Agency Flashcards
requirements for a valid proxy
SH voting
1) a writing (fax and email fine)
2) signed by the record SH (email is fine if sender can be identified)
3) directed to the secretary of the corp
4) authorizing another to vote the SH share’s
requirements for a proxy to be irrevocable
1) proxy must state that it is irrevocable AND
2) be combined with an interest in shares or given as a security (proxy holder has some interest in the shares other than voting)
agency elements (in general)
(1) Appointment
(2) Consent
(3) On behalf of
(4) Control
agency relationship
Fiduciary relationship that arises when the principal appoints agent to act on the principal’s behalf and agent consents
For a valid agency relationship to exist, all must exist:
- Capacity
- Consent of both parties
- Writing if required by the SoF
Capacity Requirements
Principal - contractual capacity
Agent - minimal capacity
can a minor be a principal? Can a minor be an agent?
A minor cannot be a principal bc they lack contractual capacity as a minor
A minor can be an agent bc the minor satisfies the minimal capacity
agent disqualifications
1- for representing both parties or
2- failing to have a required license
equal dignities rule
requires agency agreements to be in writing when the agent enters a K within the statute of frauds or when the agency agreement itself falls within the SoF
ex: A hiring B to be her agent for five years. A writing is required bc the K is for more than one year -> SoF requires a writing
is consideration required for an agency relationship?
No. One may agree to be someone’s agent for free
methods by which an agency relationship can be created
- Act of the parties
- operation of law
describe creation of an agency relationship by act of the parties
Parties enter an agreement (actual authority, through apparent authority, or ratification
creation of the agency relationship through estoppel
created through apparent authority that requires third party reliacne on the principal’s communication
creation of the agency relationship through operation of law
Creation bc of a staute designed for a limited purpose, usually governmental purposes
fid duties an agent owes to their principal
- duty of care
- duty of loyalty
- duty of obedience
define
duty of care
Agent owes duty to principal to carry out their agency with reasonable care
Reasonable care can be a higher standard based on any special skills the agent may have
define
duty of loyalty
the agent must treat the principal fairly
- no self-dealing
- must act solely for the benefit of the principal
- no competing with the principal re the subject matter of the agency
- can’t deal with P as an adverse party
define
duty of obedience
an agent must obey all reasonable directions of their principal
if agent disobeys a reasonable direction, the agent is liable to the principal for any loss that P suffers
define
subagent
person appointed by an agent to perform the agent’s acts for the agent (that the principal ordered the agent to do) on behalf of the agent’s principal
Duties if Subagent If Authorized
If the principal authorized the agent to appoint the subagent, the subagent owes the principal the same duties as the agent owes the principal
Duties if subagent was not authorized
If the agent was not authorized to appoint a subagent, the subagent does not owe duties to the principal but does owe duties to the agent
liability of agent for acts of the subagent
agent has absolute liability for breaches by a subagent
duties owed from principal to agent
No fid duties!!!
fid duties only run from agent to principal
P owes A all of the duties imposed by their K, reasonable compensation, and reimbursement for expenses
define
actual authority
authority that the agent reasonably believes they have based on the principal’s conduct with the agent
P does or says something and based on that, a reasonable agent believes they are authorized to act on P’s behalf
define
express actual authority
Authority conveyed by the principal in words (oral or written)
effective even if it was granted mistakenly or because of misrepresentation
define
implied actual authority
authority an agent reasonably beleives they have as a result of the P’s words or actions
types of implied actual authority
- Incidental to express authority
- Arising out of custom known to the agent
- Resulting from **prior acquiescence **by the principal
- To take emergency measures
- To delegate authority in cases of ministerial acts, where circumstances require, where performance is impossible without delegation, or where delegation is customary
- To pay for and accept delivery of goods where there is authority to purchase
- To give general warranties as to fitness and quality and grant customary covenants in land sales, collect payment, and deliver where there is authority to sell AND
- To manage investments in accordance with the “prudent investor” standard
Methods by which termination or revocation of actual authority may occur:
- the happening of an event specified in the agreement that will terminate the agent’s authority
- lapse of a reasonable time (if not specified in agreement)
- change in circumstances (including destruction of the subject matter of authority)
- agent’s breach of fid duty
- either party’s unilateral termination (either party may terminate the agency on its own but may be subject to breach of K)
- operation of law (death or loss of capacity)
When the principal dies, the agency relationship is terminated unless otherwise provided in the agreement. When is the termination of the agency agreement effectuated?
