Agency

Question 1

Requirements for Agency Relationship

Answer 1

1) Consent by both the principal and the agent that the agent will act for the principal’s benefit
2) Agent is subject to the principal’s control

Question 2

Agency Relationship Termination

Answer 2

Either agent or principal can manifest to the other the desire to terminate the agency relationship

Termination effective when notice is received

Express terms of the agency expire

Purpose of agency relationship is fulfilled

Question 3

Termination by operation of law

Answer 3

Agent or principal dies, loses capacity
Agent materially breaches a fiduciary duty owed to principal

Question 4

Actual Authority

Answer 4

Can be express, where the agent is expressly given authority to act for principal
Can also be implied, when the principal’s conduct leads the agent to believe he has the authority (implied by custom, past course of conduct by the principal, necessity or an emergency circumstance)

Question 5

Apparent Authority

Answer 5

1) the person dealing with the agent must do so with a reasonable belief in the agent’s authority
2) the belief must be generated by some act or neglect on the part of the principal

Question 6

Ratification

Answer 6

Even if the agent did not have the authority to enter into a transaction, the principal can ratify the acts (and thus become liable) by expressly or impliedly affirming or accepting the benefit of the acts, so long as the principal knew the material facts and had capacity

Question 7

Principal bound on a contract

Answer 7

Entered into by an agent if the agent had authority to enter into the contract

Question 8

Agent is bound to a third party on a contract

Answer 8

He enters into with the third party if the agent had no actual or apparent authority to enter into the contract. The agent is also liable if the principal is undisclosed (the third party does not know the agent is acting or another’s behalf) or if the principal is partially disclosed (the third party knows the agent is acting on behalf of another but does not know the identity of the principal

Question 9

The agent is bound to the principal for breach of contract

Answer 9

If the agent acts beyond his authority

Question 10

Vicarious Liability (Respondeat Superior)

Answer 10

The employer is liable in tort for the acts of an agent or employee if the agent or employee was
1) acting within the scope of employment
2) made a minor deviation (detour) rather than a (frolic) from employment
or
3) committed an intentional tort only if it was for the principal’s benefit because the principal authorized it or one that arose naturally due to the nature of employment

Agent is liable under joint and several liability as well

Question 11

Indemnification

Answer 11

Principal can recover against the agent for indemnification if the agent acts beyond his authority

Question 12

Direct liability of principal

Answer 12

The principal is directly liable for his own negligence if he negligently hired the agent, failed to fire the agent, or failed to properly supervise the agent

Question 13

Fiduciary Duty

Answer 13

The agent owes a duty of care and a duty of loyalty (not to engage in self dealing, not to profit without disclosure and a duty to follow instructions) The principal may recover losses from the profits made by the breaching agent

Question 14

Duty of Loyalty

Answer 14

Agent breaches duty if he has adverse interest and fails to disclose such interests
Agent cannot act on behalf of two different principals with adverse interests
No self dealing

Question 15

Obedience

Answer 15

Agent must obey principal’s lawful instructions
Agent’s interpretation of principal’s instructions must be reasonable under the circumstances

Question 16

Duty of Care

Answer 16

Agent must carry out his agency with reasonable care

Reasonable care judged in light of local community standards

Agent must notify principal of all agency-related matters that come to agent’s attention