Agency

Question 1

Agency

• Creation of Relationship
• General Principal duties
• General Agent duties

Answer 1

• Both parties must consent to one person acting on behalf of another. No consideration required, no writing required.
• Principal must have contractual capacity. Minor appointment of agent voidable.
• Principal Duties - Honor the agreement.
  1. Must not unreasonably interfere with agent performance.
  2. If agreement silent, agent entitled to reasonable compensation. Can agree to serve free.
  3. Principal must indemnify agent for reasonably incurred legal liabilities.
  4. Principal must reimburse agent for reasonably incurred expenses.
• Agent Duties - Duties arising from agreement.
  1. Must obey the reasonable instructions of the principal.
  2. Agent is fiduciary, owes duty of loyalty and reasonable care.
  3. Must hold profits or gain from agency in trust.
  4. Not to compete - Cannot serve as dual agent unless the agent discloses the proposed representation to both principals and obtain their consent to the dual representation.

Question 2

Agency

- Termination of relationship

Answer 2

1. Lapse of specified or reasonable time.
2. Happening of a specified event.
3. Change in circumstances - Destruction of subject matter, change in law or business conditions
4. Agent breach of fiduciary.
5. Either party terminating unilaterally
   - Even if breach an agreement, agency terminated, damages are in contract.
6. Operation of law - Death, loss of capacity.

Question 3

Agency

- Agency creation by ratification

Answer 3

• “Agent” acts on principal’s behalf without authority or without disclosing principal.
• Principal affirmatively treats acts of agent as authorized or engages in conduct only justified by treating act as authorized (Taking benefit).

Question 4

Agency

- Agency by Estoppel

Answer 4

• Principal made no manifestations to third party to give rise to apparent authority, however he contributed to third party belief.
• Usually fails to use reasonable care to prevent foreseeable circumstances leading to third party belief that person was acting as principal’s agent.

Question 5

Agency

• Actual Authority
• Two Types

Answer 5

• Express actual authority - Manifestation by principal to agent that agent has power to act or deal with third party as agent.
• Implied actual authority - If the principal’s words or conduct would lead a reasonable person in the agent’s position to believe that authority existed, the agent has actual authority to bind.
• Prior interactions can give rise to implied actual authority.

Question 6

Agency

- Incidental Authority

Answer 6

• Form of actual authority.
• Authority to do related incidental acts.
• Natural, ordinary, or usual steps that would be taken to act for principal, even though direction not given for each step.
• Note - If expressly directed not to do an act, no authority to do that act.

Question 7

Agency

- Apparent Authority

Answer 7

• If a principal’s words or conduct would lead a reasonable person in the position of the third party, to believe that the agent has authority to act for the principal, the agent has apparent authority to bind principal in transactions with that third party.

Question 8

Agency

- Customary Practices and Titles significance to agency created liability

Answer 8

• Customary practices in a field or customary duties of a particular title or position are important to a reasonable belief that agent has authority.
• Principal gives agent the title. Principal sends agent out to deal with the industry players (conduct by principal).

Question 9

Agency

- Equal Dignity Rule

Answer 9

• When statute of frauds applies to transaction.
• Equal dignity given to acts taken by agent that require signature. If the principal would need a writing to make and bind the other party, the principal must enter writing with his agent to make a writing with a third party.

Question 10

Agency

- Agent Warranty

Answer 10

• Generally an agent will not be liable for contracts made for the principal, but if no authority:
• When an agent purports to act for a principal, he makes a warranty to the third party that he has the authority to act.

Question 11

Agency

- Agent Liability to third parties

Answer 11

Agent is liable if:

1. the agent exceeded his authority by breaching his warranty of authority.
2. Agent worked for a partially disclosed principal. 3. Agent worked for an undisclosed principal.

Question 12

Agency

• Intentional torts by agents (employees).
• Principal liability

Answer 12

• General rule - Principal not liable for intentional torts of employees.
• Exceptions - Torts can be within scope of employment when force, violence, sexual assault, etc. by employees is foreseeable.
  1. Use of force foreseeable by nature of work (Bouncer, police)
  2. Employment naturally generates friction making force foreseeable (Repo man)
  3. Sexual assault - Might be foreseeable in some settings, ripe for taking advantage (psychiatric, strip club).

Question 13

Agency

• Subagent
• Co-agent

Answer 13

Subagent - Appointed by agent to perform functions agent has consented to perform.
- If authorized appointment sub owes duties to principal. If not, to agent.

• Co-agent - Appointed but does not perform agent’s own functions. Manager and clerk

Question 14

Agency

• Scope of employment
• Three part test

Answer 14

1. Kind of conduct must be of kind hired to perform. Reasonably similar to job description
2. Employee must be reasonably within the time and space limits of where he would need to be to complete duties.
3. Employee must have intended to benefit employer when engaging in conduct.
   - Only part of motivation need be to help employer.
   - If doing something solely for self, not in scope.

• If in scope principal liable for negligence.
• For intentional torts look for foreseeable force due to nature of job to satisfy 1 & 3.

Question 15

Agency

• Independent Contractor
• Major Distinction
• Principal liability

Answer 15

• Person employed (contracted) to do something for another, but who is not subject to the other’s right of control with respect to physical conduct in the performance or undertaking.
• The major distinction is degree of control over how the person operates
• A principal is not generally liable for torts committed by an independent contractor in connection with his work.
• Principal remains liable for his own torts, including negligent entrustment and such.

Question 16

Agency

- Definition

Answer 16

• The fiduciary relationship resulting from the consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.

Question 17

Agency

- Elements

Answer 17

1. Assent - Both parties mutually assent
2. Control - For benefit of principal - Usually a reason exists for agent to conform (salary, ability to fire).
3. Acting on behalf - Must act on principal’s behalf absent some other legal duty (contract obligates one to act, but he may act for himself).

Question 18

Agency

- Exception to Independent Contractor liability rule

Answer 18

• Principal is not generally liable for torts committed by independent contractor in connection with his work
• Exceptions
  1. Activities principal requires are inherently dangerous (Liable for contractor torts, negligence)
  2. Principal delegates non-delagable duties.
  3. Principal knowingly selected an incompetent contractor (Liable here for his own negligence, not contractor negligence)

Question 19

Agency

• Scope of employment analysis
• Deviations from defined scope

Answer 19

• Action need not be specifically authorized, if similar to employment conduct or incidental arguable within scope.
• Deviations - Matter of degree of the deviation
• Small deviations can be within scope, the motivation behind conduct need only be partly for employer benefit.
• Major deviations (frolics) are beyond the scope of employment. An employee can frolic in a company owned vehicle.
• See other card on intentional torts by agents.
• As a general rule, a foreseeable intentional tort by an employee can render the employer liable.