Agency Flashcards
Agency
Fiduciary relationship that arises when one person (principal) appoints another (agent) to act on their behalf AND the agent consents to the act.
Agent must also be subject to principals control
Consent needed
Both P and A need to consent for the relationship to be formed, can be express or implicit
“On behalf of”
Requirement understood to mean that the A must be acting primarily for the P’s benefit, rather than for A or 3rd P
“Control”
Agent must act subject to P’s control, but the degree exercised need not be significant
P’s Capacity
Must have contractual capacity.
Minors, Incompetent, and Unincorporated orgs cannot be principals
A’s Capacity
No contractual capacity needed, but must have some mental capacity
Formalities
Consent
Writing (sometimes)
No Consideration needed
When is a Writing needed?
If required by statute; OR
When the agent is going to enter into K’s governed by the SOF
Creation Methods
By Act of the Parties; OR
By Operation of Law
Act of the Parties (Formation)
May create by agreement (actual authority)
May be bound by holding out the person as an agent or ratification (Apparent authority)
Operation of Law (Formation)
Estoppel - same as apparent authority, requires third-party reliance on the P’s communication
Statute- Creation usually designed to accomplish a limited purpose
Fiduciary Duties
Duty of Care
Duty of Loyalty
Duty of Obedience
Duty of Care
A owes duty to carry out their agency with reasonable care.
Degree of reasonableness slides depending on the Agent’s special set of skills.
Duty of Loyalty
A owes a duty of UNDIVIDED loyalty to the P, includes:
1. May not use position to profit for themselves
2. Must act solely for the benefit of the P and not for themself or 3rd party
3. Must refrain from dealing w P as an adversary
4. May not compete w P
5. May not use the P’s property for the A’s own purposes or a 3rd party
Duty of Obedience
A must obey all REASONABLE directions of their principal, if the A disobeys a reasonable direction A will be liable for any loss suffered by P
P’s Remedies for A’s Breach
K actions
Tort Actions
Actions for Secret Profits
Equitable Actions
Imposition of a constructive trust
Withholding of Compensation for intentional torts or intentional breaches of duty
Constructive Trusts
Equitable remedy where court transfers property gained by unjust enrichment back to the intended party
Subagent
Person appointed by the agent to perform funtions that the agent has consented to perform on behalf of the principal.
Agent has absolute liability for breaches by a sub-agent
P’s Duties
All imposed by the contract
Reasonable compensation
Reimbursement for expenses
Actual Authority
Authority the AGENT reasonably believes they possess based on their dealings w Principal
“If the P’s words or conduct would lead a reasonable person in the agent’s position to believe that the agent has authority to act on the principal’s behalf, the agent has actual authority to bind the principal.”
May be express or implied
Express Actual Authority
Authority conveyed by the P’s words (oral or written), is effective even if it was granted mistakenly or because or misrepresentation.
Implied Actual Authority
Authority the agent reasonably believes they have as a result of the principals words or actions. Includes authority:
1. Incidental or express
2. Arising out of custom known to A
3. Resulting from prior acquiescence
4. To take emergency measures
5. To delegate authority where circumstances require
Termination of Actual Authority
- Happening of event specified to terminate authority
- Lapse of reasonable time if a time for termination is not specified
- A change in circumstances including destruction of the subject matter of authority, insolvency, or change in the law or business conditions
- Breach of fiduciary duty
- Unilateral termination (by either party)
- Operation of law (death or loss of capacity)
Irrevocable Agencies
When agency is coupled with an interest or power is given as a security
Apparent Authority
when P “holds out” another as possessing authority, and based on that a 3RD PARTY is reasonably led to believe that authority exists.
“If the P’s words or conduct would lead a reasonable person in the 3rd Party’s position to believe that the agent had authority to act on the P’s behalf, the agent has apparent authority to bind the P.
Types of Apparent Authority
- Exceeding Actual Authority
- Prior Act
- Power of Position
Exceeding Actual Authority (Apparent Authority)
Principal still bound where the agent exceeded their actual authority and 3rd party reasonably believed the agent had authority to bind the P
Prior Act (Apparent Authority)
Where the P previously permitted the A to exceed their express or implied authority and KNOWS that the third party is aware of this, P is bound
Power of Position (Apparent Authority)
Agent’s title or position may establish, when 3rd party argues that title gave reasonable belief that the agent had the authority to act in ways typical of someone with that title.
Unilateral Agent Representations
Generally, P will not be bound when the principal does nothing to hold the agent out as having authority. Apparent Authority can not be created by mere representation of an agent or other actor.
Lingering Apparent Authority
Apparent Authority can exist without Actual authority.
I.E. Agent had actual authority terminated but the third party doesn’t know yet.
Notice
May be necessary to terminate apparent authority
Can be actual or constructive
Inherent Authority
Derived solely from the agency relationship and results in the P being bound even though the agent has no actual or apparent authority to perform the act.
Respondeat Superior
Conduct similar to that authorized
Respondeat Superior
P liable when A committed an actionable offense within the scope of employment
Ratification
When A acts with no authority byt P subsequently validates the act, P will be bound
May be express (written affirmation) or implied (Accepting the benefits of the contract)
Requirements for Ratification
P must:
1. Have knowledge of (or reason to know of) ALL material facts regarding the contract
2. Accept the ENTIRE transaction (not just a part)
3. Have capacity (competent and of legal age)
Liability of P on Contract
Bound if valid authority existed (actual, apparent, or ratification)
Liability of A on Contract
Bound unless P’s existence and identity are disclosed (also can be liable for breach of the implied warranty of authority)
Liability of 3rd Party on Contract
Bound to principal if valid authority existed; Bound to A if P unidentified or undisclosed and A enforces the K, but P entitled to K benefits
Liability of P for A’s Torts
Generally, a P is vicariously liable for the torts of their agent under respondeat superior and apparent authority.
May also be directly liable for their own negligence in hiring, retaining, or supervising the A; OR
If they gave A actual authority to commit the tort or ratified the tort
Liability of P for Employee/Servant Tort Analysis
Was the act within the scope of employment?
Yes - P is liable
No - P is not liable
Liability of P for Independent Contractor’s Tort Analysis
Was either the activity involved inherently dangerous, the duty nondelegable, or did the P knowingly select an incompetent IC?
Yes - P is liable
No - P is not liable
Difference between employee and independent contractor?
Whether P retains the right to control the manner in which the person performs their work.
EE - P retains the right
IC- P does not
