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MEE subjects > Agency > Flashcards

Agency Flashcards

1
Q

What is agency?

A

Agency is a fiduciary relationship that arises when one person appoints another to act on the principal’s behalf and the agent consents to act

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2
Q

What are the the 3 reqs of an agency relationsip?

A
  1. consent of principal and agent (express or implied)
  2. agent must be acting on behalf and for benefit of principal
  3. agent must be subject to principal’s control
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3
Q

What capacity is required for principal?

A

Principal must have contractual capacity

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4
Q

What capacity is required for agent?

A

agent does not need contractual capacity

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5
Q

What can a minor be?

A

An agent, but not a principal

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6
Q

When can an agent be disqualified?

A

For representing both parties or failing to have a required license

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7
Q

Does an agency agreement need to be in writing?

A

Generally, agency law does not require appointment of an agent to be in writing.

Equal dignities rule - Many states require agency agreements to be in writing when the agent is to enter into certain contracts within the SoF, or when agency agreement itself would fall into the statute of frauds

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8
Q

Is consideration required for the creation of an agency relationship?

A

No

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9
Q

2 ways agency relationship can be created

A
  • by an act of the parties
  • by operation of law
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10
Q

How is agency created by an act of the parties?

A
  • parties may create an agency by agreement between the principal and agent (actual auth)
  • parties may also be bound in agency relationship through holding out by the principal (apparent auth) OR
  • ratification
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11
Q

How is an agency created by operation of law?

A
  • estoppel - requires 3p reliance on principal’s ratification
  • statute - usually designed to accomplish a limited purpose
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12
Q

What duties does the agent owe to the principal?

A
  • duty of care
  • duty of loyalty
  • duty of obedience
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13
Q

What is the duty of care?

A
  • owes duty to principal to carry out their agency with reasonable care
  • degree of care is a sliding scale (gratuitious may be expected to put in less effort)
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14
Q

what is the duty of loyalty?

A
  • duty of individed loyalty to principal
  • cannot use position as agent to profit for themselves unless they account to principal for any profits made while carrying out instructions
  • must act solely for benefit of principal
  • cannot deal with principle as adverse party or act on behalf of adverse party
  • cannot compete w/ principal concerning subject matter
  • cannot use p property for own purposes or 3p purposes
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15
Q

what is the duty of obedience?

A

an agent must obey all reasonable directions of their principal (will be liable for loss of disobeying reasonable direction)

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16
Q

principal’s remedies when agent breaches duties

A
  • contract action if compensated agent
  • tort actions
  • actions for secret profits
  • equitable actions for accounting
  • imposition of constructive trust
  • withholding of compensation for intentional torts or intentional breaches of duty
  • may terminate
  • may recover actual profits or properties held by agent
  • can do whatever it wants to achieve justice
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17
Q

what is a subagent?

A

person appointed by agent to perform functions that agent has consented to perform on behalf of agent’s principal

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18
Q

liability to principal for breaches by subagent

A

absolute liability to principal for breaches of a subagent

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19
Q

duties owed to principal by subagent

A

if principal authorized agent to appoint: subagent owes principal same duties as agent owes principal

if agent was not authorized to appoint a subagent: subagent does not owe duties to the principal but does owe duties to the agent

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20
Q

What duties does the principal owe an agent?

A
  • all of the duties imposed by their contract
  • reasonable compensation
  • reimbursment for expenses
  • principal does not owe duty to compensate subagent even if authorized
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21
Q

What contract agencies does a compensated agent have?

A

usual contract remedies against principal, but has duty to mitigate damages

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22
Q

real estate broker contract

A
  • in real estate broker’s contract, broker is entitled to compensation when there is a buyer ready, willing, and able to purchase property
  • if seller/principal refuses a buyer’s offer that was within the terms agreed by the broker/agent and the seller/principal, the seller/principal will be found to be breaching the duty not to interfere with the agent’s duties and will owe the agent an agreed compensation
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23
Q

what is actual authority

A

actual authority is authority that the agent reasonably believes he possesses based on the principal’s dealings with them

can be express or implied

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24
Q

what is express actual authority

A

authority conveyed by principal in words (oral or written)

effective even if granted mistkanely or bc of misrepresentation

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25
Q

what is implied actual authority

A

authority agent reasonably believes tthey have as a result of principal’s words or actions

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26
Q

types of implied authority

A
  1. incidental to express authortity
  2. arising out of custom known to agent
  3. resulting from prior acquiescence by principal
  4. to take emergency measures
  5. to delegate authority
  6. to pay for and accept delivery of goods
  7. to give general warranties, collect payment, and deliver
  8. to manage investments
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27
Q

How does actually authority terminate?

