Agency Flashcards
Common examples of principal-agent relationships
- Employee/Employer
- Named Agents
- Partner/partnership
- Officer/Director or corporation
When may a principal be liable to the actions of 3rd parties for the actions of the agent?
Either in contract or in tort
Three components of agency relationship
- Assent: Both parties manifest assent to work with one another.
- Benefit: Agency agrees to work for the principal’s benefit
- Control: Agent agrees to work subject to the control of the principal.
Consideration required to create agency relationship?
No
When one or more parties disclaim creation of agency relationship?
Courts will look to manifestations of assent which can range from formal letter, to spoken words, to physical actions.
Who can be a principal?
Any person or entity that has legal capacity - excludes minors and anyone incapacitated by illness or intoxication.
Unincorporated associations
Cannot be principals because they lack legal capacity
Who can be an agent?
ANy person or entity who has minimal capacity (includes minors). Agent must be able to:
- Assent to agency relationship;
- Perform tasks on behalf of principal; and
- Be subject to principal’s control.
Formalities for creating agency agreement
Only requires assent, benefit and control. No consideration or evidence in writing is necessary
Indepndent contractor
Principal does not control or have the right to control agent’s physical conduct of work.
- Maintain high level of indepence;
- Free to work for other people;
- Paid on fixed fee;
- Typically owns own tools.
Terminating agency relationship
Each party can terminate unilaterally
When is principal liable for contracts agent enters into on behalf of principal?
- Principal has authorised the agent to enter into contract; and
- Agent acted with legal authority.
Types of legal authority
- Actual express authority
- Actual implied authority
- Apparent authority
- Ratification
Actual Express authority
Principal creates actual express authority by using words, written or spoken, to convey authority to the agent. Agent must believe that he is doing what principal wants him to do.
Look at communication between agent and principal.
Termination of actual express authority
Upon death of principal, actual express authority terminates when agent has actual notice of principal’s death.
Terminates immediately upon death of agent.
Actual Implied Authority
A principal creates actual implied authority by using words, written or spoken, or other conduct to convey or authority to the agent to take whatever steps are necessary to achieve the principles objectives.
Look two communication between the principal and the agent .
The agent has actual implied authority to act with the accepted businesscustom or general trade usage
Apparent Authority
Where the principal creates apparent authority by words, either written or spoken, that causes a third-party to reasonably believe that the principal consents to have acts done on the principal‘s behalf by the agent.
Communication between principal and third party.
Ratification
Requires that the principal has knowledge of the material terms of the contract and the principle then accepts the contract benefits. No pre-act communication required
Disclosed principal
The third-party knows that the agent is acting on behalf of the principal and the principal’s identity. Where the contract is between 3rd party and principal.
Partially disclosed principal
Third-party knows that the agent is working on behalf of the principal, but not the identity of the principal.
Parties to contract are third party, principal and agent.
Undisclosed principal
The third-party knows neither the agent status as an agent nor the principal’s identity. Whether the undisclosed principal is also party to the contract depends on whether the agent has authority to bind the principal to the contract.
Principal’s Liability for Torts - Vicarious Liability
Respondeat superior: Principal may be liable for tortious acts of agent.
Requirements for it to apply:
1. Principal has sufficient control over the agents conduct such that the agency relationship is employer – employee.
2. The tort committed by the agent was committed while the agent was acting within the scope of his employment.
Vicarious Liability for torts - No liability for ICs exceptions
- Where the task is inherently dangerous – vicarious liability will exist even for independent contractors..
- Where the principal was negligent in the hiring of the independent contractor.
- Where the principal retains control over certain tasks and the tort is within those tasks.
Vicarious Liability for Torts - Determining Scope of Employment
Ask:
1. Did the agent intend to benefit the principal?
2. Was the agents conduct of the kind that the agent was hired to perform?
3. Did the tort occur on the job?
Frolic vs Detour
Frolic: a significant deviation from an assigned path – outside the scope of employment.
Detour: minor deviation from an assigned path – within the scope of employment.
Vicarious Liability for intentional torts
Intentional torts, generally outside the scope of employment – therefore no vicarious liability.
Exceptions:
- Conduct occurred within the general space and time limits of employment.
- Agent was motivated in some part to benefit the principal.
- Act is of a kind that the agent was hired to perform.
Fiduciary Duties owed by all agents to principal
- Duty to exercise reasonable care.
- Duty to follow reasonable instructions.
- Duty of loyalty – agent cannot use serve a business opportunity, take in secret profits, or compete in competing businesses with the principal.
