Agency

Question 1

What are the three ways an agency relationship can arise?

Answer 1

(1) expression (appointment) = explicitly appoints someone to be an agent
(2) implication by principal’s conduct
(3) misinterpretation = principal does not intend to appoint an agent, but creates an impression of an agency relationship in the mind of a third party.

Question 2

What is needed to find an agency relationship?

Answer 2

Some degree of control over the agent’s overall direction / ultimate objectives.

Question 3

What two requirements are there to become a principal?

Answer 3

Legal capacity to

(1) possess rights
(2) incur obligations

Question 4

What is required to become an agent?

Answer 4

“Minimal capacity” = the ability to consent to become an agent

Question 5

Is an agent responsible to the principal for the conduct of a subagent?

Answer 5

Yes.

Question 6

Is a principal bound by the conduct of a subagent?

Answer 6

Yes, as if the agent had acted. But agent must have authority from the principal to appoint a subagent.

Question 7

To whom does a subagent owe a duty of loyalty?

Answer 7

Both to the principal and the agent.

Question 8

What fiduciary duties to real estate brokers owe to their principals?

Answer 8

Duties of care and loyalty =

(1) to exercise reasonable skill and care;
(2) to deal honestly, fairly, and in good faith; AND
(3) to disclose all known facts that materially affect the property value

Question 9

Is a writing required to create an agency relationship for real property transactions?

Answer 9

Yes. Writing is necessary to create an agency relationship for real property transactions.

Question 10

Which party can terminate an agency relationship?

Answer 10

Either party. Termination is a unilateral right that both principal and agent possess.

Exception: irrevocable agency relationship

Question 11

When is an agency relationship terminated?

Answer 11

From the time the non-terminating party receives notice of the termination. Or, unless the terms of the relationship differ, within a reasonable amount of time.

Question 12

What events automatically terminate an agency relationship?

Answer 12

(1) death of principal
(2) death of agent
(3) principal’s loss of capacity (date of judicial determination)
(4) agent’s breach of fiduciary duty

Question 13

Must a durable power of attorney be in writing?

Answer 13

Yes. Writing must (1) evidence the agent’s appointment as a durable power of attorney and (2) must express the principal’s intention that the power of attorney will not be affected by the principal’s loss of capacity.

Question 14

What are the three types of authority?

Answer 14

(1) actual authority (based on agent’s interpretation)
(2) apparent authority (based on third-party’s interpretation)
(3) inherent authority

Question 15

What is needed for an agent to act with actual authority?

Answer 15

(1) agent’s belief in authority possessed is reasonable (objective), AND
(2) agent believes in good faith (subjective)

Question 16

Can actual authority be implied?

Answer 16

Yes. Business customs and trade usage are factors. Look for principal’s acquiescence.

Question 17

Is there implied actual authority in cases of emergency? What is the scope?

Answer 17

Yes. Agent has implied authority to take all reasonable necessary measures to protect the principal.

Question 18

In what 4 situations does the agency have implied actual authority to delegate his responsibilities?

Answer 18

(1) delegation is a ministerial or mechanical act;
(2) agent must delegate to a specialist under the law
(3) delegation consistent with custom or usage in the industry,
(4) impossible for agent to perform duties without delegation

Question 19

What are the 8 ways in which actual authority is terminated?

Answer 19

(1) Revocation
(2) agreement with the agent
(3) change in circumstances making existence of authority unreasonable
(4) passage of time
(5) principal’s death
(6) agent’s death
(7) principal’s incapacity
(8) termination by statute

Question 20

What is the test for apparent authority?

Answer 20

(1) third party reasonably and actual believes that agent is acting with authority
(2) based on words and conduct of the principal

Question 21

What factors help determine apparent authority?

Answer 21

(1) past dealings
(2) trade customs
(3) industry standards
(4) principal’s written statements of authority
(5) nature of the transaction (e.g., if it benefits the principal)

Question 22

What is inherent authority?

Answer 22

Residual category of authority. Common areas for inherent authority are…

(1) agent performs unauthorized action that is similar to authorized one
(2) Principal will be held liable for torts committed “during the scope” of an agent’s employment.
(3) principal gives agent some indicia of ownership over property loaned to the agent, and the agent sells it.

