AGENCY Flashcards
What is Agency?
An agency is when the principal authorizes an agent to act on her behalf, and the agent represents the principal in dealings with 3rd parties. Mutual assent by both parties is required.
Is agreement between the Principal and the agent required to establish AGENCY?
Yes - Agreement between both parties that the agent’s conduct is for the principal’s benefit, and that the principal has right to control the agent is NECESSARY
Can a principal have control over an Independent Contractor?
A principal has the right to control the method and manner in which an agent performs, but does not control this with an independent contractor.
Define who must have capacity to establish an AGENCY
The Principal must have capacity to contract (not be a minor) and must be mentally competent.
An Agent must have minimal capacity, so an agent must be mentally competent but can be a minor.
What duties a PRINCIPAL have with an Agent?
The principal owes the agent all duties imposed by their contract, including compensation, cooperation, indemnity, and reimbursement.
What are the remedies when the Principal is in breach?
The agent may
i) Terminate the agency and refuse to perform further.
ii) Seek contract damages and/or an accounting (must mitigate damages)
iii) Seek a possessory Lien for money due.
What are the duties an AGENT owe the PRINCIPAL?
The agent owes the principal the fiduciary duties of:
- Duty of care - to act as a reasonably prudent person under similar circumstances.
- Duty of Loyalty - the agent must put the interest of the principal above his own. The agent may not engage in i) self dealing, ii) No usurping the principal’s business opportunity, and iii) no making secret profits.
- Duty of Obedience: To follow all reasonable instructions given by the principal.
- Duty to communicate - all relevant information that would affect the principal.
What are the remedies when the AGENT is in breach?
Where the agent is in breach, a principal may do any of the following:
- Discharge the agent.
- Withhold compensation from the agent.
- Seek accounting or contract remedies, such as an action to disgorge profits, rescission, constructive trust, etc. (must mitigate damages).
- Seek tort damages for intentional or negligent performance.
- Seek indemnity for liability to third parties occasioned by the agent’s wrongful actions beyond the agency scope.
What are the subagent duties to the principal?
Subagent duties depend on whether or not they are acting with authority.
i) Acting with authority: The agent owes the principal the same duties owed by an agent.
ii) Acting without authority: The subagent only owes duties to the agent.
Lastly - The agent is liable to the principal for the subagent’s breach.
When is the agent liable for contracts with third parties ?
- The agent is acting with no authority from the principal (acts with implied warranty of authority when none exists).
- Principal’s identity is not revealed (partial disclosure because principal’s existence is known or should reasonably be known).
- Principal’s existence and identity is undisclosed/unknown.
- All of the parties intend that the agent be treated as a party to the contract.
When is the Principal liable for the agent’s contracts?
The agent’s actions will bind the principal to a contract if the agent was acting under the actual or apparent authority to act for the principal.
What is the difference between “actual express authority” and “actual implied authority” ?
i) Actual express authority is specifically granted to the agent by the principal through words or conduct - but a writing is required is the statute of fraud applies.
ii) Actual implied authority -the agent reasonably believes the principal gave him authority because of necessity, custom or prior dealing.
Under what circumstances do actual express or implied authority terminates?
- Breach of agent’s fiduciary duty.
- Lapse of a stated period, or a reasonable time if none is stated.
- Operation of law: By the death or incapacity of either party (unless durable power of attorney exists), or bankruptcy of the principal.
- Changed circumstances where it is clear the agent’s services are no longer needed, such as a significant change in the market, law, or subject matter.
- Happening of a specified event.
- Unilateral termination by either party since agency is usually c at will with notice (but, can’t terminate if agent has an interest in the subject matter or a power is given for security—i.e., consideration provided).
What is Apparent Authority?
When the principal makes an objective manifestation of the apparent agent’s authority, and a third party reasonably relies on that manifestation.
The analysis centers on what occurred between the principal and the third party.
Do 3rd parties need notice when an agent’s actual authority has terminated?
Where an agent’s actual authority has terminated (unless by death or incapacity), she continues to have apparent authority to transact with known third parties with whom she has previously transacted on the principal’s behalf until the third parties receive actual or constructive notice of the termination.
