Agency

Question 1

Parties in Agency

Answer 1

a principal and an agent

Question 2

Examples of Principal-Agent Relationships

Answer 2

(1) employee-employer,
(2) named agents, (3) partner-partnership, (4) officer/director-corporation

Question 3

Why create an agency relationship?

Answer 3

(1) to extend the principal’s economic reach,
(2) to acquire the agent’s expertise (ex. hiring an accountant), and
(3) to make money

Question 4

3 components of an agency relationship

Answer 4

(1) assent by both parties to work with one another;
(2) agent agrees to work for principal’s benefit, and
(3) agent agrees to work subject to principal’s control

no consideration or writing required

Question 5

Who can be a principal?

Answer 5

Any person with legal capacity – this excludes minors and people with an illness or intoxicated

Employers, Corporations, and Partnerships can be principals

Question 6

Who can be an agent?

Answer 6

any person or entity with minimal capacity – even a minor

Question 7

Independent Contractor vs. Employee

Answer 7

IC: principal doesn’t control physical conduct of work – independent, free to work for others, paid fixed fee, owns his own tools

EE: employer has right to control agent’s physical conduct of work – ER gives tools, paid on pay period, directs EE on how to perform tasks

Question 8

Terminating Agency Relationship

Answer 8

either party can end the relationship unilaterally

Question 9

When is a principal bound by a contract the agent enters on behalf of them?

Answer 9

(1) when the principal has authorized the agent to enter the K, and
(2) agent acted with legal authority.

Question 10

4 Types of Legal Authority

Answer 10

(1) actual express authority
(2) actual implied authority
(3) apparent authority
(4) ratification

Question 11

Actual Express Authority

Answer 11

communication between A and P where P uses written or spoken words to give agent authority

Agent must believe subjectively that he’s doing what principal wants and the belief must be objectively reasonable

Question 12

Actual Implied Authority

Answer 12

communication between A and P where P uses words or other conduct to convey authority to A to take whatever steps necessary to achieve P’s objectives

Agent can act within business customs to do what P asks

Question 13

Apparent Authority

Answer 13

communication between P and third-party where P creates apparent authority by words that cause third-party to reasonably believe that P consents to have A do acts onP’s behalf

Question 14

Ratification

Answer 14

no pre-act communication
(1) principal has knowledge of material terms of K and (2) P accepts the K’s benefits

Question 15

3 Types of Principals

Answer 15

(1) disclosed: third party knows A acting on behalf of P and knows P’s identity so parties to K are third-party and principal

(2) partially disclosed: third-party knows agent works on behalf of P, but doesn’t know P’s identity so parties to K are third-party, P, and A

(3) undisclosed: third-party doesn’t know A is an agent, nor P’s identity, so parties to K are A and third-party

Question 16

Principal’s Vicarious Liability when IC commits tort

Answer 16

in general, principal doesn’t have vicarious liability unless:

(1) task is inherently dangerous
(2) Principal negligent in hiring IC
(3) principal retains control over certain tasks and tort occurs within those tasks

Question 17

Vicarious Liability for Agent’s torts

Answer 17

P may be liable for A’s torts if:
(1) P had sufficient control over agent’s conduct (ex. employee/employer); and
(2) tort committed by agent was committed while agent acting within scope of his employment

Question 18

To Determine Scope of Employment

Answer 18

Frolic: significant deviation from assigned path, outside scope of employment

Detour: a minor deviation from assigned path, within scope of employment

Question 19

When a Principal May be Held Vicariously Liable for Intentional Torts of Agent

Answer 19

(1) conduct occurred within general space and time limits of employment
(2) agent motivated in some part to benefit principal
(3) act is of a kind that agent was hired to perform

Question 20

Agent’s Fiduciary Duties to Principal

Answer 20

(1) duty to exercise reasonable care
(2) duty to obey reasonable instructions
(3) duty of loyalty – can’t usurp business opportunity, take in secret profits, or compete in competing businesses with principal