Agency

Question 1

Agency Relationship

Answer 1

One party acts on behalf of another party and legally binds that other party
- only an entity or individual can have (contractual) capacity

Question 2

What are the different Agency Typet

Answer 2

General
Special
Universal Agent
Subagent- M
Power of Attorney
Independent Contractors
Agency coupled with an interest

Question 3

Formation of Express Agency

Answer 3

1. Writing/Record not required unless statute of frauds
   Statute of Frauds: cannot be completed in one year and contract must be in writing (example: real estate contract)
   *The statute of frauds only requires a writing for contracts for sale of goods of $500 or more, real estate, contracts impossible to perform in one year, a promise to answer the debt of another, and an executor’s promise to be personally liable for the debt of an estate, an interest in real property
   Example: agency to purchase land needs to be in writing
2. Capacity of the Principal
3. Consideration is not required but if there is no consideration then it is known as a gratuitous agency and the agent can quit at any given time
4. Capacity of Agent is not required (so agent can be a minor or incompetent - is the contract still valid? yes as long as the principal is in capacity)

** implied authority goes with express authority based on what is customary to the position and whatever is in the agreement

Question 4

Formation of Apparent Agency Relationship

Answer 4

Apparent Agency - carries the trappings of being an agent; there is no express agreement but there is an appearance of having authority (no agreement)

Example: Agent is not an employee of principal but in the presence of the principal the agent says he is and as such the agent implies he is an employee

Lingering Apparent Agency - carries over after termination due to no notice (notice to customers + general notice)

Agency by Estoppel or Ostensible Authority - apparent authority agency where principal acts as if another agent is his/her agent

Question 5

Formation of Agency by Ratification

Answer 5

• Ratification relationship has no express, implied, or apparent authority
• Agent enters relationship on behalf of the principal without authority and assumed principal
• Principal is NOT bound unless he/she chooses to be
• Must have full information about the terms
• Ratification takes authority back to the time of contracting, as if there was authority
• Ratify by action (oral or record)
• Ratification by saying nothing and allowing performance

Question 6

How many people are in an agent relationship and what is their responsibility?

Answer 6

Two people

Principal: Party who delegates authority to another in order to accomplish a task or consummate a transaction

Agent: One who acts on principal’s behalf to accomplish a task or consummate a transaction for the principal

Question 7

Special Agent

Answer 7

One authorized to conduct a single transaction or series of related transactions on the principal’s behalf

Example: 
#1 Real estate agent to sell only the principal's house 
#2 hiring an executor to sell all the personal property for the estate 
#3 bankruptcy trustee hires a company to liquidate all assets of the company in bankruptcy

Question 8

General Agent

Answer 8

One authorized to conduct all necessary personnel or business transactions for the principal

Example:
#1: Restaurant owner hires a manager to run the restaurant - such an agent can fire/hire employees, purchase supplies, and deal with health inspectors

Question 9

Universal Agent

Answer 9

One authorized to do all acts that can be legally delegated to an agent

Example: 
#1:  A soldier who goes abroad hires his sister as the universal agent to be in charge of handle all his business affairs during his absence

Question 10

Power of Attorney

Answer 10

Formal written creation of an agency relationship that lists the authority granted

• only needs to be signed by the principal (need not be signed by agent) to be valid
• generally construed narrowly
• limits agent to specific transactions

Question 11

Independent Contractor

Answer 11

Someone who acts on behalf of the principal but principal does not control the agents day to day activities and the scope is limited

Example: hire a lawyer to create a living trust for you or hiring a CPA to do audit/tax

Question 12

Subagent

Answer 12

Agent hired by another agent on behalf of the principal

Question 13

Agent Coupled with Interest

Answer 13

Agency in which the agent holds a property right in the subject matter of the agency

• death or incompetency does not terminate the agent relationship since there is a partial relationship with the interest

Example: book agent

Question 14

Examples of Agency Relationships

Answer 14

Hotel Desk Clerks
Managers (Hollywood)
Store Clerks
Sales People
Independent Contractors

Question 15

What are the duties of the principal to the agent?

