Agency

Question 1

What is required to form a principal-agency relationship?

Answer 1

• Benefit
• Consent by both principal and agent
• Control
• consideration and writing is NOT required
• writing may be required by statute of frauds

Question 2

Apparent authority

Answer 2

A has apparent authority where a P holds out another as possessing certain authority, causing a third party to reasonably believe that A has such authority and rely on A’s authority

• • A does not need to believe she has authority
• • P must do something that causes third party’s belief (P’s words, conduct, inaction)

**Discuss what transpired between the P and the third party - what did the P do to indicate to the third party that the A had authority?

Types of Apparent authority:

1) Where A has no actual authority and…
- - where P negligently permits an imposter to be in a position to appear to have agency authority
- - Lingering apparent authoirty
a) A’s actual authority terminated, will have apparent authority until 3rd parties get notice
b) A’s actual authority terminated, but 3rd parties rely on a written authority of the A
c) Death of the P

2) When A exceeds actual authority and…
a) Prior act - when P previously allowed A to exceed authority, and knows third party is aware of this, then P is bound by the unauthorized acts

b) Responsibilities of A’s position -
if A’s position customarily comes with certain responsibilities, then P is liable for A’s acts that come within these customary responsibilities

3) Inherent authority
a) Respondeat superior - liable for torts of her employee committed within scope of employment
b) Where A exceeds his actual authority but conduct is similar to acts authorized

Question 3

Duties owed by agent to principal

Answer 3

• Duty of care
• Duty of obedience - Obey all reasonable directions of the P
• Duty of loyalty - To notify P of all matters that come to A’s knowledge affecting subject of the agency

Question 4

Implied authority

Answer 4

Authority the A believes she has based on the actions/communications of the P

Question 5

What is the overriding factor distinguishing an employee from an independent contractor?

Answer 5

Whether the P has the right to control the manner/method by which person performs his tasks
Control = employee/agent

Question 6

When is P liable for A’s torts?

Answer 6

Vicarious liability - P’s liability for agent’s torts
Respondeat superior - Employer’s liability for employee’s torts

P will be liable for A’s torts if:
1) Principal-agent (employer-employee) relationship
Cf. independent contractors
– Or by estoppel - if P creates appearance of an employer-employee relationship to a third party
– Acts of a borrowed employee if P has control

2) Conduct was within the scope of agency/employment - 3 part test:
a) Was the conduct of the kind agent was hired to perform?
- - within job description
b) Did the tort occur “on the job”?
- - Detour: A minor deviation from an employer’s directions is a detour. This falls within the scope of employment.
- - Frolic: A major deviation from an employer’s directions is a frolic. This falls outside of the scope of employment
c) Did A intend to benefit the P?
- - If the A even in part intended to benefit the P by its conduct, that is enough to be inside the scope of agency

Question 7

Detour - within scope of employment?

Answer 7

A minor deviation from an employer’s directions is a detour. This falls within the scope of employment.

Ex. A’s trip with 2 purposes - will be within scope of employment if any substantial purpose of the employer is being served

Question 8

Frolic - within scope of employment?

Answer 8

A major deviation from an employer’s directions is a frolic. This falls outside of the scope of employment

Ex.

• • if employee uses an instrumentality substantially different from that authorized and causes a tort, P will not be liable.
• • employee’s invitation to passengers

Question 9

If P limits actual authority of his A, and A acts beyond the scope of his actual authority, but 3rd party is unaware of this limitation, does A have authority?

Answer 9

There is apparent authority and P is bound

Question 10

For a person with possession of goods to transfer title without authority, she must have:

Answer 10

Either 1) some indicia of ownership, or 2) be a dealer in the goods

Question 11

A P may be bound by an A’s act if he subsequently ratifies the A’s act. This happens if -

Answer 11

• P had capacity
• P had knowledge of material facts
• Acceptance of the entire transaction

Question 12

A has authority - Who is bound to the contract when P’s existence and identity is disclosed to the third party?

Answer 12

=disclosed P (existence & identity are known)
Agent is NOT liable
(only P is liable)

*A could be liable if the parties intended the A to be a party to the contract

Only the P, not the A, may enforce the contract and hold third party liable

Question 13

A has authority - Who is bound to the contract if A discloses the existence of the P to the 3rd party, but not the P’s identity?

Answer 13

=unidentified principal (existence known, identity is withheld)
Agent IS liable
(Both the A and the P are liable)

Either P or A may enforce the contract and hold third party liable

Question 14

A has authority - Who is bound on the contract when neither identity nor existence of P is disclosed?

Answer 14

=undisclosed principal (neither identity nor existence disclosed)
Agent IS liable
(Both the A and the P)

Either P or A may enforce the contract and hold third party liable

Question 15

Is the A required to have contractual capacity?

Answer 15

No -

any person may be an agent, even a minor or person with minimal mental competency

Question 16

Who is liable for actions of the subagent?

