Agency Flashcards
Examples of principal-agent relationships
(1) Employer-Employee
(2) Named agents (e.g. talent agent)
(3) Partner-Partnership
(4) Officer/Director-Corporation
A principal may be liable for the actions of an agent in respect to
contracts or tort claims
3 Components of an Agency relationship
(1) Assent (manifest assent from both parties)
(2) Benefit (agent works for benefit of principal)
(3) Control (agent works subject to control of principal)
ABCs
No consideration is required
When one or more parties disclaim creation of agency relationship, courts look to
manifestations of assent (factually dependent, need not be in writing / official)
In order to be a Principal, a person or entity must have
legal capacity (excludes minors or those incapacitated)
Common: Employer, corporation, partnership
Factors likely to make a relationship one of employer-agent
(1) Giving employees tools
(2) Paying employee on structured pay period
(3) Directing ways in which employees perform tasks
A person or entity can be an agent if
they have minimal capacity (minors may be agents)
To have minimal capacity an agent must
(1) Assent to the agency relationship
(2) Perform tasks on behalf of principal
(3) Be subject to principal’s control
Characteristics of an independent contractor
(1) Maintain high level of independence
(2) Free to work for other people
(3) Paid on fixed fee
(4) Typically own their own tools
An agency relationship may be terminated
unilaterally by either party principal or agent
OR reasonable passage of time or change in circumstances
Principal is bound to a contract when
(1) principal has authorized the agent to enter into K, and
(2) Agent acted with legal authority
4 types of authority
(1) Actual Express
(2) Actual Implied
(3) Apparent
(4) Ratification
Principal to agent = actual authority
Principal to 3rd party = apparent authority
Actual express authority requires
Subjective intent (agent believes that he is doing what principal wants him to do) AND Objective intent (the belief was objectively reasonable)
Look to written or spoken words conveying authority
Termination of actual authority happens
immediately at death of the agent
or
when the agent has knowledge of the principal’s death
Actual implied authority may be discerned through
words or conduct which conveys authority to the agent to take whatever steps are necessary to achieve the principal’s objectives
Actual implied authority grants an agent the right to
act within business customs or general trade usage
A principal may create apparent authority of an agent by
words, written or spoken, that cause a 3rd party to REASONABLY believe that the principal consents to having acts done on principal’s behalf by the agent (may be done through past dealings)
Note: Apparent authority may exist when no actual authority exists
Ratification requires
(1) Principal to have knowledge of material terms of the contract, and
(2) The principal to then accept the contracts benefits
Note: Ratification does not require a pre-act communication but MUST happen before the third party withdraws
NOTE: Must also be TIMELY and have legal capacity to ratify
3 types of principals
(1) Disclosed principal
(2) Partially disclosed principal
(3) Undisclosed principal
Disclosed principal means
the 3rd party:
(1) knows the agent is acting on behalf of the principal and
(2) the identify of the principal
Result = 3rd party and Principal are parties to the contract
Partially disclosed principal means
the 3rd party:
(1) knows the agent is acting on behalf of the principal but
(2) does not know the identity of the principal
Result = 3rd party, Principal, and Agent are parties to the contract
Undisclosed principal means
the 3rd party:
(1) does not know the agent is actin non behalf of the principal and
(2) does not know the identity of the principal
Result = 3rd party and agent are parties to the contract
Sufficient control is measured by
whether the principal controls, or has the right to control, the physical conduct (manner and means) of agent’s performance
Vicarious liability for a principal requires
(1) Principal has sufficient control over the agent’s conduct such that agency relationship is employer-employee, and
(2) The tort was committed while the agent was acting within the scope of the their employment
A principal is generally not liable for independent contractors UNLESS
(1) Task is inherently dangerous
(2) Principal was negligent in hiring the independent contractor
(3) The principal retains control over certain tasks and the tort occurs within those tasks
To determine scope of employment ask
(1) Did agent indent do benefit the principal
(2) Was agent’s conduct the kind the agent was hired to perform
(3) Did tort occur “while on the job”
Frolic v. Detour
Frolic = significant deviation (outside scope of employment)
Detour = minor deviation (within scope of employment)
Principals are generally not liable for the intentional torts of employees except when
(1) Conduct occurred within the general space and time limits of employment
(2) Agent was motivated in some part to benefit the principal
(3) The act is of a kind that the agent was hired to perform
An agent (even if unpaid) owes a principal the duty
(1) to exercise reasonable care
(2) to obey reasonable instructions
(3) of loyalty
Duty of Loyalty warrants that an agent may not
(1) Usurp a business opportunity
(2) Take in secret profits
(3) Compete in competing business with principal
A principal may be estopped from denying liability if
the principal failed to take reasonable steps and use ordinary care to inform a third party of the lack of authority
Note: an undisclosed principal may not rely on instructions to an agent to reduce authority if a third party reasonably believed the agent would have such authority had the principal been disclosed
Principal and Agent may be liable for fraudulent concealment if
either had notice the 3rd party would not have entered into K if had known P’s identity
Duties Principal owes Agent include
(1) duty to deal fairly and in good faith
(2) compensate as expressly or impliedly agree
(3) Duty not to interfere
(4) Duty to indemnify (if within scope and with actual authority)
Principal’s remedies for breach by an agent include
Injunction, breach of contract action, tort action, recision, restitution, terminating of relationship, forfeiture of compensation
If the agent lacks the power to bind the principal (e.g. no actual or apparent authority) but discloses the principal’s identity, then a breach of
the implied warranty has occurred, and the agent is liable to the third party
If the agent had the authority to bind the principal to the contract, even if the principal was undisclosed, then
both the principal and the agent are parties to the contract with the third person
Once the third party discovers the existence of the principal (previously undisclosed or unknown), the election of remedies doctrine requires the third party to
choose to hold liable either the principal or the agent
A principal can be vicariously liable when an agent is acting with apparent authority and
commits a tort and their appearance of authority allowed them to do so
