Agency

Question 1

What is the test for whether the principal will be vicariously liable for torts committed by its agent?

Answer 1

1. There is a principal-agent relationship, and
2. The tort was committed by the agent within the scope that relationship..

Question 2

What does the principal-agent relationship require?

Answer 2

Assent, benefit, and control (AB&C)

Question 3

What is assent?

Answer 3

An informal agreement between the principal who has capacity and the agent.

Question 4

What is benefit?

Answer 4

The agent’s conduct must be for the principal’s benefit.

Question 5

There will always be assent, benefit, and control between…

Answer 5

employer and employee.

Question 6

Will the principal be vicariously liable if its agent gets the help of a sub-agent and the sub-agent commits the tort?

Answer 6

The principal will be liable for a sub agent’s tort only if there is AB&C between the principal and the sub-agent.

Question 7

Typically, the principal does not assent to the sub-agent’s help and does not have the right to control the sub agent. Therefore…

Answer 7

Without AB&C, there is no vicarious liability for a sub-agent’s torts in this situation.

Question 8

Will a principal who borrows another principal’s agent be vicariously liable for the borrowed agent’s tort?

Answer 8

If a principal borrows another principal’s agent, the borrowing principal will be liable for the borrowed agent’s torts if there is AB&C between them.

Typically, although the borrowing principal may assent to, and benefit from the borrowed agent, the borrowing principal does not assume any right to control the borrowed agent. Therefore, typically no vicarious liability.

Question 9

The key distinction between an agent and an independent contractor is that:

Answer 9

• There is no right to control an independent contractor, because
• there is no power to supervise the manner of the IC’s performance.

Question 10

In general, there is no vicarious liability for an independent contractor’s torts. What are the exceptions to this?

Answer 10

1. Inherently dangerous activities
   
   1. If IC commits tort while engaged in an inherently dangerous activity, there will be VL.
2. Estoppel
   
   1. If you hold out your independent contractor with the appearance of agency you’ll be estopped from denying VL.

Question 11

How do you tell if the agent’s conduct was within the scope of the partnership?

Answer 11

1. The conduct was “of the kind” the agent was hired to perform
2. The tort occurred on the job
3. The agent intended to benefit the principal

Question 12

What is the “of the kind” requirement?

Answer 12

Was the conduct within the job description? If so, it’s likely inside the scope.

Question 13

When considering whether conduct is “on the job,” what is a frolic v. detour?

Answer 13

1. Frolic
   
   1. A new and independent journey
   2. Outside the scope
2. Detour
   
   1. A mere departure from an assigned task
   2. Still inside the scope

Question 14

What does “intent to benefit” mean?

Answer 14

If the agent, even in part, intended to benefit the principal by its conduct, that’s enough to be inside the scope

Question 15

Intentional torts are generally outside the scope of the relationship. What are the exceptions?

Answer 15

Intentional torts are within the scope if the conduct was:

1. Authorized by the principal; or
2. If the conduct was natural from the nature of the agent’s employment; or
3. The conduct was motivated by a desire to serve the principal

Question 16

What is the test for whether the principal is liable for contracts entered into by its agent?

Answer 16

The principal is liable for contracts entered into by its agent only if the principal authorized the agent to enter the contract

i.e. principal is only liable for its authorized contracts

Question 17

As it pertains to a principal’s liability for contracts entered into by its agent, what are the 4 types of authority?

Answer 17

1. Actual express authority
2. Actual (real) implied authority
3. Apparent authority
4. Ratification

Question 18

What is actual express authority?

Answer 18

Authority where the principal used words to express authority to the agent.

e.g. “go out there and make a contract”

Question 19

Actual express authority can be ____ and even ________.

Answer 19

oral; private.

Question 20

What is the exception to granting actual express authority orally/in private??

Answer 20

If the contract itself must be in writing, then the express authority to enter into that contract must be in writing.

Typically a conveyance of interest in land that lasts more than a year.

Question 21

Express authority will be revoked by:

Answer 21

• Unilateral act of either the principal or the agent, or
• Death or incapacity of the principal.

Question 22

Death or incapacity of the principal won’t revoke express authority if…

Answer 22

The principal gives the agent a durable power of attorney.

Question 23

What’s a power of attorney?

Answer 23

a written (must be in writing) expression of authority to enter into a transaction on behalf of the principal.

Question 24

What makes a power of attorney durable?

Answer 24

The document has conspicuous survival language (survives death, incapacity)

Question 25

Upon death or incapacity of the principal, the ________ is liable for the contract entered into by the agent.

Answer 25

agent (personally); estate is not liable.

Question 26

Actual express authority is narrowly construed/tailored to…

Answer 26

the actual words used within it.

Question 27

What is actual (Real) Implied authority?

Answer 27

Authority given to the agent through conduct or circumstance.

Question 28

Under the “necessity” category of actual (real) implied authority, there is implied authority to do all tasks:

Answer 28

which are necessary to accomplish an expressly authorized task.

Question 29

Under the “custom” category of actual (real) implied authority, there is implied authority to do all tasks:

Answer 29

which by the custom are performed by persons with the agent’s title or position.

Question 30

Under the “prior acquiescence by the principal” category of actual (real) implied authority, there is implied authority to do all tasks:

Answer 30

Which the agent believes to be authorized to do from prior acquiescence by the principal

i.e. you’ve done this before and they never said anything for or against it

Question 31

What is the two-part test for apparent authority?

Answer 31

1. Principal did something to cloak (“cloaked”) agent with the appearance of authority, and
2. Third party reasonably relies on appearance of authority.

Question 32

Under the “ratification” type of authority, authority can granted after the contract has been entered, if:

Answer 32

1. Principal has knowledge of all material facts regarding the contract, and
2. Principal accepts its benefits.
3. (this is called “ratifying” the contract)

Question 33

What is the exception to the “ratification” category of authority?

Answer 33

Ratification cannot alter the terms of the contract.

Question 34

What is the general rule regarding liability for an authorized contract?

Answer 34

The principal, not the agent, is liable for contracts authorized under one of the four categories.

Question 35

What is the exception to the rule regarding contract liability?

Answer 35

The unidentified or undisclosed principal

If the principal is partially disclosed or undisclosed, the authorized agent may nonetheless be liable at the election of the third party.

Question 36

What makes a principal partially disclosed or undisclosed?

Answer 36

Partially disclosed: the fact that the agent is working for a principal is known to the third party, but the identity of the principal is not know.

Undisclosed: neither the fact that the agent is working for a principal nor the principal’s identity is disclosed to the third party.

Question 37

In return for reasonable compensation and reimbursement of expenses, what duties does an agent owe a principal?

Answer 37

1. Duty of care
2. Duty to obey instructions that are reasonable, and
3. Duty of loyalty.

Question 38

Under the duty of loyalty, the agent may never do any of the following:

Answer 38

1. Self-dealing: agent cannot receive a benefit to the detriment of the principal
2. Usurp (take away) the principal’s opportunity (opportunity he could have been pursuing), or
3. Secret profits: making a profit at the principal’s expense without disclosure.

Question 39

What remedies can a principal seek if an agent breaches a duty?

Answer 39

• The principal can sue for losses that are caused by the breach, or
• disgorge (take away) profits made by the agent.