Agency

Question 1

What are the types of agency authority?

Answer 1

• express authority
• implied authority
• apparent authority
• estoppel authority
• ratification
• necessity

Question 2

What is express authority?

Answer 2

authority conferred by an actual affirmative appointment by the principal

Question 3

What is implied authority?

Answer 3

when the act was “necessary or usual” in carrying out functions which were expressly authorized by the principal

*There is no implied authority without express authority.

Question 4

What is apparent authority?

Answer 4

when the principal has cloaked a person with the appearance of authority by outward manifestations

*agent must lack express authority for apparent authority to apply

Question 5

What is estoppel authority?

Answer 5

when a principal causes or fails to correct a false belief in a third party that the agent has authority to act for the principal and the third party reasonably relies on that belief to his detriment

*typically occurs when an express authority has terminated and the principal has failed to inform a third party

Question 6

What is required for agency liability by ratification?

Answer 6

(1) agent represented to the third party that she was acting for the principal
(2) principal later expressly adopts the contract OR accepts the benefits
(3) principal knows all the material facts concerning the contract and ratifies the entire contract

• when an agent lacked express, implied, or apparent authority

Question 7

When is agency created by necessity?

Answer 7

When there is an emergency, such as a family member contracting for medical assistance or other necessities.

Question 8

A principal is liable to third parties on contracts entered by the agent when:

Answer 8

the agent had express, implied, or apparent authority, or if the principal subsequently ratified the contract.

Question 9

A principal is liable to third parties for torts of the agent when:

Answer 9

the tortious act or omission occurred in the scope of the agency

Question 10

An agent is personally liable for contracts entered into on behalf of the principal when:

Answer 10

the principal was:

• undisclosed
• unidentified
• or lacked capacity

*Rule statement: When an agent fully discloses that she is acting for a principal and identifies the principal, then the agent is not personally liable on the contract.

Question 11

An agent is personally liable for torts committed in the course of the agency when:

Answer 11

Agents are ALWAYS liable for their own torts.

Question 12

A promoter of an unformed business may avoid liability on contracts for the entity when:

Answer 12

if the third party agrees to look to the future entity; the promoter must demonstrate there was intent to effectuate a novation upon formation

Question 13

What are the exceptions to the rule that businesses are not liable for torts committed by independent contractors?

Answer 13

(1) if the independent contract is used to avoid liability from an unreasonable risk of harm to the public
(2) negligent supervision/hiring

*look for abnormally dangerous activities

Question 14

What are the fiduciary duties of an agent to the principal?

Answer 14

• duty of honest dealing, obedience, and loyalty
• duty to make full disclosure
• duty to avoid conflicts of interest
• powers are non-delegable unless with permission

Question 15

What is the gratuitous agent rule?

Answer 15

A gratuitous agent is an unpaid agent. She is not obliged to perform, but if she begins, she may not be negligent.

Question 16

If an agent exceeds the scope of express authority in dealings with third parties, what claim can the third party bring?

Answer 16

breach of warranty of authority

Question 17

What is the shop rights doctrine?

Answer 17

Both agent and principal have a nonexclusive right to use an invention or improvement created in the employer’s workplace.

*does not apply if the agent was hired as an inventor, in which case the principal has the exclusive right to the invention

Question 18

What are the principal’s duties to the agent?

Answer 18

• reimburse expenses
• indemnify for liability flowing from duties performed under the principal’s direction
• make the work place safe
• pay reasonable compensation, unless otherwise agreed

Question 19

When is an employer liable to an employee for injuries in the workplace?

Answer 19

• for “work-related injuries”

- including injuries caused by other employees authorized by management to act

Question 20

What are the types of voluntary termination of an agency relationship?

Answer 20

• agreement
• completion of the job
• time period expires
• breach of contract (potentially)
• revocation of authority
• renunciation by the agent

*revocation and renunciation require reasonable notice to the other party

Question 21

What happens if a principal dies or is incapacitated?

Answer 21

The agency terminates and the estate will not be bound for future liabilities except as to third parties relying on the agency without notice of the death/incapacity.

Question 22

What is agency coupled with an interest?

Answer 22

When an agent has an interest in the property that is the subject of the agency, there is an “agency coupled with an interest.” In this situation, the principal cannot revoke the agency.

Question 23

After termination of an agency relationship, what must the principle do to avoid liability?

Answer 23

The principal must give notice to creditors and customers that the agent no longer has authority in future dealings.

Question 24

What are the two ways that third parties are notified that an agency relationship is terminated?

Answer 24

actual notice, and constructive notice by publication in a local newspaper or trade journal