Agency

Question 1

What is Agency?

Answer 1

A fiduciary relationship which results from (1) the manifestation of consent by one person to another (2) that the other shall act on his behalf and subject to his control and (3) consent by the other so to act.

Question 2

What does it mean for an agent to act “on behalf of” the principal?

Answer 2

The agent must be acting primarily for the benefit of the principal (rather for the benefit of the agent or some third party).

Question 3

What does it mean for an agent to act “subject to the principal’s control?”

Answer 3

• The degree of control does not need to be significant.
• Will be sufficient if the principal specifies the tasks the agent should perform.

Question 4

What is contractual capacity? Do principals and agents need this capacity?

Answer 4

Being old enough to legally form a contract. Principals require contractual capacity while agents do not.

Question 5

Is a writing required under agency law?

Answer 5

Generally, writings are not required under agency law, though the Statute of Frauds may require a writing.
- Equal Dignities Rule: Agency agreements must be in writing when the agent is to enter into certain contracts within the Statute of Frauds OR the agency agreement itself would fall within the Statute of Frauds.

Question 6

What consideration is required for the creation of an agency relationship?

Answer 6

No consideration is required.

Question 7

What duties does an agent owe to its principal?

Answer 7

NOTE: These duties are fiduciary in nature!
- Duty of loyalty: Undivided loyalty to the principal (account for profits made while carrying out instructions; putting principal’s interest first; not competing; not using principal’s property for agent’s or third party’s purposes; dealing with principal as an adverse party). MUST TREAT THE PRINCIPAL FAIRLY.
- Duty of care: Carry out the agency with reasonable care (like a reasonable agent under the circumstances)
- Duty of Obedience: The agent must obey all reasonable directions of the principal (can consider this an aspect of the duty of loyalty–it’s a separate obligation though)

Question 8

What duties does a principal owe to an agent?

Answer 8

NOTE: These duties are not fiduciary in nature.
- To indemnify/reimburse the agent’s losses in carrying out the principal’s instructions.
- Compensate the agent for services.

Question 9

What are the types of authority in Agency law?

Answer 9

• Actual authority
• Apparent authority
• Ratification

Question 10

What is actual authority in Agency law? What are the types of actual authority?

Answer 10

Authority that the agent reasonably thinks that she possesses based on the principal’s dealings with her (would a reasonable person believe that she has authority after her dealings with the principal?).
- Express: conveyed by the principal in words.
- Implied: Agent reasonably believes exists based on the principal’s actions or implications of words.
- Power of Position: May be established by an agent’s title or position.

Question 11

What is Apparent Authority in Agency law?

Answer 11

The principal holds out another as possessing authority and a third party is reasonably led to believe that authority exists.
- If the principal’s words or conduct would lead a third party to reasonably believe that someone is the principal’s agent, then authority exists.
- Power of Position: May be established by an agent’s title or position.

Question 12

What is Ratification in Agency law? What are the types of Ratification.

Answer 12

Even if an agent had no authority when the contract was created, the principal can bless/authorize the transaction. To ratify, the principal must know all the material facts and must ratify the entire transaction. Ratification cannot be used to alter the rights of intervening parties.
- Express: Oral or written affirmation.
- Implied: Principal accepts the benefits.

Question 13

In what ways can Actual Authority be Terminated/Revoked?

Answer 13

• Specified time
• Specified event
• Reasonable time
• Change of circumstances
• Breach of fiduciary duty
• Unilateral act
• Death

Question 14

When is a principal bound by a contract entered into by an agent?

Answer 14

The principal is bound when the agent has actual authority, the agent has apparent authority, or the principal ratifies the agent’s contract.

Question 15

What effect for contract liability when there is an undisclosed or partially disclosed principal?

Answer 15

The agent will also be personally bound by the contract.
- Partially disclosed principal is when the other party knows that the agent is transacting on behalf of someone else.

Question 16

What is a Master/Employer in Agency law?

Answer 16

A principal who employs an agent with the right to control the agent.

Question 17

What is a Servant/Employee in Agency law?

Answer 17

An agent so employed by a master.

Question 18

What is an independent contractor?

Answer 18

A person contractually obligated to do work, but not controlled in how the work is done.

Question 19

What is Vicarious Liability?

Answer 19

A master is liable for torts in the scope of the servant’s employment.

Question 20

How is it determined whether someone is a servant agent or an independent contractor agent?

Answer 20

If someone is subject to the control of another as to the means used to achieve a particular result, that person is a servant.
If someone is subject to the control of another as to his results only, but not as to how to achieve those results, that person is an independent contractor.

Question 21

When is a Master/Employer liable for a Servant/Employee’s torts?

Answer 21

An employer is liable for an employee’s torts when the tort occurs within the employee’s scope of employment.
Relevant Factors:
- Was the conduct of the type that the employee was hired to perform?
- Did the tort occur on the job (within the time and space limits of the employment: a minor deviation from the employer’s instructions is within the scope of employment (detour) while a substantial deviation from the employer’s instructions is not within the scope of employment (frolic))?
- Was the employee’s conduct actuated, at least in part, by a purpose to serve the employer?

Question 22

When is an employer liable for intentional torts of an employee?

Answer 22

Generally, an employer is not liable for an employee’s intentional torts.
EXCEPTION: Conduct is the natural outcome of the nature of the job (EX: bar bouncer).

Question 23

What is the Borrowed Servant Doctrine?

Answer 23

An employer may lend the services of an employee to another. If the employee commits a tort in the loaned role, whoever has the primary right of control over the employee is liable for the tort.
- Generally, the employee remains under the primary control of the loaning party.

Question 24

What is estoppel in the agency context for purposes of tort liability with independent contractors?

Answer 24

While a principal is generally not liable for the tortious acts of its independent contractors, when (1) a principal creates that appearance that an employer-employee relationship exists and (2) a third party relies on that representation, the principal is estopped from denying the existence of an employer-employee relationship.