Agency Flashcards
Agency Formation (ABC)
Requires:
1) Assent - An informed agreement between the principal, who has capacity, and the agent
2) Benefit - Agent conduct for the principal’s benefit
3) Control - The principal has the right to control the agent
Liability of Principal
A principal is liable for the acts of his agent if the agent acts with (1) actual authority, (2) apparent authority, or (3) ratification.
Actual Authority
Actual authority is the authority an agent reasonably thinks she possesses based on the principal’s dealings with her. (If the principal’s conduct would lead a reasonable person in the agent’s position to believe that the agent has authority to act on the principal’s behalf)
Actual authority can be express or implied. Express actual authority is authority conveyed by the principal in oral or written words. Implied actual authority is the authority the agent reasonably believes she has as a result of the principal’s actions.
Apparent Authority
Apparent authority exists when the principal holds out another as possessing authority and a third party is reasonably led to believe that authority exists. Apparent authority can linger after actual authority has terminated. Apparent authority cannot be created by mere representations of an agent.
Ratification
Even if the agent had no authority to act on behalf of the principal, the principal will still be liable if he ratified the act. Ratification can be express or implied. Ratification requires (1) the principal’s knowledge of all material facts, 2) principal accepts entire transaction, (3) ratification is not used to alter the rights of intervening parties, / the circumstances haven’t changed since the creation of the contract.
Who is liable
General rule: the principal is liable if the agent acted with actual, apparent authority or ratification.
Exception: If the principal is undisclosed or partially undisclosed, the agent is also liable on the contract.
An undisclosed principal is when the third party is unaware that the agent is acting on behalf of a principal. A partially undisclosed principal is when the third party knows the agent is acting on behalf of a principal but does not know the identity of the principal.
Agent’s Duties to Principal
Fiduciary Duties
1) Duty of Care: duty to carry out agency with reasonable care, duty to notify principal of all matters related to the agency relationship
2) Duty of Loyalty: 1) account for profits, 2) act solely for the benefit of principal, 3) refrain from dealing with adverse party, 4) refrain from competing, 5) using principal’s property for personal purposes
3) Duty of Obedience: the agent must obey all reasonable directions of principal (if breached = agent can be liable to the principal for losses)
Breach of duty: Principal can terminate the relationship and recover damages
Principal’s Duties to Agent
Not fiduciary
1) Duty to Indemnify or Reimburse for expenses
2) Duty to Compensate
3) Duty to Cooperate
4) Duties imposed by the contract
Respondeat Superior or Vicarious Liability
A master is liable for torts committed by a servant within the scope of the servant’s employment. The master and the servant are both jointly and severally liable.
A principal is generally not liable for torts committed by an independent contractor in connection with his work.
Servant or Independent Contractor
In general, if a person is subject to the control of another as to the means used to achieve a particular result, he is a servant.
If a person is subject to the control of another as to his result only, but not over how to achieve those results, he is an independent contractor.
Servant or Independent Contractor Factors
Whether the principal has the right to control the manner and method by which the person performs his tasks
1) Skill required
2) Tools and facilities
3) Period of employment
4) Basis of compensation
5) Business purpose
6) Distinct business
Scope of Employment - Torts
A master is only liable for the torts of a servant if the servant was acting within the scope of his employment.
Three factors:
1) was the conduct of the kind that the agent was hired to perform?
2) did the tort occur on the job?
- minor detour: usually within scope
- substantial deviation/frolic: usually outside scope
3) was the conduct actuated at least in part to benefit the principal?
- Principal generally not liable for intentional torts unless 1) natural from the nature of the job, 2) motivated to serve the employer, or 3) specifically authorized or ratified by the employer
- Principal may be liable for servant’s torts if they negligently hired or failed to train
Secret Limiting Instruction
When a principal secretly limits the actual authority of his agent to act, and the agent, when dealing with a third party, acts beyond the scope of the limitation, the principal will be bound by the agreement made between the third party and the agent.
Subagent
A subagent is a person appointed by the agent to perform functions assigned to the agent by the principal.
A subagent owes the principal the same duties that an agent would.
An agent will be held liable for breaches of the subagent.
Unauthorized subagent - subagent appointed without authority: subagent owes no duties to principal. Agent alone is responsible for performance.
Express Actual Authority
Express actual authority is authority conveyed by the principal in oral or written words.
