Agency

Question 1

What is agency?

Answer 1

When one party acts on behalf of another for contractual obligations (Principal&raquo_space;agent = actual authority,
Agent»TP= apparent authority)

Question 2

Who needs capacity in agency relationship?

Answer 2

Principal (Agent must have authority from the principal to act on behalf; agent only needs sufficient mental and physical ability)

Question 3

Types of Principals

Answer 3

Fully disclosed- TP knows identity of principal (princ liable, agent not)
Partially disclosed- TP knows agent acting for another but not identity (princ and agent jointly/severally liable)
Undisclosed- TP doesn’t know about agency or identity of princ (TP can hold princ or agent liable; agent has same actual authority as if agency were disclosed but has no apparent authority, so princ will be bound by agent’s actual authority; TP not entitled to disclosure of princ)

Question 4

Rules for discovery of principal by TP

Answer 4

After discovery of princ identity, TP may hold liable UNLESS:

• Contract is a negotiable/sealed instrument
• Agent has already performed
• TP already held agent liable after discovering princ identity
• Contract states no undisclosed principal shall be liable

Question 5

Agency coupled with an interest

Answer 5

An irrevocable agency in which the principal gives the agent a property (or security) interest in the thing subject to the power of the agency
* Cannot be terminated unilaterally by the principal
Ex: if A lends P $, A will have 1/2 interest in prop and proceeds will be used to repay A (irrevocable agency power)

Question 6

How to terminate an agency

Answer 6

By operation of law> applies to both actual and apparent authority
Other terminations> only actual, and have to give notice to terminate apparent authority (actual and constructive notice)

Question 7

What is a constructive trust

Answer 7

The breach of a duty by an agent often results in some form of damage to the principal and any gain the agent has received is held as a constructive trust for the benefit of the principal, whether the agent knows it or not. A constructive trust is an equitable device that calls for the agent to be the trustee of the “ill-gotten” goods or income for the benefit of the principal.

Question 8

Circumstances in which an agency relationship would be terminated as a matter of law

Answer 8

Death of the principal (or death of the agent)
Principal’s incapacity
Agent’s failure to acquire a necessary business license (which would render the subject matter of the agency illegal)