agency Flashcards
I. LIABILITY IN CONTRACT: Principal (P) becomes liable to third party (T) through the actions of his agent (A) if
I. LIABILITY IN CONTRACT: Principal (P) becomes liable to third party (T) through the actions of his agent (A) as long as A and P both consent and A is subject to P’s control.
A. CAPACITY: P must have contractual capacity (because the contract is between P and T), but A does not (because A is just an intermediary).
- minor lacks capacity as P
- agent doesnt need contractual capacity
B. WRITING: Agency law requires no writing, but the SOF may.
- hire agent for 5 yrs: SOF contract cant be perform in 1 yr
- agent authorized to convey real property requires writing
C. CONSIDERATION: Consideration is not required.
may get paid but dont have to
II. ACTUAL AUTHORITY
A. CREATION OF ACTUAL AUTHORITY
A, P’s office manager, buys supplies from KMart without permission. A knows P. has paid without objection. If A keeps buying from KMart, is P. bound?
In a few jurisdictions, where a general agent exceeds her actual authority (i.e., violates orders) but the act performed is similar to the act authorized, the principal will be held liable. This is an example of:
A. CREATION OF ACTUAL AUTHORITY
- EXPRESS: P expressly tells A to act on P’s behalf.
- without permission means no express - IMPLIED: P’s conduct leads A to believe A has authority.
- -without permission but P knows A did it and didn’t object
sample start: agency question in a contract setting, therefore we need to see if the A has actual authority to bind P
Inherent authority.
II. ACTUAL AUTHORITY
B. TERMINATION OF ACTUAL AUTHORITY
C. DELEGATION
Peeta gives Katniss the power to sell his truck. He says the power is irrevocable. Can he revoke?
Peeta borrows money from Katniss and gives her the power to sell the truck if he defaults. He says the power is irrevocable. Can Peeta still revoke?
Peeta authorizes Katniss to sell his truck for a 15% commission. Can Peeta still revoke?
B. TERMINATION OF ACTUAL AUTHORITY: Actual authority must exist when A enters a contract, since actual authority can terminate in one of six ways:
- AFTER A SPECIFIED TIME/EVENT OR A REASONABLE TIME.
- BY CHANGE OF CIRCUMSTANCES (e.g., subject matter is destroyed).
- IF AGENT ACQUIRES ADVERSE INTEREST (e.g., joins a competitor).
- 4. WHEN AGENT SAYS SO (remember: agency is consensual).
- 5. WHEN PRINCIPAL SAYS SO (ditto) unless it is “COUPLED WITH AN INTEREST” (which makes the power of agency irrevocable).
- –mere saying irrevocable not enough; yes if collateral for a loan; fee/ commission is not an interest
yes; no; yes
- BY DEATH/INCAPACITY/BANKRUPTCY unless COUPLED WITH AN INTEREST
C. DELEGATION to subagent: OK if P consents (may be express or implied from circumstances).
implied: impossible for the agent to do everything
An agent will be held liable to the principal for breaches of the subagent.
III. SUBSTITUTES FOR ACTUAL AUTHORITY
*** A. APPARENT AUTHORITY:
A in P’s presence tell T that A is P’s A, P is silent, is P bound?
A bought goods from T, P told A not to but A bought again, no actual authority. Does A have apparent authority to bind P again?
*** A. APPARENT AUTHORITY: P leads T to mistakenly believe A has authority.
- POLICY: Protects innocent T who relies on P’s holding out A as agent.
- KEY FACT: Reasonable belief must be created by P, ___not by A alone___. Otherwise, it wouldn’t be fair to P.
- A in P’s presence tell T that A is P’s A, P is silent, then P is bond
- ** 3. PROBLEM: Apparent authority can linger after actual authority ends.
- A bought goods from T, P told A not to but A bought again, no actual authority, but have apparent authority; P can destroy this apparent authority by telling T
III. SUBSTITUTES FOR ACTUAL AUTHORITY
B. RATIFICATION
1. HOW TO RATIFY:
2. REQUIREMENTS:
A promoter enters a lease on behalf of a corporation that has not yet been formed, can corp ratify
- INTERVENING RIGHTS:
Lucy, acting without authority, sells Desi’s car for $6,000. Desi later agrees to sell it to B for $5,000. Can Desi ratify Lucy’s earlier sale when he learns about it?
- HOW TO RATIFY: Even if “A” had no authority, “P” can ratify by expressly affirming the contract, accepting the benefit of it, or suing T on it.
- REQUIREMENTS:
a. KNOWLEDGE: “P” must have knowledge of all material facts.
b. ALL OR NOTHING: “P” must accept entire transaction.
c. CAPACITY: “P” must have capacity at the time of ratification and at the time of original contract because ratification is ***RETROACTIVE.
- no capacity: A promoter enters a lease on behalf of a corporation that has not yet been formed, can’t ratify. - INTERVENING RIGHTS: Since ratification is retroactive, we must protect the intervening rights of a bona fide purchaser (BFP).