A
  • happening of an event in agreement
  • lapse of reasonable time
  • change in circumstances
  • agent’s breach of fiduciary duty
  • either party’s unilateral termination
  • operation of law (death if agent has notice, incapacity)
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28
Q

What is an irrevocable agency?

A
  • agency coupled with an interest
  • power given by security
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29
Q

What is the effect of an irrevocable agency?

A
  • cannot be unilaterally terminated by principal if the agency was given to protect the agent’s (or third party’s) rights and is supported by consideration
  • cannot be terminated by operation of law
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30
Q

What is apparent authority?

A
  • exists when the principal holds out another as possessing authority and based on this holding out a third party is reasonably led to believe that authority exists
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31
Q

apparent v. actual authority

A
  • apparent - based on reasonable beliefs of third parties by how principal holds out
  • actual - based on principal’s manifestions and how they affect the agent
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32
Q

Can apparent authority exist when actual authority does not?

A

Yes

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33
Q

Types of apparent authority: can a principal still be bound if an agent exceeds their actual authority?

A
  • prior acts - where principal previously previously permitted the agent to exceed their express or implied authority and knows the 3P is aware -> P bound through apparent authority
  • power of position - apparent authority may be established through agent’s title or position given to them by principal
34
Q

Can a principal be bound by agent’s acts if they have no actual authority?

A
  • Generally no, but there are certain situations where an agent may be bound
35
Q

will a principal be bound when the only statement of authority comes from purported agent’s claim of authority?

A

generally, no

36
Q

What happens when a principal negligently permits an imposter to be in a position to appear to have agency authority?

A

The principal will be held liable for imposter’s actions undertaken with such authority (agency by estoppel - principal will be estopped from denying partner was his agent)

37
Q

What is lingering apparent authority?

A

Apparent authority can exist even when actual authority does not and can linger when actual authority ends

38
Q

notice of termination of actual authority

A

Where an agent’s actual authority has terminated, he will have apparent authority to act on the principal’s behalf as to all third parties with whom the principal knows he dealt unless and UNTIL the third parties recieve actual or constructive notice of the termination

39
Q

writing manifesting an authority

A

where an agent’s actual authority has been terminated, but third parties rely on a written authority of the agent, agent’s apparent authority is not considered terminated - unless principal recovers written authority

40
Q

does death or incompetency of principal terminate agent’s apparent authority?

A

majority view: not automatically

41
Q

What is inherent authority?

A

inherent authority is derived solely from the agency relationship and results in the principal being bound even though the agent had no actual or apprent authority

42
Q

types of inherent authority?

A
  • respondeat superior - under doctrine of their employee committed within the scope of employment
  • conduct similar to that authorized - where agent exceeds actual authority, but conduct similar to acts authorized, principal will be held liable
43
Q

what if agent possessing goods improperly distributes them?

A

principal will be held liable if agent was given some indicia of ownership, or if goods disposed of were sold by agent who is a dealer in particular goods

44
Q

what is ratification?

A

when an agent acts on behalf of a principal without any authority at all, but the principal subsequently validates the act and becomes bound

45
Q

what liability does agent have upon ratification?

A

relieved of any liability for breach of duty and their implied warranty of authority

46
Q

Ratification: express or implied?

A

Can be express or implied through the conduct of the principal (written affirmation or accepting the benefits of a contract or silence if there is a duty to disaffirm the contract)

47
Q

What are the requirements of ratification?

A

principal must:
1. have knowledge or reason to know of all material facts regarding the contract
2. accept the entire transaction AND
3. have capacity (competent and of legal age)

48
Q

Does ratification require any principal?

A

no

49
Q

When is ratification not ok?

A
  1. if performance was illegal at the time of ratification
  2. the third party has withdrawn OR
  3. material change in circumstances
50
Q

What is the Second Restatement rule for ratification?

A

Under the 2nd restatement, an undisclosed principal CANNOT ratify, but a disclosed or unidentified principal may do so.

51
Q

What is the third restatement rule of ratification?

A

any principal may ratify

52
Q

When is a principal liable to a third party on a contract entered into by the agent?

A
  • If agent had valid authority (actual, apparent, or ratification)
  • if no authority or ratification: cannot be held liable
53
Q

If the agent had no actual/apparent authority to enter K for principal, or if principal ratified a previously unauthorized contract, can agent be held personally liable?

A

Generally no, unless existence and identity of principal are NOT disclosed

54
Q

Can the agent be held liable if the principal was disclosed, but agent did not have authority to enter the contract?

