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Agency Flashcards

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1
Q

Who may terminate the agency relationship?

A

The termination may be unilateral. The principal or agent may terminate without the other’s consent.

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2
Q

What consideration is required to form an agency relationship?

A

NONE. An agent need not receive consideration (a gratuitous agent)

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3
Q

What doctrine places liability on an innocent principal for acts of an agent?

A

Vicarious liability asserts that a principal is liable for acts of an agent, even though the principal is innocent of fault and not directly guilty of any tort or crime

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4
Q

What are the seven elements that identify someone as an independent contractor rather than an employee?

BIFF RLA

A

BIFF RLA
Bears Independence Free
Fixed Results Liable Responsibility

An independent contractor is one who:
1. Bears the risk and benefits from good management
2. Maintains a high level of independence
3. Is free to work for others
4. Agrees to be paid a fixed fee
5. Receives payment based on results
6. Is liable for work performed
7. Accepts responsibility to remedy defects at her own expense

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5
Q

Can a minor serve as a principal or agent?

A

A minor may serve as an agent
A minor may NOT serve as a principal

To become a principal and be bound by an agent’s actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal

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6
Q

What role, if any, may an incompetent play in the agency relationship?

A

An agent, but not a principal.

A person who has a factual incapacity, such as incompetence, does not have the legal capacity to be a principal, but may be an agent

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7
Q

What are the five “must have” duties an agent owes a principal?

COIL GUAC

A

COIL GUAC
Care Obedience Information Loyalty Gain Usurp Accounting Commingle

  1. Duty of Care
  2. Duty to provide information
  3. Duty of loyalty
  4. Duty of obedience
  5. Duties not to usurp a business opportunity, not to take financial gain, provide an accounting, and not commingle
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8
Q

What are the three ways to create express actual authority

WLI

A

WLI
Words Language Instructions

  1. Oral or written words
  2. Clear, direct, and definite language
  3. Specific detailed terms and instructions
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9
Q

What are the AGENT’s subjective and objective standards of intent for actual authority?

A

Subjective standard: the agent must believe that he/she is doing what the principal wants

Objective standard: the agent’s belief must be reasonable

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10
Q

What three things must an agent have or do to create an agency relationship?

CBS

A

CBS
Capacity Behalf Subject

  1. Have minimal capacity
  2. Manifest assent and consent to act on the principal’s behalf
  3. Manifest assent to be subject to the princiapl’s control
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11
Q

What is the difference in standard of care a compensated agent owes a principal compared with the standard of care an uncompensated agent owes?

A

Both owe the same standard of care: Reasonable care

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12
Q

What are the eight ways in which an agent’s actual authority may be terminated?

C CRAP TDS

A

C CRAP TDS
Circumstances Capacity Revocation Agreement Powers Time Death Statutorily

  1. Principal’s revocation
  2. Principal’s agreement with the agent
  3. Change of circumstances
  4. Passage of time
  5. Principal’s death or suspension of powers
  6. Agent’s death or suspension of powers
  7. Principal’s loss of capacity
  8. A staturorily mandated termination
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13
Q

What are the four elements required for creating an agency relationship?

MBSC

A

MBSC
Manifests Behalf Subject Consents

  1. A principal manifests assent to an agent
  2. The agent acts on the principal’s behalf
  3. The agent’s actions are subject to the principal’s control
  4. The agent manifests assent or otherwise consents
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14
Q

What is a subagent?

A

A person appointed by an agent to perform functions that the agent has agreed to perform on behalf of a principal. The agent is liable to the principal for the conduct of the subagent

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15
Q

Does an agent have a right to be compensated if not expressly written in a contract?

A

YES.

An agent has a right to receive compensation if the principal impliedly promises such. When no amount has been specified, an agent has the right to be compensated in the customary manner of the business trade.

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16
Q

What doctrine places liability on a principal for a tort committed by an agent acting within the scope of employment?

A

Respondeat superior, also known as derivative liability

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17
Q

When may a person who has not represented that an individual is authorized to act as an agent be estopped from denying the existence of the agency relationship?

A

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 intentionally or recklessly caused the belief, or failed to take reasonable steps to correct such belief

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18
Q

What is a duty non-delegable

A

Generally, a duty is non-delegable when the responsibility is so important to the community that a person should not be permitted to transfer it to another person

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19
Q

When an agent is contracting on behalf of a disclosed principal, what three steps must the agent take to avoid becoming a party to the contract?