Answer 16

The agent is liable to the P for breaches of the subagent

– Subagent is appointed by the agent to perform functions assigned to agent by the P (delegating his own power to subagent)

Question 17

Duties owed to agent by principal -

Answer 17

• Duty of compensation
• Duty to indemnify A for all expenses or losses reasonably incurred in fulfilling authorized duties
• Duty to cooperate

Question 18

Examples of situations where P will be bound without actual authority -

Answer 18

a) A principal who has previously allowed an agent to act beyond her authority will be bound if the principal knows that a third party is aware of this fact.
b) A principal will also be bound where an agent performs customary responsibilities in complying with the principal’s wishes without the actual authority to perform those tasks.
c) Negligently allowing an imposter to act as an agent will bind a principal.

Question 19

When would a principal be liable for an agent’s intentional torts?

Answer 19

Respondeat superior - Employer’s liability for employee’s torts
Vicarious liability - P’s liability for agent’s torts

• Torts that result from friction inherent in the employer’s business - natural incident of carrying out the business
• Or any tort resulting in any benefit for the employer
• Torts as a means to promote employer’s business
• Misrepresentations made by employee if employee had ANY authority to make statements concerning this subject matter

Question 20

If an employer lends the services of her employee to another and the employee commits a tort while performing in his loaned role, who is liable?

Answer 20

Usually the loaning employer if he has retained control over the employee
- but if borrowing employer has right of control over the employee, then she will be liable

Question 21

Do P and A need contractual capacity?

Answer 21

Only the P

Question 22

Actual authority

Answer 22

Actual authority is authority that the agent reasonably believes he possesses based on his dealings with the P.

• can be express by an agreement btwn the parties OR implied by P’s actions
• *Discuss what happened between P and A that indicated to A that he has actual authority

Express authority - 4 corners of agency agreement

Implied authority - agent reasonably believes she has as a result of P’s actions - Main ones:

• Necessity - implied authority to do all tasks which are necessary to accomplish an expressly authorized task
• Custom - implied authority to do all tasks which by custom are performed by persons w. agent’s title or position
• Prior acquiescence by the P - implied authority to do all tasks which the A believes to be authorized from prior acquiescence by the P

Question 23

When is actual authority terminated?

Answer 23

1) Lapse of specified or reasonable time
2) Happening of a specified event
3) Change in circumstances (e.g., insolvency of the P, destruction of subject matter of the authority)
4) A’s breach of fiduciary duty
5) Unilateral termination (may be breach of K)
6) Operation of law (e.g., death of P)

Question 24

Inherent authority

Answer 24

(Type of apparent authority)

Principal will be bound even though A had no actual or apparent authority to perform a specific act if A had inherent authority - 2 situations:

• respondeat superior - employer held liable for torts of employee when committed within scope of employment
• A exceeds actual authority, but conduct is similar to acts authorized

Question 25

Even if A exceeds actual authority, when might P still be bound?

Answer 25

A has apparent authority:

Prior act - when P previously allowed A to exceed authority, and knows third party is aware of this, then P is bound by the unauthorized acts

Responsibilities of A’s position - if A’s position customarily comes with certain responsibilities, then P is liable for A’s acts that come within these customary responsibilities

Question 26

What are the requirements for agency relationship to be created by ratification? How?

Answer 26

• • when an A has no authority at all, but purports to act on behalf of a P (meaning either P’s existence or identity is disclosed), and P subsequently ratifies the act and become bound.
• • Most states follow A must be purporting to act on behalf of a P, so if P is completely undisclosed and unidentified, then there can be no ratification and P is not bound.

Requirements:

i) P must know (or should know) all material facts
ii) P must accept the entire transaction
iii) P must have capacity

How?
- Ratification may be express or implied through the conduct of the P
Ex. acceptance of transaction’s benefits, silence if there is a duty to disaffirm, or suing on the transaction

Question 27

When is an agency relationship created?

Answer 27

An agency relationship is created when the principal manifests an intent that the agent act on his behalf, and both parties consent to the agreement. A P is contractually bound to the acts of the A if the A acted with actual or apparent authority.

Question 28

When will principal be liable for torts of her agent?

Answer 28

1) P can be directly liable for an A’s tort if she gave A actual authority to commit the tort or ratified the tort

2) Through vicarious liability:
- - repondeat superior
- - A had apparent authority

2) P can be directly liable for her own negligence in hiring or supervising the A

Question 29

Vicarious liability for an independent contractor’s torts

Answer 29

In general, a principal is not liable for an independent contractor’s torts.

2 exceptions:

1) Inherently dangerous activities - if IC commits a tort while engaged in an inherently dangerous activity, the P will be vicariously liable
2) Estoppel - if P creates the appearance that the ICs are employees/agents, and a third party relies on this relationship, then the P is estopped from denying liability

Question 30

When is the P liable for contracts entered into by its agent? For A’s torts?

Answer 30

Contracts: Only if the A had authority to enter into the contract

Torts: Vicarious liability / Respondeat superior analysis

Question 31

Express authority will be revoked by:

Answer 31

1) Unilateral act of either P or the A
2) Death or incapacity of the P
- - then P’s estate is NOT liable on the K, and A is personally liable

Exception: Express authority is revocable, unless durable
– If P gives A a durable power of attorney (written expression of authority, with clear survival language), then this is durable