When the agent has notice of the principal’s death
when does an irrevocable agency relationship form?
neither the agent nor the principal can terminate unilaterally
when the agency is formed with:
- an interest (ownership in shares or security interest) OR
- a power given as a security
AND
- was created to protect the agent’s or a third party’s rights
AND
- the agreement is supported by consideration
define
apparent authority
in general
if the principal’s words or conduct would lead a reasonable person in the 3P’s position to believe that the agent has authority to act on the principal’s behalf, the ageny has apparent authority to bind the principal
actual vs. apparent authority
what is each based on
actual authority is based on the principal’s words or conduct and **how they affect a reasonable agent **
apparent authority is based on the principal’s words or conduct and how they affect a reasonable third party
how to terminate an agent’s apparent authority to act on the P’s behalf
Terminated when the third parties receive actual or constructive notice of the termination
inherent authority
authority that is derived solely from the agency relationship and binds the principal even if the agent had no actual or apparent authority to perform the particular act
examples:
- respondeat superior: an agent will be liable for the actions of their employees committed within the scope of their employment
- agent’s conduct exceeds their actual authority but is similar to other authorized acts
define
ratification
agent purports to act on behalf of a principal but doesn’t have authority to do so, but the principal subsequently validates the agent’s act and is bound by the agent’s act
principal retroactively gives the agent authority to perform the act
most common form of express ratification
ratification through oral or written affirmation of a contract
most common form of implied ratification
principal accepts the benefits of the contract
could also accept by silence/failing to disaffirm the agent’s actions
For ratification to occur, the principal must:
- have knowlegde or have reason to know all material facts regarding the K
- accept the entire transaction made by the agent (partial ratification prohibited) AND
- have capacity to ratify/serve as a principal
ratification cannot be used to alter the rights of intervening parties
Lucy, acting without authority, sells Desi’s car for $6,000. Not knowing that Lucy had arranged the sale, Desi agrees to sell hiscar to John Wayne Bobbitt for $5,000. Can Desi ratify Lucy’s earlier sale when he learns about it? No bc D cannot cut off B’s rights
what is an unidentified principal
the third party knows that the agent is dealing on behalf of a principal, but does not know exactly who the principal is
what is an undisclosed principal
the agent does not reveal to the third party that they are contracting on behalf of a principal
If either the principal is unidentified or if the principal is undislclosed, who can be held liable on the contract?
Either the principal or the agent if the agent had authority to enter the contract
if the principal is disclosed, who may enforce the contract and hold the third party liable?
only the principal
If the principal is unidentified or undisclosed, who may enforce the contract and hold the third party liable?
either the principal or the agent
A principal may be held vicariously liabel for the torts of their agent under two theories:
- respondeat superior
- apparent authority
define
vicarious liability
joint and several liability for the agent’s tort will be imputed to the principal
when may a principal be held directly liable in regard to an agent’s actions?
- P’s own negligence in hiring, retaining, or supervising the agent
- an agent’s tort if they gave the agent actual authority to commit the tort or ratified the tort, or in other situations with independent contractors
define
respondeat superior
An employer is libable for the torts of an employee committed by the employee committed within the employee’s scope of employment
a person is an independent contractor if:
standard for employees vs. independent contractors
the principal does not have the right to tell the agent how to achieve the results sought
Independent contractor or employee:
- great skill required
- worker supplies his own tools and facilities
- definite and short period of employment
- payment on job basis
- for a non-business purpose
- worker has his own business or occupation
independent contractor (not all are required for an independent contractor, just factors to consider)
A principal is/is not liable for the torts of an independent contractor
is not liable
An employer lends the services of an employee to another. If the employee commits a tort in the loaned role, who is liable?
determine who is the employer in the sitaution:
- who has the primary right of control over the employee is liable
unilateral agent representation
a principal will not be bound when the principal does nothing to hol dthe agent out as having authority and the only statement of authority comes from the purported agent’s claim they have authority
BUT- if the agent says they are P’s agent (when they are not) in P’s presence and P says nothing, agent has apparent authority bc of P’s silence
A partnership is liable for all contracts entered into by a partner if the partner had BLANK or BLANK authority to enter into it
actual or apparent authority
apparent authority must be in the scope of the partnership business
steps in an agency essay analysis for whether a principal will be bound on an agent’s contract
- determine whether the agent acted with actual autority
- If agent did not have actual authority, determine whether the agent acted with apparent authority
- Then look for ratification if the principal granted authority after the contract was made
rule to put down in an agency question to establish a principal/agent relationship
An agency relationship is created when a person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement.
who may not ratify a contract?
what type of principal
principals whose existence are not known to the third party
An agent must purport to be acting on behalf of a principal- agent can’t hide the fact that he is acting on behalf of a principal, if he does, the contract can’t be ratified
a person is an employee if:
standard for employees vs. independent contractors
the principal has the right to tell the agent how to achieve the results the principal desires
an employer is liable/not liable for the intentional torts of an employee
not liable
independent contractor or employee:
- principal provides tools and facilities to perform the job
- indefinite or long period of employment
- compensation based on time
- person hired to perform an act in furtherance of principal’s business
employee
when will an employer be liable for the intentional torts of their employee?
when the intentional tort is within the scope of thier employment
- force is authorized
- nature of the work requires hostilities/force
- employee is motivated to serve the employer with the intentional tort
- the employer specifically authorizes or ratifies the employee’s intentional tort
frolic
major deviation from employer’s direction that will likely put the employee’s actions outside the scope of employment
When can a principal NOT ratify an agent’s actions
- performance was illegal at the time of ratification
- the third party has withdrawn or
- there has been a material change in cirumstances
power of position
situation where agent exceeds their authority but the P is still bound
what type of authority is this associated with?
apparent authority is established through an agent’s title or position. the agent’s position creates a reasonable belief in the third party that the agent was authorized to act for the P in ways that are typical for someone who holds that title or position
