AGENCY

Question 1

agency definition

Answer 1

• principal appoints agent to act on principals behalf
• principal controls agent

Question 2

consent

Answer 2

of both principal and agent is necessary to form relationship

Question 3

creation of the relationship

Answer 3

• capacity: principal must have contractual capacity; agents need only minimal capacity
• appointment of agent doesnt have to be in writing (but SofF may require one!)

Question 4

modes of creating agency relationship - act of parties or by operation of law

Answer 4

• can be created by act of parties or by operation of law
• act of parties: agreement b/w principal and agent
• by operation of law: estoppel or statute

Question 5

agent’s duties to the prinicpal

Answer 5

• agent is a fiduciary of their principal (in addition to any express contractual duties that agent owes principal, the duties of loyalty, obedience to lawful instructions, and reasonable care under circumstances are owed)

Question 6

duty of care

Answer 6

• agent owes duty to their principal to carry out their agency with reasonable care
• degree of care = sliding scale depending on any special skills that agent may have

Question 7

duty of loyalty

Answer 7

• agent owes duty of undivided loyalty to principal
• agent breaches if he has adverse interests and fails to disclose them; agent can’t act on behalf of 2 diff principals with adverse interests

Question 8

duty of obedience

Answer 8

agent has to obey all reasonable directions of their principal

Question 9

what if agent breaches duty?

Answer 9

principal’s remedies include:
- contract actions
- tort actions (agent is subject to tort liability for damages resulting from his misuse of principal’s property, or for failure to perform)
- principal can recover actual profits or property if agent breaches fid duty
- principal can end the agency

Question 10

principal’s duties to agent

Answer 10

• owes agent duties imposed by their K, reasonable compensation, reimbursement for expenses that the agent incurred

Question 11

agent’s remedies

Answer 11

• a compensated agent has the usual K remedies against the principal but has duty to mitigate damages
• agent has possessory lien on any money principal owes her

Question 12

LIABILITY OF PRINCIPAL FOR THE AGENT’S CONTRACTS

Answer 12

• agent has power to bind a principal to a K the agent enters on principal’s behalf ONLY IF agent acted with AUTHORITY
• three types of authority: actual, apparent, ratified
• look to see if agent had actual authority; if not, look to see whether apparent authority was present (ratified authority comes into play only if princiapl grants authority AFTER K is made)

Question 13

actual authority

Answer 13

• authority that the agent reasonably believes they possess BASED ON THE PRINCIPAL’S DEALINGS WITH THEM
• if the principal’s words/conduct would lead a reasonable person in agent’s shoes to believe agent has authority to act on principals’ behalf, the agent has actual authority to bind principal

NEED authority at the time of entering into the contract

Question 14

express or implied actual authority

Answer 14

• express: contained within 4 corners of agency agreement - provided in writing or orally from principal to agent
• implied authority: authority agent reasonably believes they have as a result of the principal’s words or actions (it includes authority incidental to express authority; arising out of custom known to agent; to take emergency measures; etc)

example of implied actual authority: if principal tells agent to hire a receptionist, agent has authoritty to take actions reasonably necessary to do so (place a job posting, interview people, etc)

Question 15

termination of actual authority

Answer 15

termination or revocation of actual authority occurs by:

• happening of agreed upon event
• terms of agency expire
• agent or principal dies
• agent breached a fiduciary duty owed to principal

Question 16

apparent authority

Answer 16

• if principal’s words or conduct would lead a reasonable person in the THIRD PARTY’s position to believe that agent has authority, the agent has apparent authority to bind principal (arises from reasonable beliefs of third parties)
• apparent authority can exist even when actual authority does not —> DIFFERENT CONCEPTS
• need to discuss what transpired b/w the principal and the third party – ask what the principal did to indicate TO THE THIRD PARTY that agent had authority

Question 17

types of apparent authority
agent’s title

Answer 17

• apparent authority can be established through agent’s title or position (Principal appoints Agent as “treasuer”)

Question 18

types of apparent authoirty
when agent has no actual authoirty

Answer 18

• unilateral agent representations: apparent authority CANNOT be created by mere representations of agent or other actor (apparent authority is based on the PRINCIPAL’S MANIFESTATIONS TO THIRD PARTY)

Question 19

ratification

Answer 19

• even if agent had no authority at time of entering into the K, principal will be bound by agent’s actions if principal ratifies the K
• methods of ratifying: may be express or implied through conduct of the principal; most common is oral or written affirmation of a K; or where principal accepts benefits of the K
• upon ratification, agent is relieved of liability for breach of duty

Question 20

requirements for ratification

Answer 20

principal must:
1. have knowledge of all material facts regarding the K
2. accept the entire transaction; AND
3. have capacity

Question 21

what is the effect of ratification?

Answer 21

principal who ratifies an agent’s unauthorized act becomes liable to third parties for those acts

Question 22

liability of agents and principals to third parties

third party v. principal

Answer 22

• principal will be liable to third party on a K entered into by their agent if agent had valid authority to act (actual, apparent, or through ratification)

Question 23

Third party v. Agent
disclosed principal

Answer 23

where third party knows of principals existence and identity –> principal is liable, agent is NOT liable

Question 24

undisclosed and unidentified principals

Answer 24

• if principal is not identified (third party knows the agent was dealing on behalf of a principal but doesn’t know exactly who it is) OR if principal is not disclosed (agent doesn’t reveal that they are contracting on behalf of a principal), EITHER THE PRINCIPAL OR AGENT can be liable on K if agent had authority to enter the K

3rd party can sue both principal and agent

Question 25

liability of principal for AGENT’S TORTS

Answer 25

• principal can be vicariously liable for torts of their agent under 2 theories: respondeat superior/vicarious liability and apparent authority

***in addition to vicarious liability, principal can be directly liable for their own negligence in hiring or supervising the agent

***a principal may also be directly liable for agent’s tort if they gave agent actual authority to commit tort or ratified the tort, or in other circumstances involving independent contractors

Question 26

main question re: respondeat superior (whether principal is liable under vicarious liability)

Answer 26

• principal can be liable for torts of agent under this doctrine – employer is liable for the tort of an employee committed within scope of employment
• a principal is NOT liable generally for torts committed by independent contractor
• first step is to determine whether agent is employee or an IC

Question 27

employee or independent contractor

Answer 27

• difference b/w employee and IC is that principal/employer retains right to control manner in which employee performs their work
• principal doesn’t reserve/have right to control manner in which work is performed by IC

***look to extent of the principals control over the manner and method of agent’s performance

Question 28

employee

Answer 28

• was the tort committed by employee in the scope of employment?
• look at factors such as: was conduct of the kind agent was hired to perform; did tort occur on the job; was conduct actuated at least in part to benefit the principal
• if yes, principal is vicariously liable (employer and employee are jointly and severally liable to the 3rd party)
• if no, principal is not liable

Question 29

intentional torts

Answer 29

general rule is that employer is NOT liable for intentional torts of employee

exceptions: intentional torts will be viewed as within scope of employment if conduct is natural incident to carrying out employer’s business

Question 30

liability for acts of independent contractors

Answer 30

principal will incur liability for acts of an IC where:
- inherently dangerous activities (e.g., blasting) are involved
- nondelegable duties have been delegated, or
- the principal knowingly selected incompetent IC