Agency

Question 1

What does the law of agency address?

Answer 1

The legal consequences of the agent action on behalf of and subject to the control of the principal.

Question 2

Agency law governs what type of liabilities?

Answer 2

Ageny relationships involve contractual and tortious acts.

Question 3

How is an agency relationship created?

Answer 3

Generally, a principal appoints an agent (expressed orally or in a writing.

An agency relationship can also be created by:

1. Implied through a principal’s conduct, or
2. The Third-Party misinterpreting the relationship between the apparent agent and the principal.

Question 4

When is an agency relationship created?

Answer 4

1. A principal manifest assent to an agent,
2. the agent acts on the principal’s behalf,
3. the agent’s actions are subject to the principal’s control, and
4. the agent manifests assent or otherwise consents.

Question 5

Who can be a principle?

Answer 5

Any individual or entity (including a government, an organization, or an association) that:

• has the legal capacity to possess rights, and
• has the legal capacty to incur obligations.

Question 6

What are principal’s authorized to do?

Answer 6

• Delegate task
• Give instructions
• Direct their agent’s tasks
• Monitor their agent’s activities

Question 7

What is the principal’s control?

Answer 7

An agent agrees to be subject to the principal’s control, and the principal agrees to be bound by its agent’s acts within the scope of the agent’s authority.

Question 8

What type of individual can be a principal?

Answer 8

Any individual who has contractual capacity in the jurisdiction.

Question 9

What is a “master” in agency law?

Answer 9

A principal who employs an agent to perform services, and who has the right to controls the physical conduct of the agent’s performance.

Also refered as an employer.

Question 10

What are the factors used to distinguish servants/employees from independent contractors?

Answer 10

• The principal exercises signifcant control over the details of the worker’s day-to-day activities
• The principal supplies the tools at the place of employment
• The principal pays the worker on a structured pay period
• The worker’s skill level is specialized
• The principal directs the work to completion

Question 11

Under agency principals, who is an entrepreneur?

Answer 11

Any business owner who has the legal capacity to contract with a person to represent him and conduct business on his behalf.

Question 12

Who are a corporation’s principal? Agent?

Answer 12

The corporation is the principal. All employees, directors, and officers are the corporation’s agents.

Question 13

Generally, what is required to be an agent?

Answer 13

Due to the consensual nature of agency relationships, an agent must:

• have minimal capacity,
• manifest assent and consent to act on the principal’s behalf, and
• manifest assent to be subject to the principal’s control.

Question 14

What is required for an individual to be an agent?

Answer 14

Any individual with minimal capacity has the requisite capcity.

Question 15

Under agency law, what is minimum capcity? What is the consequence of this definition?

Answer 15

Minimum capcity is some understanding that a contract is being initiated and the general nature of its subject matter.

As such, minors can be agents.

Question 16

What is a servant in an agency relationship?

Answer 16

A servant is an agent who is subject to the principal’s control with respect to the physical conduct of the employee’s performance.

Servants are also call employees.

Question 17

What are some factors the identify servants?

Answer 17

• Master’s pay servant’s hourly or by time periods.
• Their work is an integral part of the master’s work.
• Tasks are generally completed under the master’s direction.
• Servants are employed for long periods under the same master.

Question 18

What factors generally distinguish an independent contractor from a servant?

Answer 18

Independent contractor

• bear the risk and benefits from good management,
• maintian a high level of independence,
• are free to work for others,
• agree to be paid a fixed fee,
• recieve payment based on results,
• is liable for work performed, and
• accepts responsiblity to remedy defects at private expense.

Question 19

What limits are placed upon gratuitous agents?

Answer 19

None.

Question 20

What are gratuitous agents?

Answer 20

Agents whose agency agreement lacks any consideration (monetary or otherwise). Gratuitous agents are still agents and principals are still liable in contract or tort.

Question 21

What is a general agent?

Answer 21

A general agent is an agent with broad authority over a wide variety of tasks.

Question 22

What are special agents?

Answer 22

Special agents have limited authority regarding specific transactions or a string of repetitious acts.

Question 23

Are trustees agents?

Answer 23

A trustee is an agent and is subject to the control of the settlor of the trust or one or more of its beneficiaries.

A trustee maintians a fiduciary relationship with and holds property for the benefit of the settlor.

Question 24

What is a subagent?

Answer 24

A subagent is a person appointed by an agent to perform functions that the agent has agreed to perform on behalf of a principal.

Question 25

To whom and who are subagents liable?

Answer 25

The agent is liable to the principal for the conduct of the subagent.

Question 26

How are agents empowered to appoint subagents?

Answer 26

An agent may only appoint subagents with actual authority or apparent authority.

Question 27

What duties does a subagent hold? To whom does the subagent hold these duties?

Answer 27

A subagent owes a duty of loyalty to the principal as well as to the appointing agent.

Question 28

Who is contractually liable for the subagents actions?

Answer 28

The agent is liable to the principal for the subagent’s contractual conduct.

The principal is still bound by the subagents acts to the same extent as if the agent had undertaken the acts.

Question 29

Who is toritiously liable for a subagent’s conduct?

Answer 29

An agent who appoints a subagent may be vicariously liable for torts committed by the subagent.

Question 30

What three persons are not generally able to serve as a principal?