A

Yes, the agent can be held liable to the third party for damages for breaching an implied warranty that a principal with contractual capacity exists and that they, the agent had authority to contract for it

55
Q

What is an unidentified principal?

A

third party knows agent was dealing on behalf pf principal but does not know exactly who principal is

56
Q

what is an undisclosed principal?

A

agent does not reveal they are contracting on behalf of a principal

57
Q

unidentified and undisclosed principals: who can a third party sue?

A

majority view: 3p can file suit against both principal and agent but, upon objection of either D, 3p must elect prior to judgment which party they wish to hold liable

if 3p obtains judgment against unidentified principal, they can later sue principal when their identity is discovered if judgment has not been satisfied

58
Q

When is the type of principal relevant (disclosed, unidentified, undisclosed)?

A

only when determining whether agent is liable

59
Q

When the principal is disclosed, who can enforce the contract and hold the 3P liable?

A

only the principal

60
Q

when the principal is unidentified and undisclosed, who can enforce the contract and hold the 3p liable?

A

either the principal or agent

if agent enforces, principal is entitled to all the rights and benefits

61
Q

If a principal is unidentified or undisclosed, when can a principal not enforce a contract?

A

if there has been a fraudulent misrepresentation of principal’s identity or unforeseen increased burden to the third party due to the fact that performance is due to the principal and not the agent

62
Q

under what theories can a principal be vicariously liable for the torts of their agent?

A
  • respondeat superior and
  • apparent authority
63
Q

What is vicarious liability?

A

joint and several liability for the agent’s tort will be imputed to the principal

64
Q

What are three ways a principal could be vicariously liable?

A
  1. directly liable for their own negligence in hiring, retaining, or superviisng the agent
  2. on agent’s tort if they gave them actual authority to commit it or ratified the tort
  3. other circumstances involving independent contractors
65
Q

When is a principal liable under respondeat superior?

A

an employer is liable for the torts of an employee commited within the scope of employment (generally not liable for torts by an independent contractor)

66
Q

independent contractor v. employee

A

employee: have control over the manner in which employee performs work
independent contractor: does not havwe right to control how it does work

look at the amount of control exercised over how the agent achieves the result

67
Q

What are some factors to consider for the right to control?

A
  • degree of skill (if more skill, probably IC)
  • whose tools and facilities are used (if principal supplies, more likely employee)
  • period of employment (if longer, probably employee)
  • basis of compensation (if on time, likely employee)
  • if in furtherance of business purpose (more likely employee)
  • if person has a distinct business (more likely an IC)
  • understanding of parties
  • customs of locality
68
Q

Factors to determine whether something was committed within the scope of employment

A
  • conduct of kind agent hired to perform
  • tort occur on the job vs. a frolic or detour
  • was the conduct to benefit the principal
69
Q

Does employee ownership of vehicle driving during time of tort automatically impose liability?

A

NO

70
Q

Is employee’s invitation to passengers inside the scope of employment?

A

Generally no, and employer not held liable to injuries sustained by passengers

71
Q

Is employer responsible for use of unauthorized instrumentalities?

A

Generally no

72
Q

What if employee makes a trip with two purposes?

A

It will be in the scope of employment if any substantial purpose of employer is being served

73
Q

Can an employer ratify employee’s torts?

A

Yes, but make sure they know ALL of the material facts

74
Q

Is an employer liable for the intentional torts of employee?

A

Generally no, unless conduct is:
1. a natural incident of the employee’s duties
2. where employee is promoting business and motivated to serve employer
3. specifically authorized or ratified by employer

75
Q

When is principal liable for agent’s representations? (including intentional misrepresentations)

A

if agent had actually, apparent, or inherent authority to make statements concerning subject matter involved

76
Q

If an employer lends the services of an employee to another, who is liable if the employee commits a tort?

A

Whichever has the primary right of control of the employee is liable

77
Q

What is directly liability?

A

the concept that every person is liable for their own torts

78
Q

Is employer liable for torts of subservant?

A

Generally, not if subservant engaged without authority

79
Q

What is employer-employee by estoppel?

A

When a principal creates the appearance of an employer-employee relationship upon which a third party relies, that principal will be estopped from denying the relationship and will be liable under the doctrine of respondeat superior

80
Q

When will a principal incur liability for acts of indepedent contractors?

A
  1. inherently dangerous activities involved
  2. nondelegable duties have been delegated
  3. principal knowingly selected incompetent IC
81
Q

What is an alternate theory to respondeat superior?

A

Apparent authority:
A principal is vicariously liable where an agent appears to deal or communicate on behalf of the principal and the agent’s apparent authority enables the agent to:
1. commit a tort or
2. conceal its commission

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