AGENCY Flashcards
What is actual authority in the context of agency?
A principal is bound to contracts entered into by its agent if the agent has actual authority.
Actual authority may be expressed or implied.
Define expressed actual authority.
Occurs when the principal explicitly tells the agent (orally or in writing) that he is entitled to act.
This is a direct communication from the principal to the agent.
What is implied authority?
Occurs when an agent believes he is entitled to act because the action is incidental or necessary to carry out expressed authorized duties.
It can also arise from prior dealings or customary actions in that position.
What constitutes apparent authority?
A principal is bound to contracts entered into by an agent if the agent has apparent authority.
Apparent authority arises when the principal holds out the agent as having authority and the third-party reasonably relies on that authority.
What must a principal do to create apparent authority?
The principal must give the agent a position or title indicating such authority and not publish a revocation of said authority.
This creates the appearance that the agent has the authority to act.
When is a principal not bound by apparent authority?
When the third-party has actual knowledge that the agent did not have authority.
This protects the principal from liability when the third-party is aware of the agent’s limitations.
What is ratification in agency law?
A principal’s ratification of an agent’s conduct will make the principal liable for contracts entered into without actual or apparent authority.
Ratification occurs when the principal has knowledge of all material facts and manifests assent to the same.
What is a sole proprietor?
A single owner for-profit business that operates without formally creating a business organization.
This structure allows for complete control by the owner but also personal liability.
Define a partner in the context of a partnership.
A co-owner of a partnership who shares the profits of the business and is a party to the partnership agreement.
Partners typically share profits and losses unless otherwise agreed.
What is a member in an LLC?
An owner or co-owner of an LLC who is a party to the operating agreement and has a capital account.
This reflects the individual accounting of each member’s investment in the LLC.
What is a shareholder?
The owner of one or more shares of stock in a corporation.
Shareholders have rights and responsibilities based on the number of shares they own.
What is vicarious liability?
Under the doctrine of respondeat superior, an employer is vicariously liable for an employee’s negligent acts if the employee was acting in the scope of employment.
This principle holds employers accountable for their employees’ actions during the course of their work.
When is a party not generally vicariously liable?
A party is not generally vicariously liable for the tort acts of an independent contractor.
This is because independent contractors operate outside the direct control of the employer.
What defines acts that are not within the scope of employment?
Acts that occur within an independent course of conduct and not intended by the employee to serve any purpose of the employer.
This distinction is important for determining liability.
What are acts within the scope of employment?
Acts that involve performing work assigned by the employer or conduct that is of the same general nature as that authorized.
Conduct is not outside the scope merely because an employee disregards instructions.