Answer 15

To comply with the agreement
To reimburse reasonable expenses
* principle is liable for injuries during the agent;s scope of work

Question 16

What are the duties of the agent to the principle?

Answer 16

1. Fiduciary Relationship and supreme loyalty
2. Agent cannot make a profit at the principal’s expense
3. Subagent have fiduciary duty to agent and principal
4. Duty of Obedience - follow instructions unless illegal
5. Reasonable Care - discharge responsibilities and is responsible for any negligence or damage due to carelessness
6. Accounting - provide to principal for all funds
7. Duty of Disclosure- any important info
8. Duty of Loyalty - acts in best interest and does not make a profit on principal’s interest
   - no competition
   - no conflict of interest
   - no appropriation of business opportunities
   - no disclosure of confidential information

Question 17

What are the different terminations?

Answer 17

Termination by Fulfillment - agency relationship is complete
Termination by lapse of time - time ends
Termination by specific event - event is done
Termination by mutual agreement
Termination by unilateral act of 1 party
* principle cannot terminate an agent that is coupled by interest (must be in writing)

Question 18

Termination by act of parties

Answer 18

Principal must notify third parties about termination
Agent has duty to honor termination and not use apparent authority to continue
Lingering apparent authority must end through actual actual notice or constructive notice

Question 19

Termination by Operation of Law

Answer 19

• Death by agent/principal

- Insanity of principal

Question 20

Termination by Operation of Bankruptcy

Answer 20

Bankruptcy of the agent terminates an agency relationship only if the agent’s bankruptcy would impair A’s ability to act as an agent.

Question 21

Termination of Change of Law or Law

Answer 21

immediately ends relationship

Question 22

Termination of loss/destruction subject matter

Answer 22

immediately ends relationship

Question 23

In order to terminate apparent authority, notice is required but to revoke authority, a principal can fire an agent. (T/F)

Answer 23

True

Question 24

Principal’s are not liable to third parties for the misrepresentation of an independent contractor. (T/F)

Answer 24

True

Question 25

Gratuitous agents are obligated to the duty of account for principal’s property.

Answer 25

True

Question 26

Disclosed Principal with Actual Authority (express or implied)

Answer 26

Principal is only liable to third party

Question 27

Disclosed Principal with Apparent Authority

Answer 27

Both Principal and Agent are liable to third party

• third party believed agent work for principal
• acted within scope
• third party relied on appearance

Question 28

Agent with no actual or apparent authority

Answer 28

Agent is liable to third party

Question 29

Partially disclosed principle Actual Authority

Answer 29

Both agent and principal are liable to third party

Ex. Agent wont get buyer if he/she reveals principals identity

Question 30

Undisclosed Principals Actual Authority

Answer 30

Both agent and principal are liable to third party but the agent can identify the principal and the third party can choose to sure the principal or not

Question 31

If principal is undisclosed, then the agent has obligation to perform to third party. (T/F)

Answer 31

True

Question 32

Principal Ratification to Contract

Answer 32

To ratify such a contract, the principal must know all material facts, affirm the entire contract, have capacity to ratify the contract, act within certain time constraints, and follow the same formalities (as far as a writing requirement) that the original contract had to follow

Question 33

Torts - when are agents liable and when are principals liable?

Answer 33

Agents are liable for the torts they commit but are not liable if:

• during the scope of work (depends)
• it was instructed by the principal
• the principal hires the agent for a job that he/she is not qualified for
• principal failed toe supervise properly
• negligent in hiring agent or negligent in retention
• harms by agents that are dangerous

Question 34

Difference between independent contractor and master.servant

Answer 34

if principal can control agents work it is a master servant relationship if not then it is independent contractor

if agent works regular 9-5pm and principal provides tools to agent and is paid hourly then it is a master servant relationship

Question 35

Principal is not accountable for agent’s tort if:

Answer 35

• Minor
• reasonably close to departing
• frolic and detour (doing personal tasks while working)
• goes back to the business after personal tasks are complete

Question 36

When is a principal liable for independent contractor torts

Answer 36

• if they are authorized

- inherently dangerous activities (both are liable)