BDP

A

BDP
Behalf Disclose Party

The agent must:
1. Enter into the contract on behalf of the disclosed principal
2. Affirmatively disclose to the third party both the existence and identity of the principal, AND
3. Not agree to become a party to the contract

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20
Q

What is a special agent?

A

Special agents generally have limited authority regarding a specific transaction or a string of repetitive acts.

Examples: real-estate agents, subagents, insurance agents, commission merchants, bailees

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21
Q

Agency: When does the election of remedies doctrine come into play?

A

When a principal is first undisclosed and the agent binds the principal to a contract with a third party, and then the third party learns of the principal’s existence, this doctrine comes into play and requires the third party to choose to hold either the agent or the principal liable and obtain a judgment against only one

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22
Q

What are three situations that would result in a principal being directly liable to a third party harmed by an agent’s conduct?

A
  1. The principal authorizes or ratifies the agent’s conduct
  2. The principal is negligent in selecting, supervising, or otherwise controlling the agent
  3. The principal delegates to an agent performance of a non-delegable duty to use care to protect other persons or their property, and the agent breaches the duty

Because it is the agent’s conduct that triggers a principal’s liabiltiy for violation of a non-delegable duty, some jurisdictions treat the principal’s liabiltiy as vicarious rather than direct

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23
Q

What capacity does a principal need?

A

To become a principal and be bound by an agent’s actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal

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24
Q

What is the two-factor rule for when a principal is vicariously liable to a third party harmed by the agent’s conduct

ES

A

ES
Employ[-er, ee], Scope

A principal is vicariously liable when:
1. There is an employer-employee relationship, AND
2. The agent commits a tort while acting within the scope of employment

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25
Q

When is a principal not required to indemnify an agent’s losses?

A

A principal is not obligated to indemnify losses that result from an agent’s own negligence, illegal acts, or other wrongful conduct

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26
Q

What is it called when an employee’s personal errand involves a significant deviation from the path that otherwise would be taken for the purposes of performing work?

A

A frolic

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27
Q

Under what two areas (or subjects) of law may an agent file a claim against a principal?

A

Tort and Contract

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28
Q

What four concepts arise when agency is at issue on an exam question?

RLFT

A

RLFT
Relationship Liability Fiduciary Terminated

In partnership and corporation questions, always consider:

  1. Is there an agency relationship?
  2. Is the principal subject to liability for the agent’s actions?
  3. What is the agent’s fiduciary duty to the principal and was it breached?
  4. Has an agency relationship terminated?
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29
Q

When does fraudulent concealment apply?

A

For fraudulent concealment to apply, either the principal or the agent must have notice that the third party would not have dealt with the principal. Mere suspicions or doubts are not enough to give notice

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30
Q

In a partnership, who is the principal and who is the agent?

A

The partnership can be considered the principal, while partners, employees, and others, such as attorneys, can serve as agents of the partnership

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31
Q

Which type of authority results when the principal’s words or actions cause an agent to reasonably believe in the agent’s authority to act?

A

Implied authority

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32
Q

What are the five types of principals?

PIECE

A

PIECE
Partnership Individual Employer Corporation Entrepreneur

  1. Individual
  2. Master / Employer
  3. Entrepreneur
  4. Corporation
  5. Partnership
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33
Q

As between a principal and agent, who owes whom the duty of loyalty?

A

The agent owes the principal the duty of loyalty, the principal does not owe the agent a duty of loyalty. However, a principal does have a duty to refrain from conduct likely to injure an agent’s business reputation or reasonable self-respect

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34
Q

What is the capacity required to serve as an agent?

A

Generally, anyone with minimal capacity can serve as agent, including minors, incompetents, and entities

35
Q

What are the seven types of agents?

GI SITES

A

GI SITES
Gratuitous Individual Subagent Independent Trustee Employee Special (and general)

  1. Individual
  2. Employee
  3. Independent Contractor
  4. Gratuitous agent
  5. General and special agent
  6. Trustee
  7. Subagent
36
Q

What is the term for what happens when a principal affirms a prior act that was done or purported to be done on the principal’s behalf?

