Agency Flashcards
Creating an Agency Relationship
Creating an agency relationship requires:
(1) Assent – principal and the agent manifest assent to work with one another
(2) Benefit – the agent agrees to work for the principal’s benefit and
(3) Control– the agent agrees to work subject to the control of the principal.
- No consideration is required to create an agency relationship.
- Easy to enter, Easy to Leave.
Relationship can be terminated in many ways including the principal manifesting a desire to discontinue the relationship. (If one of the parties disclaims that an agency relationship existed, the Courts will look to manifestations of assent).
Who is the Principal?
Any person or entity that has legal capacity can be a principal.
Exceptions:
* minors
* anyone incapacitated by illness or intoxication
* Unincorporated associations
(because they lack legal capacity)
.
Generally, employers exert a great amount of control over their employees conduct and have control over their day to day activities such as giving them tools to work at the workplace, paying them on a structured pay period and directing the ways in which the employees should finish and perform the tasks.
Who is the Agent?
A person or an entity who has minimal capacity,
A minor may serve as an agent so long as they can:
(1) assent to the agency relationship,
(2) perform the tasks on behalf of the principal and
(3) are subject to the principal’s control.
Who is an Independent Contractor?
An independent contractor is one who, by virtue of his contract, possesses independence in the manner and method of performing the work he has contracted to perform for the other party to the contract.
- usually paid by the job instead of receiving ongoing salaries
Individual who hires an independent contractor typically does not supervise the contractor’s activities or retain a right to control his activities.
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When is a Principal Liable for Contractor Liability
A principal is liable for the contracts that an agent enters on behalf of the principal when:
- the principal has authorized the agent to enter into the contract and
- the agent acted with “legal authority.”
An agent acts with legal authority when there is (1) actual express authority, (2) actual implied authority, (3) Apparent authority, or (4) Ratification.
Actual Authority
Express vs. Implied
Actual *Express *authority: A principal is liable for contracts entered into by the agent when the agent acted with actual or apparent authority to bind the principal.
* Created by using written or spoken words, clear direct and definite language, or specific detailed terms and instructions.
* For it to exist, the agent must have the subjective intent believing that what he is doing is what the principal wants him to do. In other words, the principal makes a manifestation that causes the agent to reasonably believe that the agent is authorized to act on the principal’s behalf.
Actual Implied Authority: a principal gives the agent actual implied authority when the principal communicates to the agent by using word, written or spoken or other conduct to convey authority to the agent to take whatever steps are necessary to achieve the principal’s objectives.
- The agent has actual implied authority (unless instructions to the contrary) to act within the accepted business custom or general usage.
Apparent Auhtority
The principal creates apparent authority through words, written or spoken that cause a 3rd party to reasonably believe that the agent can act on behalf of the principal because the principal has consented to have acts done on the principals behalf.
- Apparent authority exists until the principal notifies the 3rd party of the revoked authority.
- Derives from reasonable reliance of a 3rd party on the agent’s authority based on the principal’s behavior over a period of time.
An agent purporting to be acting for a principal gives an implied warranty of authority to the third party. If the agent lacks the power to bind the principal, then a breach of the implied warranty has occurred, and the agent is liable to the third party.
Apparent Auhtority in Torts
A principal is liable for a tort committed by an agent with apparent authority when the agent’s appearance of authority enables him to commit a tort or conceal its commission.
- For apparent authority to exist, a third person must believe that the agent acted with actual authority, and such belief must be reasonable and be traceable to a manifestation by the principal.
Ratification
RLBK (Ratify Legal Binding Kontract)
Ratification occurs when a principal affirms a prior act that was done on the principal’s behalf. The principal must:
(i) ratify the entire contract,
(ii) have legal capacity to ratify the transaction,
(iii) ratify in a timely manner, AND
(iv) have knowledge of the material facts involved in the original act.
- If the principal ratifies an agent’s action, the principal is bound the action as if the principal had authorized the agent, even if the agent acted without authority.
- Regardless of whether the principal is liable, the agent can be liable for violating a contract or committing a tort regardless of his status as an agent.
If the agent binds the principal to the contract, or if the principal ratifies the contract, then both the principal and agent are parties to the contract with the third party
Principal Disclosure
Disclosed vs. Partially Disclosed vs. Undisclosed
- Disclosed Principal: When the agent acts on behalf of the principal and the principal’s identity is disclosed the 3rd party and the principal are parties to the contract.
- Partially Disclosed: A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity. Unless the agent and the third party agree otherwise, an agent who enters into a contract on behalf of a partially disclosed principal becomes a party to the contract.
- Undisclosed Principal: An undisclosed principal is when the third party does not know of the agent’s status as an agent and is unaware of the principal’s existence or identity. When the agent enters into a contract on behalf of an undisclosed principal, the agent and the third party are parties to the contract. Thus, the agent becomes liable to the third party on the contract unless the agent informs the third party of the identity or the existence of the principal. Whether the undisclosed principal becomes a party to the contract depends on if the agent had authority to bind the principal to the contract. If the agent had the authority to bind the principal to the contract, then both the principal and agent are parties to the contract with the 3rd person.
- Once the third party discovers the existence of the principal, the election of remedies doctrine requires the third party to choose to hold liable either the principal or the agent.
Vicarious Liability: Employee v. Employer
Employee/Employer: Under the doctrine of vicarious liability or respondent superior a principal may be liable for the tortious acts of his agent when (1) the employer has the right to control the means and methods by which the other person performs his tasks or achieves a result. (2) the person is an employee and not an independent contractor where there is no right to control (3) the tort committed by the agent was committed while the agent was acting within the scope of employment.
Conduct within the scope of employment: includes acts that the employee is employed to perform or that were intended to profit or benefit the employer. Careful instructions given by the employee do not protect the employer from liability even when the employee acts counter to those instructions as long as the employee is acting within the scope of employment.
To determine whether a person acted within the scope of employment: courts distinguish between a frolic and a detour. A frolic is when the employee’s actions majorly deviate from the assigned work duties or path and fall outside the scope of employment. A detour is a minor deviation from the agents work duties and fall within the scope of employment.
If an employee travels during the workday for a personal errand it may be considered to fall withing the scope of employment if the errand is merely a detour
Viarious Liability: Intentional Torts
Intentional torts generally falls outside the scope of employment, and the employer would not be liable unless the conduct occurred within the general space and time limits of the employment.
- The agent was motivated in some part to benefit the principal and
- the act is the kind of act that the agent was hired to do.
Estoppel
A person who has not represented that an individual is authorized to act as an agent may be estopped from denying the existence of an agency relationship or an agent’s authority with respect to a transaction entered into by the agent.
Estoppel applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for the principal and either the principal:
i) Intentionally or carelessly caused the belief; or
ii) Having notice of such belief and the possibility that the belief might induce others to change their positions in reliance on it, failed to take reasonable steps to notify them of the facts.
- In short, a principal, or purported principal, is liable for the appearance of authority arising solely from the principal’s failure to take reasonable steps and use ordinary care.
Undisclosed Principal vs. Partially Disclosed Principal
Undisclosed P:
- 3rd party has no notice of P’s existence
- Agent becomes personally liable to 3rd party
Partially Disclosed P:
- 3rd party has notice of P’s existence but not P’s identity
- Agent becomes a party to K, unless agent and 3rd party agree otherwise
