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Bar Exam > Agency > Flashcards

Agency Flashcards

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1
Q

Agency: Definition

A

Fiduciary relationship which results from the manifestation of CONSENT by one person to another that the other shall act ON HIS BEHALF and subject to his CONTROL, and consent by the other to so act.

Person acting for another: agent
Person for whom the agent is acting: principal

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2
Q

Consent

A

Consent of both the principal and the agent is necessary to form an agency relationship.

Can be express (written/oral)
Can be implied (by conduct)

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3
Q

On Behalf Of

A

The agent must be acting PRIMARILY for the benefit of the principal, rather than for the benefit of the agent or some other party

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4
Q

Control

A

Agent must act subject to the principal’s control, but degree of control need not be significant.

Simply the fact that the principal has SPECIFIED THE TASK that the agent should perform, even if the principal has not prescribed the HOW of how the task should be accomplished

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5
Q

Capacity

A

PRINCIPAL must have contractual capacity.

Agent need NOT have capacity (just a mere intermediary)

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6
Q

Equal Dignities Rule

A

Agency agreements must be in writing when the agent is to enter into certain contracts that fall within the Statute of Frauds OR when the agency agreement itself would fall within the Statute of Frauds.

Otherwise: agency law requires no writing

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7
Q

Consideration

A

NOT required for creation of an agency relationship

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8
Q

Actual Authority

A

Authority that the AGENT rxbly thinks she possesses based on the principal’s dealings with her. If the principal’s words/conduct would make a rxble person in the agent’s shoes believe agent has actual authority, there is actual authority.

Must exist when agent enters into a contract.

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9
Q

Express Actual Authority

A

Authority conveyed by principal in words (oral or written)

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10
Q

Implied Actual Authority

A

Authority agent rxbly believes she has as a result of principal’s actions (words, conduct, acquiescence)

Where agent exceeds actual authority but conduct is similar to acts authorized, principal will be held liable

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11
Q

Termination of Actual Authority

A

(1) after a specified time or event, or after a rxble time (if no specified time/event)
(2) By change of circumstances (e.g. subject matter of agency destroyed)
(3) By breach of agent’s fiduciary duty
(4) By unilateral act of either the principal or the agent
(5) By death or incapacity of the principal or agent

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12
Q

Apparent Authority

A

When the principal “holds out” another as possessing authority, and a 3rd party is rxbly led to believe that authority exists. If the principal’s words or conduct would lead a rxble person in the 3rd party’s position to believe that the agent has apparent authority to bind the principal. Protects innocent third parties.

Can exist even where actual authority does not.

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13
Q

Apparent Authority: Power of Position

A

May be established through the agent’s title/position creates rxble belief agent is authorized

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14
Q

Apparent Authority: Unilateral Agent Representations

A

Based on PRINCIPAL’S manifestations to 3rd party (not agent or other actors)

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15
Q

Apparent Authority: Lingering Apparent Authority

A

Can linger after actual authority ends

third parties require actual or constructive notice

where 3rd party relies on a writing, apparent authority is not terminated

death or incompetency of principal DOES NOT automatically terminate agent’s apparent authority

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16
Q

Apparent Authority: Ratification

A

Even if agent has no authority at the time of entering into the contract, principal will still be bound by the agent’s actions if the principal ratifies the contract. This can be express or implied (principal accepts the benefits of the contract).

2nd Restatement: undisclosed principal may not ratify
3rd Restatement: does not require agent purport to be acting on behalf of a principal, so any principal may ratify. But purported agent may not treat contract as its own.

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17
Q

Apparent Authority: Ratification Requirements (3)

A

(1) Principal must have knowledge of all material facts regarding the contract
(2) Principal must accept ENTIRE transaction– cannot merely ratify a portion of of the transaction.
(3) Ratification cannot be used to alter rights of intervening parties.

2nd Restatement: undisclosed principal may not ratify
3rd Restatement: does not require agent purport to be acting on behalf of a principal, so any principal may ratify. But purported agent may not treat contract as its own.

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18
Q

Rules of Liability on the Contract: General Rule

A

If actual authority, apparent authority, or ratification is present, the PRINCIPAL is liable on the contract and the agent is not.

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19
Q

Rules of Liability on the Contract: Exception

A

If the principal is undisclosed (at the time of the agent’s transaction, 3rd party has no notice that the agent is acting for the principal), or partially undisclosed (at time of agent’s transaction, 3d party has notice that agent is acting for a 3rd party but no notice of principal’s identity), agent is also liable on contract (principal is still liable!)

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20
Q

Agent’s Duties to the Principal

A

Fiduciary duties: agent (even an unpaid one) is a fiduciary of its principal and owes corresponding fiduciary duties to its principal.