A

Ratification

37
Q

What makes a principal partially disclosed?

A

A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity

38
Q

What may an agent with implied actual authority do?

A

Implied actual authority allows an agent to take whatever actions are propertly necessary to achieve the principal’s objectives, based on the agent’s reasonable understanding of the manifestations and objectives of the principal

39
Q

What is the most common method of creating an agency relationship?

A

By appointment (either oral or written)

40
Q

When a seller is using a broker to sell their home, what is the role of each party?

A

Seller: Principal
Broker: Agent
Realtor: Subagent

41
Q

Must an agent consent to the agency relationship verbally, in writing, with actions, or by a combination thereof?

A

An agent does not have to verbally consent, but may manifest assent by performing acts on behalf of the principal

42
Q

Who may be principal?

A

Any individual or entity that has the legal capacity to possess rights and incur obligations can be a principal

43
Q

What three situations provide the agent with power to bind the principal to a contract?

EIAE

A

EIAE
Express Implied Apparent Estopped

  1. The agent has actual authority (express or implied)
  2. The agent has apparent authority
  3. The principal is estopped from denying the agent’s authority
44
Q

What results when a principal’s manifestation intended for one agent is actually given to another agent in error?

A

This situation creates express authority to the agent who received the manifestation by mistake

The same result occurs when a principal’s manifestation concerning the subject matter is incorrect

45
Q

Which type of authority results when the principal causes a third party to reasonably believe the agent has authority to act?

A

Apparent authority (aka the doctrine of ostensible agency)

46
Q

What five circumstances would each count as a change in circumstance, ending the agency relationship?

SICDD

A

SICDD
Statute Insolvency Conditions Destruction Disaster

  1. A change in a statute relating to the subject matter
  2. Insolvency of either party
  3. A dramatic change in business conditions
  4. The destruction of the subject matter of the agency relationship
  5. A disaster (natural or unnatural)
47
Q

What are common crimes that a principal could be vicariously liable for?

A

Negligence, misrepresentation, false imprisonment, battery

48
Q

Under what negligence theory can a principal be liable to a third party?

A

A principal who is negligent in selecting, supervising, or otherwise controlling an agent runs the risk of liability attaching to that negligence

49
Q

What are an agent’s five general rights?

CIRSI

A

CIRSI
Compensated Interference Reimbursed Safe Indemnified

  1. To be compensated (if promised)
  2. Allowed to work without interference
  3. Reimbursed for losses
  4. Provided a safe work environment
  5. Indemnified for working on behalf of a principal
50
Q

When should one apply tort law to an agency scenario?

A

Tort law applies when vicarious liability attaches to a principal for torts or crimes committed by an agent

51
Q

What are the three components of an agency relationship?

ABC

A

ABC
Assent Benefit Control

  1. Assent: this requires that both parties manifest assent to work with one another
  2. Benefit: the agent agrees to work for the principal’s benefit
  3. Control: the agent agrees to work subject to the control of the principal
52
Q

When one or more parties disclaim or refute the creation of an agency relationship, what will the courts look for to determine if an agency relationship really existed?

A

The courts will look to manifestations of assent which can range from a formal letter to spoken words to physical actions

53
Q

What are the features of an employer-employee agency relationship that pertain to the employer’s control over the employee’s day-to-day activities?

A

Giving the employees tools to work at the workplace
Paying the employees on a structured pay period
AND
Directing the ways in which employees should finish and perform tasks

These features differentiate this type of agency relationship from the type that includes a subcontractor as the agent

54
Q

What is required of an organization or entity to be a principal?

A

The entity must have legal capacity. Thus, a loose-knit collection of unstructured individuals cannot be a principal.

55
Q

What level of capacity is required of a person to be an agent?

APS

A

APS
Assent Perform Subject

“Minimal” capacity. Thus, a minor can be an agent.

Minimal capacity requires the ability to:
1. Assent to the agency relationship
2. Perform the tasks on behalf of the principal
AND
3. Be subject to the principal’s control

56
Q

Do employers have the right to control an independent contractor’s physical conduct of work, insofar as an agency relationship is concerned?

A

NO.

Unlike in an employer-employee relationship, a principal does not have control over the independent contractor’s physical conduct of work

57
Q

When is a principal bound to a contract entered into by its agent?

