Agency Flashcards
Agency - defintion
Fiduciary relationship that arises when one person (the principal) appoints and manifests consent to another (the agent), to act on the principal’s behalf, and the agent consents to act
Principal must have contractual capacity
Agent does not need to have contractual capacity
- Can be a minor!
Equal Dignities Rule
Agency agreements must be in writing when agent is to enter into certain contracts within statute of frauds OR agency agreement itself would fall within statute of frauds
Agent’s Fiduciary Duties to Principal
Duty of Care
o Carry out agency with reasonable care
Duty of Loyalty
o Owe undivided loyalty to principal
Treat the principal fair!
Duty of Obedience
o Agent must obey all reasonable directions of principal
- Remedies for breach of these duties
o Damages, disgorgement of profits, contract actions, tort actions
Principal’s Duties to Agent
- Not fiduciary in nature
- Indemnify agent’s losses in carrying out principal’s instructions
- Compensate agent for services
o Reasonable compensation!
Actual Authority (MEMORIZE THIS)
Principal’s words or conduct would lead a reasonable person in the agent’s position to believe that the agent has authority to act on the principal’s behalf
Express
o Conveyed by principal in words
Implied
o Agent reasonably believes exist as a result of the P’s words or actions
Termination of Actual Authority
- Specified time
- Specified event
- Reasonable time
- Change of circumstances
- Breach of fiduciary duty
- Unilateral act
- Death
o Agent must have notification of death!
Apparent Authority (MEMORIZE THIS)
Principal’s words or conduct would lead a reasonable person in the 3rd parties’ position to believe that the agent has authority to act on the principal’s behalf, then agent has apparent authority to bind the principal
Power of Position
o Based on agent’s title or position
o Creates reasonable belief in the 3rd party that the agent was authorized to act for the principal in ways that are typical of someone who holds that title or position
- APPARENT AUTHORITY CAN EXIST WHEN ACTUAL AUTHORITY DOES NOT!
- Unilateral agent representations are insufficient to create actual or apparent authority
- Apparent authority can linger after actual authority ends -> make sure to tell/give notice to 3rd parties that the agent no longer represents principal
Ratification - 3 requirements (MEMORIZE THIS)
Created when an “agent” purports to act on behalf of a “principal” without any authority at all, but the “principal” subsequently validates the act and becomes bound
- After-the-fact authority
Requirements of Ratification
o 1. Principal must have knowledge of all material facts regarding the contract
o 2. Accept the entire transaction AND
o 3. Have capacity (competent and legal age)
Express
o Oral or written affirmation
Implied
o Principal accepts benefits
Who is bound to the contract?
***Actual authority, apparent authority, or ratification = Principal Bound
- Undisclosed or partially disclosed principal = Agent also bound
Principal being liable?
A principal can be held liable for the torts of an agent when:
1. The agent acts with apparent authority and
2. The apparent authority enables the agent to commit the tort
Vicarious Liability and Respondeat Superior - Liability of Principal for Agent’s Torts
Master liable for torts in scope of servant’s employment
Detour -> Minor deviation from employer’s directions = employer liable
Frolic -> Substantial deviation form employer’s directions = employer NOT liable
Master not liable for torts committed by independent contractor in connection with his work
- UNLESS (1) work is inherently dangerous or (2) duty is non-delegable due to public policy such as keeping customer’s safe from contractors work in store, or (3) negligent selection of incompetent contractor
**Control is key factor here to determine Servant or Independent Contractor
- Discuss this in the analysis
Estoppel
Estoppel can be raised when the principal creates the appearance that an employer-employee relationship exists, and a third party relies on that relationship!
Factors to determine Right to Control - Employee vs. Independent Contractor… use these in analysis to discuss whether they are a employee or independent contractor
The primary factor in determining whether an employee or independent contractor is whether the principal has CONTROL over the method and manner of individual’s work!
- Skill required
- Tools and facilities
- Period of employment
- Basis of compensation
- Business purpose
- Distinct business
**Talk about both sides! Factors for employee and factors for independent contractor!
***Conclusion is basically irrelevant…ANALYSIS IS WHAT MATTERS HERE!
Intentional Tort Liability
Employer generally not liable for employee’s intentional torts
Exceptions
o Conduct natural from nature of job
o Employee is promoting the employer’s business
o Specifically authorized to do so by employer
Borrowed Servant/Employee
- Employee of one employer doing service for another
- Generally loaning principal is liable because they remain under the control of
them
