Agency

Question 1

When will a principal be liable for the torts of its agent?

Answer 1

When:

1. There is a principal/agent relationship, and
2. The tort was committed by the agent within the scope of the relationship

Question 2

What it required to form a principal/agent relationship?

Answer 2

1. Assent
2. Benefit
3. Control

Question 3

Will a principal be vicariously liable for the torts of a sub-agent?

Answer 3

Only if there is assent, benefit, and control between principal and sub-agent.

Question 4

Will a principal be vicariously liable for the tort of a borrowed agent?

Answer 4

Only if there assent, benefit, and control between the borrowing principal and the borrowed agent.

Question 5

What is the difference betweenn an agent and an independent contractor?

Answer 5

The principal lacks control over the independent contractor.

Question 6

Is a principal vicariously liable for the torts of an independent contractor?

Answer 6

No.

Two Exceptions:

1. Ultra-hazardous or inherently dangerous activities, and
2. Estoppel - where the independent contractor is held out as an agent.

Question 7

How do you determine what the scope of an agency is?

Answer 7

Ask:

1. Was conduct within the job description?
2. Did the tort occur while on a frolic or a detour?
3. Did the agent intend to benefit the principal?

Question 8

What is the difference between a frolic and a detour and how does it effect liability?

Answer 8

A frolic is a new and independent journey. The principal will not be held liable for torts occurring while on a frolic because it is outside the scope of the agency.

A detour is a mere departure from an assigned task. Principal is liable because it was within the scope of the agency.

Question 9

When will a principal be liable for the intentional torts of an agent?

Answer 9

Generally, intentional torts are considered to be outside the scope of the agency except when the conduct was:

1. Authorized by the principal, or
2. Natural given the nature of the employment, or
3. Motivated by a desire to serve the principal.

Question 10

What is the general rule regarding an agents ability to bind a principal in contract?

Answer 10

A principal is liable on its authorized contracts.

Question 11

What are the four types of authorization?

Answer 11

1. Actual express authority,
2. Actual implied authority,
3. Apparent authority, and
4. Ratification

Question 12

Misc. points about actual express authority:

Answer 12

1. May be oral and even private but must be in writing if the underlying contract must be in writing.
2. May be revoked unilaterally by principal or agent or upon the death or incapacity of the principal unless the agent was granted a durable power of attorney.

Question 13

What are the three different types of actual implied authority?

Answer 13

1. Necessity: There is implied authority to all tasks which are necessary to accomplish an expressly authorized task.
2. Custom: There is implied authority to do all tasks which are customarily performed by person with the agent’s title or position.
3. Prior acquiescence by the principal: There is implied authority to do all tasks which the agent believe to have authority because of the principal’s past acquiescence.

Question 14

What are the two requirements for apparent authority?

Answer 14

1. The principal cloaked the agent with the appearance of authority, and
2. A third party reasonably relied on appearance of authority.

Question 15

What is required for ratification?

Answer 15

1. The principal must have knowledge of the material facts of the contract,
2. The principal must accept the entire contract and its benefits.

Question 16

When is an agent liable on a contract?

Answer 16

Generally, an agent is not liable for an authorized contract except when the principal is undisclosed.

Question 17

What three duties does an agent owe to a principal?

Answer 17

1. Duty of care
2. Duty to obey reasonable instruction
3. Duty of loyalty

Question 18

What three things are prohibited by the duty of loyalty?

Answer 18

1. Self-dealing
2. Usurping the principal’s opportunity
3. Secret profits without disclosure to the principal

Question 19

What are a principal’s remedies for a breach of duty?

Answer 19

Principal may recover:

1. Losses caused by breach, and
2. Disgorgement of profits from agent

Question 20

What is a general partnership?

Answer 20

A general partnership is the association of two or more people who are carrying on a business for profit as co-owners.

Question 21

What is the general rule regarding general partnership liability?

Answer 21

The general partnership is liable for each partner’s torts in the scope of partnership business and for each partner’s authorized contracts.

Agency law applies to general partnerships.

Question 22

Are incoming partners liable for pre-existing debts?

Answer 22

No, but contributed capital may be used to pay for pre-existing debts.

Question 23

What is the rule of liability for dissociating partners?

Answer 23

A dissociated partner retains liability on future debts until notice of dissociation is given to creditors or 90 days from filing notice of dissociation with the state.

Question 24

What is general partnership liability by estoppel mean?

Answer 24

One who represents to a third party that a general partnership exists will be liable as if a general partnership exists.

Question 25

What is the only assets that belongs to a general partner personally?

Answer 25

Share of profits.

Question 26

What is the default rule for voting rights?

Answer 26

Absent an agreement, each partners is entitled to equal control.

Question 27

What is the general rule regarding salary?

Answer 27

There is no salary.

Question 28

What are the default rules for profits and losses?

Answer 28

Profits are shared equally.

Losses are shared like profits.

Question 29

What is the priority structure for partnership distributions?

Answer 29

1. Creditors - maybe trade creditors or insiders
2. Contributed capital - partnership must pay these back!!
3. Profits.