AGENCY Flashcards
Agency Relationship
In an agency relationship, the agent has the power to bind the principal and act on his behalf and under his control.
Principals may be bound to contracts or liable in tort for certain actions by their agent.
Creating the Agency Relationship
(ABC)
An agency relationship is created mutual Assent for the agency to act for the principal’s Benefit, and under the principal’s Control.
Either party may unilaterally terminate the agency relationship.
Agent Authority
Principals are only bound by the authorized actions of their agent.
Agents can bind their principals by acting under actual authority (express or implied), apparent authority, or if their initially unauthorized actions are later ratified by the principal.
Agent Liability for Torts
Agents will be liable in lieu of the principal where they have committed an intentional tort (generally), or if their actions were outside the scope of employment.
Agent Liability for Contracts
An agent will be bound to contracts with third parties if they were not authorized to enter into them and their actions were not ratified by the principal, or if they were acting on behalf of an undisclosed principal.
Difference between Implied and Apparent Authority
Implied authority is when the AGENT believes that they had authority (from past course of conduct, etc.)
Apparent authority is when the THIRD PARTY believes that the agent had authority (based on an action by the PRINCIPAL).
Actual Implied Authority
Under the Restatement of Agency, an agent acts with actual implied authority when the principal’s conduct, either from past course of conduct custom, or necessity, lead the agent to believe that they were authorized to act on behalf of the principal.
Apparent Authority
Under the Restatement of Agency, an agent possesses apparent authority to bind a principal in contract when the PRINCIPAL’S overt actions led a third party to reasonably believe that the agent had authority.
Inherent Authority
Inherent authority” in a partnership refers to the power of a partner to act on behalf of the partnership, even if that power isn’t explicitly stated in the partnership agreement, as long as the action is considered necessary to carry out the ordinary course of business within the partnership’s scope; essentially, it’s the implied authority a partner has to perform actions that are reasonably expected to achieve the partnership’s goals.
Ratification
Ratification allows a principal to retroactively authorize an agent’s previously unauthorized actions, thus binding the principal to the contract.
To ratify an agent’s unauthorized actions, the principal must have had knowledge of the contract terms OR accepts the contract benefits.
Respondeat Superior (Principal Tort Liability)
Under respondeat superior, vicarious liability is imposed upon a principal for the torts committed by their agent within the scope and course of their agency/employment.
Agent and principal (employer and employee) are JOINTLY liable.
Intentional Torts by the Employee/Agent
Under respondeat superior, a principal is not vicariously liable for the intentional torts committed by their agent, with some exceptions.
(BAN — “intentional torts are BANned”)
A principal may be vicariously and jointly liable for their agent’s intentional torts if the agent was (1) acting for the principal’s Benefit, (2) the principal Authorized the action, or (3) the tort arose Naturally due to the nature of the employment (bouncer).
Indemnification
A principal can recover from the agent for indemnification if the agent is acting beyond their authority.
Principal Contract Liability
In general, principals are bound by the authorized actions by their agents.
The principal alone is bound to a contract in which their agent was authorized to enter into.
If the agent was not authorized to enter into a contract on behalf of the principal, the agent alone will be liable.
If the agent was authorized to act but the principal was not disclosed to the third party, the agent alone will be liable.
If the agent was unauthorized to act but the principal ratified their actions by accepting the benefit of the contract, the principal alone will be liable.
Scope of Employment/Agency
Principals are vicariously and jointly liable for the torts committed by their agent during the course and scope of their employment/agency.
An employee/agent is acting within the scope or course of their agency/employment if they are acting in furtherance of their principal’s interests on their principal’s instruction, even if there was a minor deviation (detour) from the employment.
An employer is not vicariously liable where the employee has substantially deviated (frolicked) from the course of employment.
An employer is also not vicariously liable for the intentional torts by their employee, with exceptions.
Independent Contractors
Principals are generally not vicariously liable for the actions of independent contractors, unless the contractor was performing an inherently dangerous activity (demolition) or was negligently selected/hired.
Generally, an employee is an independent contractor where the principal has little to no manage or control over their actions.
Actual Express Authority
Under the Restatement of Agency, an agent acts with actual express authority when the principal directly requests the agent to act on his behalf.
What does the law of agency address?
The legal consequences of the agent action on behalf of and subject to the control of the principal.
Agency law governs what type of liabilities?
Ageny relationships involve contractual and tortious acts.
How is an agency relationship created?