Question 23

Is travel between work and home within the scope of an employee’s employment?

Answer 23

No. Commuting is generally outside the scope.

But business travel is within the scope.

Question 24

What is the difference between implied actual authority and apparent authority?

Answer 24

Implied actual authority = principal causes an agent to reasonably believe that the agent has authority to act

Apparent authority = principal causes third party to reasonable believe the agent has authority to act

Question 25

What is ratification?

Answer 25

Even if agent acted without authority, principal can ratify the action, and it gets treated as if authority existed. May be express or implied.

Question 26

What is required for ratification?

Answer 26

(1) Knowledge: principal has knowledge of the act
(2) Comprehensiveness: Can only ratify an entire act, not portions.
(3) Timeliness: must ratify within a reasonable amount of time
(4) Capacity: principal had the capacity to ratify

Question 27

What is agency by estoppel?

Answer 27

Principal negligently enabled someone to carry on as the principal’s authorized agent.

Third party can estop a principal from denying agency in this situation IF third party relied on the agent’s authority to her detriment.

Question 28

What is the test for determining the scope of employment?

Answer 28

Agent was motivated by desire to serve the principal.

Question 29

What 5 factors do NY courts consider when assessing the scope of an agent’s employment?

Answer 29

(1) is tortious activity closely connected to agent’s work
(2) is activity common in this type of work
(3) history of the principal-agent relationship
(4) did agent depart from normal methods
(5) whether agent’s actions were reasonably foreseeable to principal.

Question 30

Can a principal be held liable for torts or crimes of an agent?

Answer 30

Yes, if they were committed within the scope of employment. However, serious crimes are usually outside the scope.

Question 31

What is a frolic?

Answer 31

A significant deviation from agent’s duties for personal reasons.Principal is not liable for acts during a frolic.

Question 32

What is a detour?

Answer 32

A minor deviation from agent’s duties. Principal is still liable for acts during a detour.

Question 33

What is the master-servant rule?

Answer 33

Needed for vicarious liability. Established when the master has control over not only the ends of the agent’s activities, but also the conduct of the agent. (I.e., ability to micromanage).
Vicarious liability can also be found if…
(1) agent engages in inherently dangerous activity, or
(2) principal hired an incompetent agent.

Question 34

When is a agent personally liable for a contract entered into on behalf of a principal?

Answer 34

Only if principal was undisclosed OR partially disclosed.

Question 35

What is required for partial disclosure of a principal?

Answer 35

Agent reveals that he is working for a principal but does not identify the principal.

Question 36

What is needed for full disclosure of a principal?

Answer 36

Agent reveals that he is (1) working on behalf of a principal, and (2) identifies that principal.

Question 37

When can a third party void a contract entered into with a agent?

Answer 37

(1) principal is undisclosed
(2) agent falsely represented he was acting alone
(3) agent or principal knew that the third party would not have entered into the contract of the third party had known who the principal was.

Question 38

What is the “warranty of authority”?

Answer 38

Doctrine that holds that a person who makes a contract on behalf of another person impliedly represents that they have authority to do so. When breached, no contract is formed but agent may be personally liable for damages resulting from breach.

Question 39

Is the agent personally liable for torts committed?

Answer 39

Yes. Always.

Question 40

What is the principal’s right of notification?

Answer 40

Agent is obliged to provide notice of everything learned that is relevant to the subject matter of the agency relationship.

Question 41

What are the principals obligations to the agent?

Answer 41

(1) deal fairly and in good faith with agent
(2) cooperation
(3) act in accordance with contractual duties
(4) reasonably compensate the agent
(5) indemnify the agent of losses taken within scope of employment (unless losses are agent’s own fault.)

Question 42

How can an agent recover for breach of a fiduciary duty of his principal?

Answer 42

Tort or contract

Question 43

What is an agent’s fiduciary duty to a principal?

Answer 43

Duty of loyalty. Forbids three things:

(1) use of relationship for personal gain
(2) usurp a business opportunity
(3) compete with the principal

Duty of care: perform duties with care, competence, and diligence. Keep agent’s property separate and provide accounting.

Question 44

Can an agent work for multiple principals?

Answer 44

Yes. But must disclose this fact to all principals.