A

When the principal authorized the agent to enter into the contract
AND
The agent acted with legal authority

Legal Authority:
Actual express authority
Actual implied authority
Apparent authority
Ratification

58
Q

What does the effect of the principal’s or agent’s death have on the agent’s actual express authority?

A

Upon the death of the principal, actual express authority terminates when the agent has ACTUAL knowledge of the principal’s death.
Actual express authority terminates immediately upon the death of the agent.

59
Q

What is actual implied authority and how is it formed?

WCANO

A

WCANO
Words Conduct Authority Necessary Objectives

An agent has actual implied authority (absent express instructions to the contrary) to act within accepted business custom or general trade usage

A principal creates actual implied authority by using:
1. Words, written or spoken; OR
2. Other conduct
3. To convey authority to the agent
4. To take whatever steps are necessary
5. To achieve the principal’s objectives

60
Q

What is apparent authority?

WPBCB

A

WPBCB
Words Party Believe Consents Behalf

The principal creates apparent authority by:
1. Words, written or spoken,
2. That cause the 3d party
3. To reasonably believe that the principal
4. Consents to have acts done
5. on the principal’s behalf by the agent

61
Q

Agency: What is ratification?

KMB

A

KMB
Knowledge Material Benefits

Ratification requires that:
1. The principal has knowledge of the
2. Material terms of the contract
AND
3. The principal then accepts the contract’s benefits

62
Q

What is a disclosed principal and what is its effect on a contract?

KBI

A

KBI
Knows Behalf Identity

A principal is disclosed when:
1. The 3d Party knows
2. The agent is acting on behalf of a principal
AND
3. Knows the principal’s identity

An agent who enters into a contract on behalf of a DISCLOSED principal does NOT become a party to the contract, unless they agreed otherwise.

63
Q

What is a partially disclosed principal and what is its effect on a contract?

KBN

A

KBN
Knows Behalf Not

A principal is partially disclosed when:
1. The 3d Party knows
2. That the agent is working on behalf of a principal,
BUT
3. Does not know the principal’s identity

An agent who enters into a contract on behalf of a partially disclosed principal DOES BECOME a party to the contract, UNLESS the 3d party and the agent agree otherwise.

64
Q

What is an undisclosed principal and what is its effect on a contract?

KNSI

A

KNSI
Knows Neither Status Identity

A principal is undisclosed when:
1. The 3d party knows
NEITHER
2. The agent’s status as an agent
NOR
3. The principal’s identity

An agent who enters into a contract secretly on behalf of the principal with a 3d party WILL BECOME a party to the contract.

65
Q

When does vicarious liability (respondeat superior) attach to the principal because of the agent’s conduct?

A
  1. The principal has sufficient control over the agent’s conduct such that the agency is employer-employee;
    AND
  2. The tort committed by the agent was committed while the agent was acting within the scope of his employment

Scope of Employment Factors:
1. Did the agent intend to benefit the principal?
2. Was the agent’s conduct of the kind that the agent was hired to perform?
3. Did the tort occur “on the job?”

66
Q

What are the exceptions to a principal’s lack of liability for an independent contractor’s tortious conduct?

A
  1. The task is inherently dangerous
  2. The principal was negligent in hiring the independent contractor
  3. The principal retains control over certain tasks and the tort occurs within those tasks
67
Q

What is the difference between a frolic and a detour?

A

Frolic: a significant deviation from an assigned path; outside the scope of employment

Detour: a de minimus deviation from an assigned path; within the scope of employment

68
Q

When might a principal be held liable for the intentionally tortious acts of an agent?

A
  1. The conduct occurred within the general space and time limits of employment
  2. The agent was motivated in some part to benefit the principal
  3. The act is of a kind that the agent was hired to perform
69
Q

Whose manifestations must be reasonably relied on for apparent authority to exist?

A

Apparent authority exists when a third party reasonably relies on manifestations by the principal concerning the agent’s authority to act on the principal’s behalf.

70
Q

When is a principal an undisclosed principal and what is the effect of such?

A

A principal is an undisclosed principal if the third party has no notice of the principal’s existence. An agent who enters into a contract on behalf of an undisclosed principal becomes a party to the contract.

71
Q

When is a principal partially disclosed and what is the effect of such?

A

A principal is a partially disclosed principal 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.