Generally, a principal appoints an agent (expressed orally or in a writing.
An agency relationship can also be created by:
- Implied through a principal’s conduct, or
- The Third-Party misinterpreting the relationship between the apparent agent and the principal.
When is an agency relationship created?
- A principal manifest assent to an agent,
- the agent acts on the principal’s behalf,
- the agent’s actions are subject to the principal’s control, and
- the agent manifests assent or otherwise consents.
Who can be a principle?
Any individual or entity (including a government, an organization, or an association) that:
- has the legal capacity to possess rights, and
- has the legal capacty to incur obligations.
What are principal’s authorized to do?
- Delegate task
- Give instructions
- Direct their agent’s tasks
- Monitor their agent’s activities
What is the principal’s control?
An agent agrees to be subject to the principal’s control, and the principal agrees to be bound by its agent’s acts within the scope of the agent’s authority.
What type of individual can be a principal?
Any individual who has contractual capacity in the jurisdiction.
What is a “master” in agency law?
A principal who employs an agent to perform services, and who has the right to controls the physical conduct of the agent’s performance.
Also refered as an employer.
What are the factors used to distinguish servants/employees from independent contractors?
- The principal exercises signifcant control over the details of the worker’s day-to-day activities
- The principal supplies the tools at the place of employment
- The principal pays the worker on a structured pay period
- The worker’s skill level is specialized
- The principal directs the work to completion
Under agency principals, who is an entrepreneur?
Any business owner who has the legal capacity to contract with a person to represent him and conduct business on his behalf.
Who are a corporation’s principal? Agent?
The corporation is the principal. All employees, directors, and officers are the corporation’s agents.
Generally, what is required to be an agent?
Due to the consensual nature of agency relationships, an agent must:
- have minimal capacity,
- manifest assent and consent to act on the principal’s behalf, and
- manifest assent to be subject to the principal’s control.
What is required for an individual to be an agent?
Any individual with minimal capacity has the requisite capcity.
Under agency law, what is minimum capcity? What is the consequence of this definition?
Minimum capcity is some understanding that a contract is being initiated and the general nature of its subject matter.
As such, minors can be agents.
What is a servant in an agency relationship?
A servant is an agent who is subject to the principal’s control with respect to the physical conduct of the employee’s performance.
Servants are also call employees.
What are some factors the identify servants?
- Master’s pay servant’s hourly or by time periods.
- Their work is an integral part of the master’s work.
- Tasks are generally completed under the master’s direction.
- Servants are employed for long periods under the same master.
What factors generally distinguish an independent contractor from a servant?
Independent contractor
- bear the risk and benefits from good management,
- maintian a high level of independence,
- are free to work for others,
- agree to be paid a fixed fee,
- recieve payment based on results,
- is liable for work performed, and
- accepts responsiblity to remedy defects at private expense.
What limits are placed upon gratuitous agents?
None.
What are gratuitous agents?
Agents whose agency agreement lacks any consideration (monetary or otherwise). Gratuitous agents are still agents and principals are still liable in contract or tort.
What is a general agent?
A general agent is an agent with broad authority over a wide variety of tasks.
What are special agents?
Special agents have limited authority regarding specific transactions or a string of repetitious acts.
Are trustees agents?
A trustee is an agent and is subject to the control of the settlor of the trust or one or more of its beneficiaries.
A trustee maintians a fiduciary relationship with and holds property for the benefit of the settlor.
What is a subagent?
A subagent is a person appointed by an agent to perform functions that the agent has agreed to perform on behalf of a principal.
To whom and who are subagents liable?
The agent is liable to the principal for the conduct of the subagent.
How are agents empowered to appoint subagents?
An agent may only appoint subagents with actual authority or apparent authority.
What duties does a subagent hold? To whom does the subagent hold these duties?
A subagent owes a duty of loyalty to the principal as well as to the appointing agent.
Who is contractually liable for the subagents actions?
The agent is liable to the principal for the subagent’s contractual conduct.
The principal is still bound by the subagents acts to the same extent as if the agent had undertaken the acts.
Who is toritiously liable for a subagent’s conduct?
An agent who appoints a subagent may be vicariously liable for torts committed by the subagent.
What three persons are not generally able to serve as a principal?
Persons lacking the ability to contract cannot serve as principals. Accordingly, non-legal entities cannot serve as principals either.
Therefore:
- Minors
- Incompetents
- Unincorporated associations
cannot serve as a principal.
What is the equal-dignities rule?