- if B has no knowledge of earlier sale, he is BFP, P cannot ratify
III. SUBSTITUTES FOR ACTUAL AUTHORITY
C. ADOPTION
A promoter enters a lease on behalf of a corporation that has not yet been formed. Can the corporation, once formed, adopt the lease?
difference between adoption and ratify:
yes, once corp is formed
however, the promoter is not automatically relieved of liability
difference between adoption and ratify: adoption is not retroactive, adopting party is only liable from the point adoption going forward
IV. RELATIONSHIP OF PARTIES
A. PRINCIPAL-AGENT
- AGENT IS A FIDUCIARY: Even a gratuitous A owes P duties of loyalty (must put P’s interests above her own), care (“sliding scale” depending on any special skills A may have), and obedience.
- PRINCIPAL: Must pay (unless gratuitous A), reimburse and indemnify A.
- REMEDIES: Wide range available (e.g., a constructive [fictional] trust where A breaches the duty of loyalty).
- treated “as if” put in trust
IV. RELATIONSHIP OF PARTIES
B. PRINCIPAL-THIRD PARTY
what if agent disclose the existence of P but didn’t disclose the identity
C. THIRD PARTY-AGENT
B. PRINCIPAL-THIRD PARTY [assuming actual authority or a substitute]
1. PRINCIPAL IS ALWAYS LIABLE TO THIRD PARTY
2. THIRD PARTY IS ALMOST ALWAYS LIABLE TO PRINCIPAL
__unless__ A has special skills and T does not know P exists (“undisclosed P”).
Both the principal and the agent will be bond
C. THIRD PARTY-AGENT: Generally no liability (since A is just a go-between)
V. LIABILITY IN TORT
A. TEST:
B. SERVANT OR INDEPENDENT CONTRACTOR
V. LIABILITY IN TORT (vicarious liability to protect an “innocent” third party)
*** A. TEST: Was a tort committed by a servant acting within the scope of employment? If so, the master and servant are jointly and severally liable.
B. SERVANT OR INDEPENDENT CONTRACTOR: Did employer have __THE RIGHT to control__ how the employee did the job (even if never EXERCISED control)? Who supplied tools/workplace? Was the job part of the employer’s regular business? Was it long-term? How much skill was required? Was payment made in regular intervals, like a salary, or by the job?
-depends on the factors: if next issue in the question leads to agency, then conclude its servant
V. LIABILITY IN TORT (vicarious liability to protect an “innocent” third party)
C. SCOPE OF EMPLOYMENT
D. LIABILITY
if T recovers from M, can M sue S?
if T release S, what about M?
E. DIRECT LIABILITY
C. SCOPE OF EMPLOYMENT: M is not automatically liable for S’s torts. M is liable only if S was acting within the scope of her employment.
- USUAL TASK: If S was doing a usual task, the tort was within the scope.
- DEVIATION: The issue will be, “How substantial was the deviation?”
a. “DETOUR”: A minor deviation is usually within the scope.
b. “FROLIC”: A substantial deviation is usually outside the scope. depends on the circumstance - INTENTIONAL TORTS: S’s intentional torts are outside scope unless force is used to further M’s business, M ratifies use of force or M authorized S to commit tort (i.e., S’s intent is not generally imputed to M).
However, where the intentional tort occurs as a natural incident to the carrying out of the employer’s business, or if any benefit may be found running to the employer, courts tend to hold the employer liable. If an employee intentionally chooses a wrongful means to promote the employer’s business, the employer will be held liable for any torts that result.
D. LIABILITY: M and S are jointly and severally liable to T (i.e., T can sue S alone or M alone or join them as defendants, but is entitled to only one total satisfaction).
- M can sue S
- relieve the S doesn’t auto relieve the M’s vicarious liability
- BORROW SEVANT: the borrower M is liable if he has the right to control S when the accident occured
E. DIRECT LIABILITY: M is liable for its own negligence if M fails to properly train or supervise employees or check an employee’s criminal record or job history.
-M hired S without checking his driving record. S had two DWIs. Drunk on a frolic, S injures T: M is not vicariously liable for S’s negligence because frolic, but is directly liable for its own negligence because failed to check record
AGENCY MINI-outline
contract or tort
- CONTRACT: Is a principal liable to a third party on a contract entered into by an agent?
a. Did the agent have ACTUAL or APPARENT AUTHORITY at the time of the contract or did the principal RATIFY or ADOPT the contract later on?
b. If so, the PRINCIPAL IS LIABLE on the contract (but the agent is not!). - TORT: Is an employer liable for a tort committed by an employee?
a. Was a tort committed by a SERVANT in the SCOPE OF EMPLOYMENT?
b. If so, the master and the servant are JOINTLY AND SEVERALLY LIABLE.
intentional tort issue
However, where the intentional tort occurs as a natural incident to the carrying out of the employer’s business, or if any benefit may be found running to the employer, courts tend to hold the employer liable. If an employee intentionally chooses a wrongful means to promote the employer’s business, the employer will be held liable for any torts that result.
direct liability: might be negligent hiring/training/supervising issue too
