Agency

Question 1

Two Part Test

Principal will be liable for torts committed by its agent if:

1) _______________________ ; and
2) _______________________

Answer 1

Two Part Test

Principal will be liable for torts committed by its agent if:

1) Principal–Agent relationship; and
2) Scope: tort was committed by the agent within the scope of the relationship

Question 2

A Principal–Agent relationship is requires:

1) _______________________
2) _______________________; and
3) _______________________

Answer 2

A Principal–Agent relationship is requires:

1) Assent: informal agreement btwn agent and principal
2) Benefit: agents’ conduct for principal’s benefit
3) Control: principal has right to control and power to supervise agent

Question 3

Is a Principal liable for a Sub-Agent’s tort?

Answer 3

Yes, but only if there are the same elements of:

1) Assent
2) Benefit
3) Control

Between the Principal and the Sub-Agent.

Question 4

Vicarious Liability

The general rule for Independent Contractors and Principals is…..

Answer 4

The general rule is that Principals are not Vicariously Liable for torts committed by independent contractors.

Question 5

There are two exceptions to the bar on vicarious liability for Independent Contractors:

1) _______________________
2) _______________________

Answer 5

There are two exceptions to the bar on vicarious liability for Independent Contractors:

1) Inherently Dangerous Activities
2) Estoppel: if Principal holds out independent contractor with the appearance of liability
(ex: independent contractor wears uniform of Principal’s company.)

Question 6

The question ‘Frolic or Detour’ is used to examine whether a tort occurred within the scope of agency.

How is the test applied to determine vicarious liability o the Principal?

Answer 6

Frolic: new and independent journey. Outside the scope of agency. No vicarious liability for principal.

Detour: mere departure from assigned task. Within scope of agency. Vicarious Liability exists for principal.

(Ex: agent makes personal stop in co. car on her way to work. this stop is a detour and Principal would liable for agent’s torts.)

Question 7

What is the vicarious liability for Principals concerning Intentional Torts by their agents?

Answer 7

Intentional Torts are generally considered outside the scope of Principal-Agent relationship, and therefore Principals are not vicariously liable for their agents’ intentional torts.

Question 8

Principals are not generally subject to vicarious liability for the intentional torts of their agents.

What are the exceptions to this rule?

1) _______________________
2) _______________________
3) _______________________

Answer 8

Exceptions

Intentional torts are within the scope of Agent–Principal relationship if:

1) Authorized by the Principal
2) Natural from nature of employment
3) Motivated by desire to serve the principal

Question 9

When is a Principal liable for the contracts entered into by its agent?

Answer 9

A Principal is liable for contracts entered into by its Agent only if the Principal authorized the Agent to enter the contract.

Question 10

Authority for an agent to enter a contract that is binding on the Principal may be Implied by:

1) _______________________
2) _______________________
3) _______________________

Answer 10

Authority for an agent to enter a contract that is binding on the Principal may be Implied by:

1) Necessity
2) Custom
3) Prior Acquiescence by the Principal

Question 11

An agent may be authorized to enter a contract that is binding on the Principal by “Apparent Authority” if:

1) _______________________
2) _______________________

Answer 11

An agent may be authorized to enter a contract that is binding on the Principal by “Apparent Authority” if:

1) Principal “cloaked” agent with appearance of authority
2) 3rd party reasonably relies on the appearance of authority

Question 12

Ratification

A Principal may grant authority to be bound by its agent AFTER the contract has been entered if:

1) _______________________
2) _______________________
3) _______________________

Answer 12

Ratification

A Principal may grant authority to be bound by its agent AFTER the contract has been entered if:

1) Principal has knowledge of all material facts regarding the contract
2) Principal accepts its benefits
3) Principal cannot alter the terms of the contract

Question 13

What are the three duties an agent owes its principal?