Duty of care

Duty of loyalty

Duty of Obedience

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21
Q

Agent’s Duty of Care

A

An agent owes a duty to her principal to carry out her agency w/ rxble care (a “sliding scale”) and depending on any special skills the agent may have

While gratuitous and compensated agent may owe the same duty of care, measure of “reasonableness” may vary because compensation is a proper circumstance to consider.

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22
Q

Agent’s Duty of Loyalty

A

Agent owes a duty of undivided loyalty to the principal. Includes the following obligations:

(1) agent must account to the principal for any profits made while carrying out the principal’s instructions
(2) an agent must act solely for the benefit of the principal and not to benefit himself or a 3rd party
(3) agent must refrain from dealing w/ his principal as an adverse party or acting on behalf on an adverse party
(4) agent may not compete w/ principal concerning subject matter of the agency
(5) agent may not use principal’s property (incl. confidential info) for agent’s/3d party’s purposes

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23
Q

Remedies for Breach of the Duty of Loyalty

A

Principal may sue for damages caused by breach and disgorgement of profits made by agent

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24
Q

Duty of Obedience

A

Agent must obey all rxble directions of the principal. While principal may well be liable for agent’s acts in violation of directions (apparent authority), agent will be liable to principal for any loss that the principal suffers.

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25
Q

Principal’s Duty to the Agent

A

Not fiduciary in nature– fiduciary responsibilities run only from agent to principal.

Principal has duties to:

Indemnify

Compensate

26
Q

Principal’s Duty to the Agent: Duty to Indemnify

A

If agent incurs expenses or suffers other losses in carrying out the principal’s instructions, the principal has a duty to indemnify her.

27
Q

Principal’s Duty to the Agent: Duty to Compensate

A

Unless circumstances indicate otherwise, will be inferred that principal agreed to compensate agent for his services

28
Q

Respondeat Superior/Vicarious Liability: Master

A

(i.e. an employer)

A principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.

Master is liable for torts committed by a servant w/in the scope of the servant’s employment. Master and servant are jointly and severally liable

29
Q

Respondeat Superior/Vicarious Liability: Servant

A

(i.e. an employee)

An agent so employed by a master.

30
Q

Respondeat Superior/Vicarious Liability: Independent Contractor

A

A person who contracts w/ another to do something for him who is not controlled by the other nor subject to the other’s right to control w/r/t his physical conduct in the performance of the undertaking.

Principal generally not liable for torts committed by an independent contractor in connection w/ his work.

31
Q

Servant or Independent Contractor?

A

In general, if a person is subject to the control of another as to the MEANS used to achieve a particular end–> SERVANT.

If person subject to control of another as to his RESULT ONLY (but not over how to achieve those results)–> INDEPENDENT CONTRACTOR

32
Q

Servant v. Independent Contractor: Factors to Consider

A

(1) Skill required: more skill, more likely independent contractor
(2) Tools and facilities: if principal supplies, more likely to be an employee
(3) Period of employment: if indefinite, employee
(4) Basis of compensation: if paid overtime, employee
(5) Biz purpose: in furtherance of biz, employee
(6) Distinct biz: person w/ own biz/occupation, independent contractor

33
Q

Scope of Employment

A

Master only liable if servant acting within scope of his employment.

34
Q

Scope of Employment: 3 Factors to Consider

A

(1) Was conduct “of a kind” that agent was hired to perform?
(2) Did tort occur “on the job” (i.e. within space and time limits of employment)?
(3) Was conduct actuated at least in part to benefit the principal?

35
Q

Detour

A

Minor deviation from employer’s directions, usually within the scope of employment

36
Q

Frolic

A

Substantial deviation from employer’s directions usually outside scope of employment

37
Q

Respondeat Superior/Vicarious Liability: Intentional Torts General Rule

A

Employer is NOT liable for the intentional torts of an employee (e.g. battery/assault)

Intentional torts are generally viewed as outside the scope of employment.

38
Q

Respondeat Superior/Vicarious Liability: Intentional Torts Exceptions

A

Intentional torts will be viewed as within the scope of employment if the conduct

(1) is natural from nature of the job
(2) motivated to serve the employer, or
(3) specifically authorized or ratified by employer

39
Q

Borrowed Servant

A

An employer may lend the services of an employee to another. If the employee commits a tort in the loaned role, the key issue is who has the primary right of control over the employee: the loaning principal? or the borrowing principal? That employer is liable.

In most situations, the employee remains under control of the loaning principal

40
Q

Direct Liability

A

Every person is liable for his own torts.

Master is liable for his own negligence for failure to properly train/supervise employees, or fails to check and employee’s criminal record or job history.

