Agency

Question 1

When will agent incur personal liability in transaction with third party?

Answer 1

• When principal is not disclosed

- When principal is partially disclosed

Question 2

When is agent presumed to be party to third-party contract?

Answer 2

When agent is not disclosed.

To escape liability, agent must make clear he is acting on principal’s behalf.

Question 3

Explain effect of disclosing principal after contract entered into.

Answer 3

Agent is still liable.

Question 4

Can third party sue both agent and principal?

Answer 4

No. Must choose one.

Question 5

When does apparent authority arise?

Answer 5

When third party reasonably believes, because of an overt action, that agent has authority to act on principal’s behalf.

Question 6

What is effect of apparent authority?

Answer 6

Principal is liable if third party’s belief is reasonably and traceable to manifestation by principal.

Question 7

When is principal liable for agent’s acts that exceed his authority?

Answer 7

When principal negligently or knowingly allows agent to exceed scope of authority.

Question 8

When does agency by estoppel exist?

Answer 8

1. principal intentionally/carelessly caused reasonable belief that agency existed;
2. principal didn’t try to correct mistaken belief once he gets notice; and
3. third party detrimentally changed his position in reliance.

Question 9

When is actual authority created?

Answer 9

1. manifestation of principal;

2. for agent to act for benefit of principal

Question 10

Define express authority.

Answer 10

Agent has authority to take specific action on behalf of principal.

Question 11

Define implied authority.

Answer 11

Exists from actions incidental to agent’s carrying out actions of primary authority.

Question 12

Explain effect of ratification on illegitimate transaction.

Answer 12

Principal can give authority for agent’s action via ratification, but it does NOT legitimate otherwise illegitimate transaction.

Question 13

Ratification requires:

Answer 13

1. act that principal is seeking is otherwise valid when performed;
2. principal existed when act was performed;
3. act was done on principal’s behalf; and
4. ratification done with formalities required of initial authorization.

Question 14

Explain “partial ratification”

Answer 14

Principal cannot partially ratify contract. Partial ratification will ratify the entire contract.

Question 15

Define “borrowed employee”

Answer 15

One who becomes employee of another for purposes of transaction.

An employee will be considered a borrowed employee when new employer has right of control.

Question 16

What are factors to determine independent contractor vs. employee?

Answer 16

• amount of control master exerts over agent;
• how long agent is employed;
• who supplies tools for agent’s work?
• whether agent is paid hourly or by job;
• whether principal/agent intend to create employment relationship

Question 17

List the default obligations of principal to his agent.

Answer 17

• compensate agent for services rendered;
• indemnify him for liability arising out of non-negligent performance;
• reimburse agent for reasonable expenses incurred;
• cooperate with agent in performance of duties;
• exercise due care toward agent.

Question 18

What defenses can principal assert against agent’s conduct?

Answer 18

• agent disobedience

- contributory negligence

Question 19

Define “business opportunity”

Answer 19

something so closely related to business that it is “incidental to business.”

An agent may not usurp business opportunities.

Question 20

Describe duty of confidentiality in agency relationship.

Answer 20

Agent may not use information obtained from the principal to the detriment of the principal.

Question 21

List the 4 consequences of entering into agency:

Answer 21

1. duties arise between principal and agent;
2. agent can bind principal;
3. principal can be liable for acts of agent; and
4. knowledge of agent imputed to principal.

Question 22

What is burden of proof to show agency relationship?

Answer 22

Party claiming its existence bears burden.

Must prove by preponderance of the evidence.

Question 23

Does employee act within SOE while driving to and from work?

Answer 23

Maybe, if employer provided him a vehicle or exerted control over use of that vehicle.

Question 24

When is principal liable for tort of independent contractor?

Answer 24

1. inherently dangerous activity;
2. non-delegable duty;
3. negligent selection of contractor.

Question 25

Can minor/incompetent person act as agent?

Answer 25

Yes.

Question 26

When is termination of agency effective?

Answer 26

If principal notifies agent. UNLESS:

1. agency naturally expires on completion of action; or
2. agency set to expire at particular time.