1) _______________________
2) _______________________
3) _______________________

Answer 13

The three duties an agent owes its principal are:

1) Duty of Care
2) Duty to Obey
3) Duty of Loyalty

Question 14

An agent’s Duty of Loyalty includes a duty to never do the following:

1) _______________________
2) _______________________
3) _______________________

Answer 14

An agent’s duty of loyalty includes a duty to never engage in the following:

1) Self-dealing
2) Usurping the principal’s opportunity
3) Making Secret Profits at the principal’s expense without disclosure

Question 15

What is the definition of a general Partnership?

Answer 15

A general Partnership is an association of two or more persons who are carrying on as co-owners of a business for profit.

Question 16

Partners are considered agents of ___________________.

Answer 16

Partners are considered agents of the partnership for apparently carrying on usual partnership business.

Question 17

Which of the following parties must have contractual capacity to enter into an agency relationship?

A
The principal.

B
The agent.

C
The principal and the agent.

D
No party is required to have contractual capacity to enter into an agency relationship.

Answer 17

A
The principal.

Only the principal must have contractual capacity to enter into an agency relationship.

To create an agency relationship, the respective parties must have capacity, but the degree of capacity required for a principal differs from that required for an agent.

Generally, any person (including entities) having capacity to contract may appoint an agent. Any person may be an agent, even if she has no contractual capacity herself.

Question 18

Implied actual authority is the authority:

A
An agent has based on the principal holding the agent out to third parties.

B
An agent believes she has based on her communications and relationship with the principal.

C
A third party believes the agent has based on the principal’s communications with the third party.

D
Granted within the four corners of the agency agreement.

Answer 18

B
An agent believes she has based on her communications and relationship with the principal.

Implied actual authority is the authority that the agent reasonably believes she has as a result of the actions of the principal.

Question 19

What is the primary overriding factor in determining whether a person is an employee?

A
Whether the person was hired to perform a particular job.

B
Whether the person is to be compensated on the basis of time.

C
Whether the principal has the right to control the manner and method of performance.

D
Whether the parties believe they have entered into an employer-employee relationship.

Answer 19

C
Whether the principal has the right to control the manner and method of performance.

The single overriding factor in determining whether a person is an employee is whether the principal (i.e., the employer) has the right to control the manner and method by which the person performs his tasks.

Question 20

Who can be bound to a contract when the principal’s identity is disclosed to the third party and the agent had authority to enter the contract?

A Both the principal and the agent, regardless of whether the parties intended the agent to be a party to the contract.

B Only the principal.

C Only the agent.

D
The principal and, if the parties intended the agent to be a party to the contract, the agent.

Answer 20

D
The principal and, if the parties intended the agent to be a party to the contract, the agent.

A disclosed principal is one whose existence and identity are known to the third party.

A disclosed principal is always liable on a contract entered into by an authorized agent. The agent generally is not bound unless the parties intended that the agent would be a party.

Question 21

A principal gives his agent authority to enter a contract with a third party. The agent discloses to the third party that a principal exists, but does not disclose the principal’s identity. Who can be bound to the contract?

A
Both the principal and the agent.

B
Only the principal.

C
Only the agent.

D
Neither the principal nor the agent, because the identity of the principal has not been disclosed.

Answer 21

A
Both the principal and the agent.

Where the third party knows of the principal’s existence but does not know his identity, both the authorized agent and the principal are liable on the contract.

Question 22

An agency relationship may NOT be unilaterally terminated by the principal where:

A
Ending the agency relationship would cause a breach of contract.

B
A third party would be adversely affected by the termination.

C
The agent has an interest in the subject matter of the agency.

D
The purpose of the agency has not been completed.

Answer 22

C
The agent has an interest in the subject matter of the agency.

There are two types of agency relationships that may not be unilaterally terminated by the principal (and that generally are not terminated by operation of law): where (i) the agent has an interest in the subject matter of the agency, or (ii) a power is given for security.

Question 23

An agency relationship is created when:

1. ___________
2. ___________

Answer 23

An agency relationship is created when:

1. the principal manifests an intent that the agent act on his behalf
2. Both parties consent to the agreement