41
Q

Implied Authority

A

(1) Incidental to express authority
(2) arising out of custom known to the agent
(3) resulting from prior acquiescence by the principal
(4) To take emergency measures
(5) to delegate authority in cases of ministerial acts, where circumstances require, where performance is impossible without delegation, or where delegation is customary
(6) to pay for and accept delivery of goods where there is authority to purchase
(7) to give general warranties as to fitness and quality and grant customer covenants in land sales, collect payment and deliver where there is authority to sell
(8) to manage investments in accordance with the prudent investor standard

42
Q

Irrevocable Agencies

A

Neither an agency coupled with an interest nor a power given as security may be unilaterally terminated by the principal if the agency was given to protect the agent’s (or third party’s) rights and it is supported by consideration.

Neither will such agencies be terminated by power of law.

43
Q

Death of Agent

A

Terminates the agency, unless agency is irrevocable

44
Q

Apparent Authority: Imposters

A

Where principal negligently permits an imposter to be in a position to appear to have agency authority, the principal will be held liable for the imposter’s actions undertaken with such authority

45
Q

Apparent Authority: Prior Act

A

Where principal previously permitted the agent to exceed his authority and knows that the third party is aware of this, the principal is bound by agent’s unauthorized act

46
Q

When Principal May Not Enforce Contract: Undisclosed Principal

A

Principal may not enforce contract if affirmative fraudulent misrepresentation of principal’s identity or if there is an unforeseen increased burden to third party due to fact that performance is due to principal and not agent

47
Q

Liability for Acts of Subservants

A

Respondeat superior applies to duly authorized subservants.

Authorization to hire subservants may be express or implied.

Implied authorization can arise from:

  • past practices
  • emergency situations
  • reasonable necessity to achieve an authorized result

Employer generally not liable for torts of a subservant engaged without authority

48
Q

Employer-Employee by Estoppel

A

Where a principal creates the appearance of an employer-employee relationship upon which a third party relies, principal will be estopped from denying relationship and will be liable under doctrine of respondeat superior

49
Q

Liability for Acts of Independent Contractors

A

Principal liable for independent contractor where:

(1) inherently dangerous activities are involved
(2) nondelegable duties have been delegated
(3) principal knowingly selected an incompetent independent contractor (if the principal was merely negligent in selection– principal is liable only for her own negligence in selection, not for contractor’s negligence

50
Q

Scope of Employment: Passengers

A

Employee’s invitation to passengers, unless expressly authorized by employer, is generally outside the scope of employment and employer would not be held liable for injuries sustained by such passengers

51
Q

Scope of Employment: Unauthorized Instrumentalities

A

Employer is not liable for torts caused by use of substantially different instrumentalities than those authorized (ie those creating a greater risk of harm)

52
Q

Scope of Employment: Trips with Two Purposes

A

If the employee makes a trip with two purposes, it will be within the scope of employment if any substantial purpose of the employer is being served.

53
Q

Apparent Authority and Vicarious Liability

A

A principal is vicariously liable where agent appears to deal or communicate or behalf of the principal and the agent’s apparent authority enables the agent to

(1) commit a tort or
(2) conceal its commission

For principal to be liable, must be a close link between agent’s tortious conduct and agent’s apparent authority

54
Q

Agency by Estoppel

A

Agency may be created through estoppel. Estoppel is virtually the same as apparent authority in that it requires third-party reliance on principal’s communications

55
Q

Agency by Statute

A

Statutes creating agencies are usually designed to accomplish a limited purpose (e.g. statute appointing secretary of state as out-of-state motorist’s agent for service of process for damages arising from driving in-state)

56
Q

Real Estate Broker’s Contracts: Nonexclusive Contracts

A

Generally entitle the agent to compensation upon his production of a ready, willing, and able buyer, even though the sale is not consummated

57
Q

Real Estate Broker’s Contracts: Exclusive Contracts

A

Enable broker to get his commission if anyone produces a ready, willing, and able buyer

58
Q

Subagents

A

Person appointed by an agent to perform functions that the agent has consent to perform on behalf of the agent’s principal

Agent has absolute liability to principal for breaches by subagent

Owes same duties as agent if authorized

If unauthorized, owes no duties to principal, but owes duties to agent

59
Q

Coagent

A

Another agent of the principal.

Agent may appoint coagent, but does not delegate his own power to that person.

Employees of a single organization are presumed to be co-agents, not subagents

60
Q

Principal’s Remedies

A
  • Contract actions (against compensated agents)
  • Tort actions
  • Actions for secret profits
  • Equitable actions for an accounting
  • Withholding of compensation for intentional torts or intentional breaches of fiduciary duty
  • Actual profits or properties held by the agent whether or not the agent’s profit has caused the principal any loss
  • Termination of the agency prior to any termination date in a contract

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