Agency

Question 1

What are the two parties in an agency relationship?

Answer 1

Principal - The party who delegates authority to another in order to accomplish a task or consummate a transaction.
Agent - One who acts on a principal’s behalf to accomplish a task or consummate a transaction for the principal.

Question 2

What is a special agent?

Answer 2

One authorized to conduct a single transaction or series of related transactions on the principal’s behalf.
Real estate agent, estate liquidating company, etc.

Question 3

What is a general agent?

Answer 3

One authorized to conduct all necessary personal or business transactions for the principal.
Manager for a restaurant

Question 4

What is a universal agent?

Answer 4

One authorized to do all acts that can be legally delegated to an agent.

Question 5

What is a power of attorney?

Answer 5

A formal written creation of an agency relationship that lists the authority granted. A power of attorney must be signed by the principal.

Question 6

What is an independent contractor?

Answer 6

Someone who acts on behalf of a principal, but that principal does not control the agent’s day-to-day activities and the scope of the independent contractor is limited.

Question 7

What is an express agency relationship?

Answer 7

One in which the principal orally or in writing delegates authority to another.

Question 8

Is a writing required for an express agency relationship?

Answer 8

No, not generally required, except when required under the Statute of Frauds. One example would be a real estate contract. Another example would be if the relationship cannot reasonable be completed in one year.

Question 9

Capacity of the agent, is it required?

Answer 9

No, there is no requirement of capacity on the part of the agent. A minor agent can quit at any time and a minor agent can bind an adult principal.

Question 10

Is consideration required to create an agency relationship?

Answer 10

No, an agency relationship can be created with or without consideration. (gratuitous agency relationship)

Question 11

What is implied authority in an express agency relationship?

Answer 11

An agent has whatever authority is customary for his or her position - whatever authority can be implied because of the position. Normal day-to-day business activities, not obtaining loans, mortgaging a business property, or selling a business. No extraordinary steps without express authority.

Question 12

What is apparent agency?

Answer 12

This is an agency relationship in which the agent does not have an express agreement but still has authority to act as an agent for a principal because of the appearance of having that authority. (Principal does not object to an appearance of authority).

Question 13

What is lingering apparent agency?

Answer 13

The principal fires an agent (ends the actual or express agreement), but the agent continues to act as an employee. The agency continues until properly terminated.

Question 14

What is an agency by estoppel or ostensible authority?

Answer 14

This agency relationship is another form of apparent authority agency that is created when the principal acts as if another is his or her agent.

Question 15

What is the creation of an agency relationship by ratification?

Answer 15

The agent does not have express, implied, or apparent authority, but he or she enters into a contract on behalf of an assumed principal. The principal is not bound, but ratification gives the principal a choice. Ratification is required where the agent has acts without authority, either express or implied.

Question 16

What are duties of principal to agent?

Answer 16

• To comply with the agency contract

- To reimburse reasonable expenses

Question 17

What are the duties of the agent to the principal?

Answer 17

• A fiduciary duty
• Duty to follow instructions
• Reasonable care
• Accounting
• Duty of disclosure
• Duty of loyalty

Question 18

What is a fiduciary relationship?

Answer 18

The agent owes a supreme duty of loyalty tho his or her principal. The agent cannot make a profit at the principal’s expense.

Question 19

What are aspects to the duty of loyalty?

Answer 19

No competition, no conflict of interest, no appropriation of business opportunities, no disclosure of confidential information

Question 20

What are the examples of termination of agency relationships by act of the parties?

Answer 20

• fulfillment (conduct authorized is complete)
• lapse of time (authorized length of time ends)
• specified event (the event is complete)
• mutual agreement (principal and agent agree to end)
• unilateral act of one party (principal or agent fails to perform)

Question 21

What is an agency coupled with an interest?

Answer 21

A unique agency relationship created by a writing that gives the agent some interest vested in the property that is the subject matter of the agency relationship. The principal does not have the power to terminate the relationship.

Question 22

Does apparent authority terminate by the act of the parties?

Answer 22

No, the principal has a duty to notify third parties about the termination in order to halt the agent’s authority. The agent also has a duty to honor the termination and not use apparent authority to continue benefiting from the relationship.

Question 23

How do you end lingering apparent authority?

Answer 23

• Actual notice to third parties

- Constructive notice - publication or general mailings

Question 24

What are examples of termination by operation of law?

Answer 24

• death of principal or agent
• insanity of the principal
• bankruptcy
• change of law
• loss or destruction of subject matter

Question 25

What does termination by operation of law do to authority?

Answer 25

It ends all authority, including express, implied, and apparent. No duty of notice applies.

Question 26

Explain contract liability for disclosed principals with actual authority and disclosed principals with apparent authority.

Answer 26

Principal only

Question 27

Explain contract liability for partially disclosed and undisclosed principals with actual authority.

Answer 27

Principal and Agent

Question 28

Explain contract liability for disclosed principals with no actual or apparent authority.

Answer 28

Agent only

Question 29

What is ratification?

Answer 29

An agent with no authority enters into a contract on behalf of an assumed principal. The principal can choose to be bound by the agreement.

Question 30

What is required for ratification?

Answer 30

• Know all material facts
• Affirm the entire contract
• Have capacity to ratify the contract
• Act within certain time constraints
• Follow the same formalities (writing requirements, etc.)

Question 31

Does terminating actual authority end apparent authority?

Answer 31

No. The principal must give both direct notice and constructive notice.

Question 32

Are agents liable for the torts they commit?

Answer 32

Yes

Question 33

How is a principal liable through conduct?

Answer 33

• Liable for agent’s torts if agent was following orders
• negligent entrustment (agent not qualified)
• negligent supervision
• negligent in hiring or retention

Question 34

What is vicarious liability (also known as respondent superior)?

Answer 34

Principal is liable for agent’s negligent torts or acts.

Question 35

What are the requirements for vicarious liability?

Answer 35

• existence of master-servant relationship
• agent commits the tort while the agent is doing something for the principal within the scope of employment
• When extra-hazardous activity is involved, the principal has strict liability
• a nondelegable duty

Question 36

Explain frolic and detour

Answer 36

An agent is completing personal tasks while working on principal’s business. The principal has no liability during the frolic and detour.

Question 37

Explain within authority.

Answer 37

• Was this the type of work agent was hired to do?
• Did it occur substantially within normal time and space limitations?
• Was it done to serve the principal in some way?

Question 38

What is contributory negligence?

Answer 38

Actions of third party considered to be a contributory factor in the injury suffered, and sometimes reduces the amount recovered from the defendant. Generally a defense for both the agent and the principal.