Answer 30

Persons lacking the ability to contract cannot serve as principals. Accordingly, non-legal entities cannot serve as principals either.

Therefore:

1. Minors
2. Incompetents
3. Unincorporated associations

cannot serve as a principal.

Question 31

What is the equal-dignities rule?

Answer 31

A statute that requires the principal’s authorization to be in writing. The rule protects the principal against third-party action. It serves as a defense.

It does not apply in a contract action brought be a principal against a third party or in an action brought by an agent against the principal.

Question 32

What is Express Actual Authority?

Answer 32

• Oral or written words.
• Clear, direct, and definite language.
• Specific detailed terms and instructions.

Question 33

What is the standard of intent for express actual authority?

Answer 33

The principal’s manifestation must cause the agent to believe that the agent is doing what the principal wants, and the agent’s belief must be reasonable.

Question 34

What is the requirement to prove a principal’s manifestation of assent or intent in an actual express authority?

Answer 34

A principal must make a manifestation that causes the agent to reasonably belive the agent is authorized to act.

A principal must give the agent clear notice if the principal disagrees with the agent’s actions.

Question 35

What is implied actual authority?

Answer 35

Implied actual authority allows an agent to take whatever actions are properly necessary to acheive the principal’s objectives, based on the agent’s reasonable understanding of the manifestation and objectives of the principal.

Question 36

What is customary implied authority?

Answer 36

An agent has implied authority to act within accepted business customs or general trade usage within an industry.

The agent must be aware of the normal business customs or usage before the agent acts.

Question 37

What is implied authority by position?

Answer 37

A principal may manifest assent to the actions of his agent by placing the agent in a position that customarily has certain authority.

Question 38

What is implied authority by acquiescence?

Answer 38

The principal’s accepts the agent’s act as they occur.

The principal fails to object to an agent’s unauthorized acts that affirm the agent’s belief those acts further the principal’s objectives and supports the agent’s perceived authority to act in the future.

Question 39

What is implied authority due to emergency?

Answer 39

Agents may take all reasonable necessary measures in cases of emergency.

Question 40

What is implied authority to delegate?

Answer 40

Agents generally are prohibited from delegating either express or implied authority to a third party without the principal’s express authorization.

In certain cases, a principal may be shown to have granted implied authority to the agent to delegate his duties to a third person or subagent:

• Mechancial or ministerial acts (e.g., cleaning debris from a work site),
• Specific to a situtation or circumstance (e.g., when required by law),
• Custom or usage,
• Impossibility.

Question 41

What is apparent authority?

Answer 41

Apparent authority results when the principal causes a third-party to reasonably believe the agent has authority to act.

Question 42

When may a principal be held liable for an imposter’s acts?

Answer 42

When the principal negligently allows an imposter to have the appearance of actual authority to act on the principal’s behalf.

Question 43

What factors are sued to determine whether the third-party’s belief is reasonable?

Answer 43

• The third-party is aware of past dealings between the principal and the agent
• Trade customs regarding how a similiar transaction is normally accomplished,
• Relevant industry standards,
• The principal’s written statement of authority,
• Transactions that do not benefit the principal, or
• Extraordinarily or novel transactions for the principal or similar types of principals.

Question 44

What can terminate an agent’s actual authority?

Answer 44

• The principal’s revocation;
• The principal’s agreement with the agent;
• A change of circumstances;
• The passage of time;
• The principal’s death or suspension of powers;
• The agent’s death or suspension of powers;
• The principal’s loss of capacity; or
• A statutorily mandated termination.

Question 45

What type of circumstances can end an agency relationship?

Answer 45

The agency relationship terminates when the changed circumstance should cause the agent to reasonably believe that the principal no longer consents to the agent acting on the principal’s behalf. The relationship may end as a result of:

• A change in a statute relating to the subject matter,
• Insolvency of either party
• A dramatic change in business conditions
• The destruction of the subject matter of the agency relationship, or
• A disaster (natural or unnatural)

Question 46

Who can revoke an agency relationship? When does the revocation take effect?

Answer 46

Either party can revoke consent previously given. Still, a principal cannot revoke an agent’s authority if the power is coupled with an interest in the subject matter of the power.

Revocation takes effect as soon as the other party recieves notice.

Question 47

What amout of time is required to terminate an agency relationship?

Answer 47

When not agreed upon, a reasonable period terminates an agency relationship.

Question 48

What is the result of a principal’s death?

Answer 48

Under common law, the principal’s death termiantes all power of the agent to act regardless of whether the agent or third party has notice of the principal’s death.

Question 49

What is the result of the agent’s death?

Answer 49

The agent’s death automatically terminates the agent’s actual authority. It does not pass to the agent’s estate or heirs.

Question 50

What is durable power of attorney?

Answer 50

A principal may override the loss-of-capacity rule by giving an agent a durrable power of attorney in advance of the incapacity.

An agent’s authority under a durable power of attorney continues despite the principal’s lack of capacity.

A durable power of attorney must be in writing, evidence the agent’s appointment, and express the principal’s intention that the power will not be affected by the principal’s future disability or incapacity or, alternatively, will take effect upon such an event.

Question 51

What is the result of a principal’s loss of capacty?

Answer 51

At common law, it terminates the agent’s actual authority.

Modern trends include a notice requirement.