third party, but they can hold the agent liable for acting without authority
How can apparent authority be terminated?
when a principal terminates an agent’s actual authority, the agent will continue to have apparent authority until the principal notifies third parties
actual notice - given to terminate apparent authority to old customers
constructive notice - given to terminate apparent authority to potential customers
Key points to remember about disclosed/undisclosed principals
if principal is disclosed, then the agent is not liable
if principal is unidentified (identity is not disclosed but the fact that a person is acting as an agent is disclosed) or undisclosed (neither identity or existence are disclosed), then the agent is liable
the principal is bound if the agent had authority regardless of whether or not the principal was disclosed, undisclosed, or unidentified; if the agent did not have authority, the principal is bound only if he ratifies
T/F: a principal is not liable for the torts committed by their agent
True, only the agent is liable
However, under the doctrine of respondeat superior, an employer can be liable for the employee’s torts if they were committed within the scope of employment
this does not relieve the agent of liability, it just simply means that the injured person can sue both the employer and the agent
an employer is not liable for torts committed by independent contractors
