Agency Flashcards
Who can terminate the agency relationship?
Either the principal or agent
Termination can be unilateral, consent of other party is not necessary
Vicarious Liability
Vicarious liability holds that a principal is liable for the acts of the agent in the scope of agent’s employment even when the principal is innocent of an fault. Principal & agent are both jointly & severally liable.
But if agent is an Independent Contractor, then not liable for it
Factors to Distinguish b/w IC v. Employee
In determining whether an individual is an employee or an IC, the primary issue is whether the principal has the right to control the individual’s method and manner of work.
1) Skills required→ if more skills required then likely IC
2) Tools & facilities→ if principal supplies tools and facilities, likely employee
3) Period of employment→ if period of employment is indefinite and/or long, more likely to be employee
4) Basis of compensation → if compensation is paid on basis of time, more likely to be employee. If compensation is based on job, more likely to be ic
5) Business Purpose → if person was hired to perform an act in furtherance of person’s business, more likely to be employee
6) **Distinct business **→ person who has her own business/occupation is more likely to be an IC
7) Restrictions on Other Employment → if person cannot work anywhere else
8) How they are Titled in a K (employee or Independent Contractor) → Although not dispositive on the issue, the contract provides that doctors are Independent contractors.
In light of the foregoing factors, if principal has no significant right to control the method and manner of work, then more likely an IC.
Scope of Employment?
1) Was the conduct “of the kind” the agent was hired to perform?
2) Did the tort occur “on the job” (within the time and space limits of the employment)
-Detour: minor deviation from employer’s directors OR
-Frolic: substantial deviations from employer’s directions, outside scope
3) Was the conduct actuated at least in part to benefit the principal?
Who can be a principal?
Any person or entity with legal capacity
Excludes minors & anyone incapacitated by illness or intoxication
Who can be an agent?
Any person or entity with minimal capacity-who can:
1) Assent to the agency relationship
2) Perform tasks on behalf of the principal
3) Be subject to principals control
A minor can serve as an agent
Agent’s Duties Owed to Principal
1) Duty of Care: carry out agency w/ reasonable care
2) Duty of Loyalty: owe undivided loyalty to principal
3) Duty of Obedience: agent must obey all reasonable directions of principal
Principal’s Duties to Agent
Not fiduciary in nature, that’s only one-way street from agent to principal
Indemnify agent’s losses in carrying out principal’s instructions
Compensate agent for services
When can a principal be liable for contracts entered into by an agent?
A principal will be liable to a third party for contracts entered into by an agent only if they authorized or ratified the contract.
(this is regardless of the agent’s status as an employee or IC)
A principal is liable to a contract entered into by an agent only if they had 1) actual or 2) apparent authority or later 3) ratifies the act.
RULE STATEMENT FOR UNDISCLOSED/DISCLOSED/UNIDENTIFIED
As a general matter, an agent binds a principal to a contract [whether or not the principal is disclosed to the third party] if the agent had either actual or apparent authority to enter into the contract.
Without that authority, the agent alone is liable on the contract unless the principal becomes liable by subsequently ratifying the contract.
An agent acting with authority is not liable on the contract if the principal’s identity is disclosed to the third party, but is liable if the principal’s identity is not disclosed or only partially disclosed, unless the contract provides otherwise.
Actual Authority
Actual authority is authority that an agent reasonably believes he possesses based on his dealings with the principal.
REMEMBER: Based on principal’s manifestations & how they affect the reasonable agent.
Express Authorization: when the principal explicitly authorizes the agent (either orally or in writing) to engage in certain tasks
Implied Authorization: when the action is necessary to carry out the agent’s expressed duties, the agent acted similarly in prior dealings w/ the principal or its customary for an agent in that position.
-if exceed scope of actual authority (for ex buying it at a higher price than authorized) then you act without actual authority
-if agent had the authority to purchase the item from the principal, but purchased it for the principal’s competitor → then agent did not have authority & principal is not liable
Apparent Authority
Apparent authority is authority that a third party reasonably believes the agent has based on the principal’s holding out the agent as having such authority.
REMEMBER: Based on a principal’s manifestations and how they affect the reasonable 3rd party.
-Apparent authority exists when:
1) A 3rd party reasonably believes the agent has authority to act on behalf of the principal and
2) That belief is traceable from the principal’s manifestation. A principal holds the agent out as having authority of the principal when the principal:
a) gives a position or title indicating authority,
b) previously held the agent out and did not publish a revocation, or
c) cloaked the agent with the appearance of authority
-apparent authority can be based on credentials shown to 3rd party that were supplied by principal to agent
-if principal fires agent & asks for credentials back. agent never gives credentials back & principal does not send 3rd party notice of Principal’s termination of Agent’s authority, then apparent authority will still exist.
How can agents actual authority be terminated?
1) after specified time
2) after specified event
3) reasonable time
4) change of circumstances
5) breach of fiduciary duty
6) unilateral act of either principal or agent
7) death or incapacity of principal or agent (termination in principals death is only effective when the agent has notice of death)
Requirements to Create Agency Relationship
Remember: “ABC”
1) Assent: both the principal and agent manifest assent to work with each other
2) Benefit: the agent agrees to work for the principals benefit
3) Control: the agent agrees to work subject to the principal’s control
Ratification Requirements
Even if agent had no authority at time of entering into contract, the principal will still be bound by the agent’s actions if the principal ratifies the contract. Ratification “blesses” the trx.
-Ratification can be express or implied.
-Express: oral or written affirmation
-Implied: principal accepts benefits
3 Requirements for Ratification:
1) Principal must have knowledge of all material facts of the K
2) Principal must accept entire trx, must ratify entire K or none of it
3) Ratification cannot be used to alter rights of intervening parties
-If principal refuses to accept delivery → then principal does not ratify the unauthorized purchase
Do you need a writing or consideration to form an agency relationship?
No