72
Q

What are the elements required for ratification of an agent’s act?

A
  1. The principal must ratify the entire contract
  2. The principal and the third party must have legal capacity to enter into the cotnract
  3. The ratification must occur before the third party withdraws from the contract
    AND
  4. The principal must know the material facts of the transaction
73
Q

When is an agent liable to a contract made on behalf of the principal, or also otherwise liable?

A
  1. Acts that are illegal, negligent, or outside the scope of agent’s authority
  2. The agent is liable to the PRINCIPAL for the conduct of the subagent
  3. The agent is vicariously liable for the torts committed by subagent
  4. If the agent breaches its contract with the principal
74
Q

When is agency authority granted by the doctrine of “implied by acquiescence?”

O FAS

A

O FAS
Occur Failure Affirm Support

Implied authority based on acquiescence commonly results from:
1. A principal’s acceptance of the agent’s acts as they occur
OR
2. The principal’s failure to object to the unauthorized actions of the agent that:
…a) Affirm the agent’s belief that those actions further the principal’s objectives
AND
…b) Support the agent’s perceived authority to act in the future

74
Q

When a principal is vicariously liable for an agent’s conduct, how must the agent have been acting?

A

WITHIN THE SCOPE OF HIS EMPLOYMENT

75
Q

When is an agent liable to a contract made on behalf of the principal, or also otherwise liable?

A
  1. Acts that are illegal, negligent, or outside the scope of the agent’s authority
  2. the agent is liable to the PRINCIPAL for the conduct of the subagent
  3. The agent is vicariously liable for the torts committed by subagent
  4. If the agent breaches its contract with the principal
  5. If there is no employer-employee relationship, such as if the actor is an independent contractor and thus not a true agent
  6. The agent does not disclose the principal’s excistence (undisclosed principal)
  7. The agent discloses the principal’s existence (undisclosed principal)
  8. The agent acts outside of agency authority, the principal does not take reasonable steps to notify the third party of the facts, and the third party CHOOSES to hold the agent liable instead of the principal (under election of remedies doctrine) or holds BOTH the agent and the principal liable (satisfaction rule) - these two remedial options depend on jurisdiction
  9. The agent impliedly (or expressly) warranties to the third party that he is acting on a principal’s behalf but was actually not, the agent is liable for breach of contract to the third party. If there has been apparent authority, though, the agent will not be liable for breach even if he exceeded his authority
  10. The agent is liable for his own tortious conduct
  11. An agent can be liable to the principal if tortious conduct results in harm to the principal
76
Q

What is the difference between vicarious liability, respondeat superior, and derivative liability.

A

They are all essentially the same thing:

Vicarious Liability: a principle is liable for the acts of an agent, even though the principal is innocent of fault and not directly guilty of any tort or crime.

Respondeat Superior: a principle may be vicariously liable for a tort committed by an agent acting withing the SCOPE of his employment

Derivative Liability: the imputation of liability to a principle by the agent’s acts

77
Q

What must the agent’s state of mind be for actual authority to be effective?

A
  1. The principal’s manifestation must cause the agent to believe that the agent is doing what the principal wants,
    AND
  2. The agent’s believe must be reasonable
78
Q

What is the technical effect of an agent disclosing the principal and principal’s identity?

A

An agent purporting to be acting for a principal gives an IMPLIED WARRANTY OF AUTHORITY to the third party.
If the agent lacks the actual power to bind the principal, then the agent has breached the implied warranty, and the agent is liable to the third party.

79
Q

Agency: When does the election of remedies arise?

A

When an agent partially discloses or fails to disclose the principal, the agent and the principal are bound to the contract if the agent was acting within its agency authority.

In this case, both the agent and the principal are bound to the third party, but the third party can only sue one if the contract is breached.

80
Q

Can an agent avoid being liable to a contract with a third party if the agent only partially discloses the principal?

A

The agent who enters into a contract on behalf of a partially disclosed principal becomes a party to the contract, UNLESS the agent and the third party agree otherwise.

81
Q

What is required for a principal to ratify an agent’s conduct that was outside of its authority?

A

The principal must
1. Ratify the entire contract
2. Have legal capacity to ratify the transaction
3. Ratify in a timely manner
AND
4. Have knowledge of the material facts involved in the original act

82
Q
A

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