Agency

Question 1

What is the law of agency?

Answer 1

The law of agency governs the fiduciary relationship created when one party is authorized to act on behalf of another.

Question 2

Agent

Answer 2

A party acting on behalf or in place of another.

Question 3

Principal

Answer 3

The person for whom or in place of whom the agent acts.

Question 4

Elements necessary to establish an agency relationship

Answer 4

1) Principal’s consent
2) Agent must be acting on behalf of principal
3) Agent must be subject to control of the principal
4) Agent’s consent

Question 5

Requirement for Contractual Liability of Principal (3 Ways)

Answer 5

1) Agency relationship (4 elements met) AND actual authority; OR
2) Apparent authority; OR
3) Agency relationship (4 elements met) AND inherent agency power

Question 6

Inherent agency power

Answer 6

Authority that may be reasonably inferred from the very nature of the particular agency relationship or the position the agent holds.

Example: The agent has been given some actual authority, which they have gone beyond, and fairness requires binding of the principal.

Question 7

Types of Authority

Answer 7

Actual and Apparent

Question 8

Apparent Authority

Answer 8

The power held by an agent or another actor to affect a principal’s legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations.

Question 9

Actual Authority: definition and types

Answer 9

Definition: An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent (through the principal’s words or actions) that the principal wishes the agent to act.

Types: Express or Implied

Question 10

Express Authority

Answer 10

An agent has express authority to act if the principal specifically states, orally or in writing, that the agent may take discrete action or engage in a discrete undertaking on the principal’s behalf.

Question 11

Implied Authority

Answer 11

Authority not expressly granted, but reasonably inferred from the principal’s conduct. Implied authority may arise if a reasonable person in the principal’s position could foresee that, based on the principal’s own conduct, the agent will believes she has authority to act.

This may include incidental authority (authority to do things reasonably necessary to carry out any express authority or industry custom).

Question 12

What is the distinguishing factor between whether an agent has apparent authority or actual authority?

Answer 12

The granting of power. For actual authority, the agent has been granted power. For apparent authority, the agent has not been granted power and is therefore creating their own.

Question 13

Is acting within the scope of authority relevant for liability in contract?

Answer 13

No. Only for liability in tort.

Question 14

Is whether or not the agent is an independent contractor relevant for liability in contract?

Answer 14

No. Only for liability in tort.

Question 15

Liability of Principal in Tort: Two Options

Answer 15

Direct Liability or Vicarious Liability

Question 16

Direct Liability

Answer 16

The principal is negligent in selecting, retaining, or managing the agent, and that negligence contributes to the injury.

Question 17

Vicarious Liability: Two Elements

Answer 17

1) Must have an agency relationship that is an Employer/Employee relationship; AND
2) The employee must commit the tort will acting within the scope of their employment

Question 18

How to tell if there is an EE/ER relationship?

Answer 18

An agency relationship morphs to an EE/ER relationship based upon how much control the ER has. The more control they retain, the more likely they are to be an employer.

If the ER is not exhibiting enough control over the EE, the EE is most likely an independent contractor, and the principal can never be liable in tort (however the independent contractor may still be an agent).

Question 19

Scope of Employment

Answer 19

An EE acts within the scope of their employment when performing work assigned by the ER or engaging in a course of conduct subject to the ER’s control.

An EE’s act is not within the scope of their employment when it occurs within an independent course of conduct not intended by the employee to serve any purpose of the employer. (Test: Motive or Foreseeability).

Question 20

Fiduciary Duties of Agents

Answer 20

An agent’s general fiduciary obligation is to act for the principal’s benefit, placing the principal’s interests above her own, in all matters concerning the agency relationship. Two requirements:

1) Duty of loyalty/good faith
2) Duty of care

Question 21

Duty of Loyalty/Good Faith

Answer 21

If the agent’s and the principal’s interests ever conflict, the agent must subordinate their own interests to the principal’s.

• Duty to avoid dealing with the principal as an adverse party
• Duty to avoid competing with the principal
• Duty to avoid self-dealing

Question 22

Duty of Care

Answer 22

Requires that the agent act as diligently, carefully, and competently as a reasonable agent would in similar circumstances.

If the agent has (or falsely claims to have) special skills, competence, or expertise, they must perform at that level.