A statute that requires the principal’s authorization to be in writing. The rule protects the principal against third-party action. It serves as a defense.
It does not apply in a contract action brought be a principal against a third party or in an action brought by an agent against the principal.
What is Express Actual Authority?
- Oral or written words.
- Clear, direct, and definite language.
- Specific detailed terms and instructions.
What is the standard of intent for express actual authority?
The principal’s manifestation must cause the agent to believe that the agent is doing what the principal wants, and the agent’s belief must be reasonable.
What is the requirement to prove a principal’s manifestation of assent or intent in an actual express authority?
A principal must make a manifestation that causes the agent to reasonably belive the agent is authorized to act.
A principal must give the agent clear notice if the principal disagrees with the agent’s actions.
What is implied actual authority?
Implied actual authority allows an agent to take whatever actions are properly necessary to acheive the principal’s objectives, based on the agent’s reasonable understanding of the manifestation and objectives of the principal.
What is customary implied authority?
An agent has implied authority to act within accepted business customs or general trade usage within an industry.
The agent must be aware of the normal business customs or usage before the agent acts.
What is implied authority by position?
A principal may manifest assent to the actions of his agent by placing the agent in a position that customarily has certain authority.
What is implied authority by acquiescence?
The principal’s accepts the agent’s act as they occur.
The principal fails to object to an agent’s unauthorized acts that affirm the agent’s belief those acts further the principal’s objectives and supports the agent’s perceived authority to act in the future.
What is implied authority due to emergency?
Agents may take all reasonable necessary measures in cases of emergency.
What is implied authority to delegate?
Agents generally are prohibited from delegating either express or implied authority to a third party without the principal’s express authorization.
In certain cases, a principal may be shown to have granted implied authority to the agent to delegate his duties to a third person or subagent:
- Mechancial or ministerial acts (e.g., cleaning debris from a work site),
- Specific to a situtation or circumstance (e.g., when required by law),
- Custom or usage,
- Impossibility.
What is apparent authority?
Apparent authority results when the principal causes a third-party to reasonably believe the agent has authority to act.
When may a principal be held liable for an imposter’s acts?
When the principal negligently allows an imposter to have the appearance of actual authority to act on the principal’s behalf.
What factors are sued to determine whether the third-party’s belief is reasonable?
- The third-party is aware of past dealings between the principal and the agent
- Trade customs regarding how a similiar transaction is normally accomplished,
- Relevant industry standards,
- The principal’s written statement of authority,
- Transactions that do not benefit the principal, or
- Extraordinarily or novel transactions for the principal or similar types of principals.
What can terminate an agent’s actual authority?
- The principal’s revocation;
- The principal’s agreement with the agent;
- A change of circumstances;
- The passage of time;
- The principal’s death or suspension of powers;
- The agent’s death or suspension of powers;
- The principal’s loss of capacity; or
- A statutorily mandated termination.
What type of circumstances can end an agency relationship?
The agency relationship terminates when the changed circumstance should cause the agent to reasonably believe that the principal no longer consents to the agent acting on the principal’s behalf. The relationship may end as a result of:
- A change in a statute relating to the subject matter,
- Insolvency of either party
- A dramatic change in business conditions
- The destruction of the subject matter of the agency relationship, or
- A disaster (natural or unnatural)
Who can revoke an agency relationship? When does the revocation take effect?
Either party can revoke consent previously given. Still, a principal cannot revoke an agent’s authority if the power is coupled with an interest in the subject matter of the power.
Revocation takes effect as soon as the other party recieves notice.
What amout of time is required to terminate an agency relationship?
When not agreed upon, a reasonable period terminates an agency relationship.
What is the result of a principal’s death?
Under common law, the principal’s death termiantes all power of the agent to act regardless of whether the agent or third party has notice of the principal’s death.
What is the result of the agent’s death?
The agent’s death automatically terminates the agent’s actual authority. It does not pass to the agent’s estate or heirs.
What is durable power of attorney?
A principal may override the loss-of-capacity rule by giving an agent a durrable power of attorney in advance of the incapacity.
An agent’s authority under a durable power of attorney continues despite the principal’s lack of capacity.
A durable power of attorney must be in writing, evidence the agent’s appointment, and express the principal’s intention that the power will not be affected by the principal’s future disability or incapacity or, alternatively, will take effect upon such an event.
What is the result of a principal’s loss of capacty?
At common law, it terminates the agent’s actual authority.
Modern trends include a notice requirement.
