Agency

Question 1

“Agency”

Answer 1

“Legal relationship whereby one person (P) manifests assent that another person (A) shall act on her behalf and under her control, and the agent consents to so act.”

(1) Assent, (2) Benefit, & (3) Control (manner and method of performance)

Question 2

Writing requirement of agency?

Answer 2

No writing requirement UNLESS underlying K has writing requirement (falls under SOF — transactions involving land)

Question 3

Agent’s duties to Principal

Answer 3

(1) Contractual duties +
(2) Reasonable care under circs +
(3) obedience +
(4) loyalty (no self-dealing, no usurping opportunities, no secret-profiting)

Question 4

Principal’s remedies for Agent’s breach of duties

Answer 4

(1) K actions (against compensated agents, not gratuitous agents)
(2) tort actions (against all agents)
(3) actions for secret profits (disgorge profits)
(4) actions for an accounting
(5) withholding compensation for intentional torts/intentional breaches of duty
(6) terminate the agency relationship prior to any contractual termination date (b/c breach of duty = material breach of K)

Question 5

“Subagent”

Answer 5

(1) Appointed by an agent (2) to perform the functions that the agent has consented to perform on the principal’s behalf

Question 6

Liability of agent to P for subagent

Answer 6

An agent has absolute liability to the P for breaches by a subagent

Question 7

Liability of P for subagent tort

Answer 7

Only if (1) assent (2) benefit & (3) control

• but often, P won’t know about subagent so no assent to subagent

Question 8

Duties of subagent to P & A

Answer 8

(1) if appointed with proper authority –> subagent owes P the same duties as the agent
(2) if subagent is unauthorized –> he owes no duty to the P, but does owe duties to the A

Question 9

Principal’s duties Agent

Answer 9

(1) duties imposed by K +
(2) reasonable compensation* (but not to subagent, even if agent had authority to hire subagent, unless agreed otherwise)
(3) reimbursement of expenses
(4) should cooperate with agent
(5) should not unreasonably interfere with agent’s performance

Question 10

Agent’s remedies for P’s breach of duties

Answer 10

(1) Usual contractual remedies BUT agent has duty to mitigate damages
(2) right to possessory lien for any money due from P, including compensation for services

Question 11

P’s liability to 3rd parties for K’s entered into by A: General Rule

Answer 11

P will be liable for K’s A was “authorized” to enter into.

Actual Express Authority, Actual Implied Authority, Apparent Authority, Ratification

Question 12

Actual Authority (Express or Implied) vs. Apparent Authority

Answer 12

Actual Authority - authority that the A reasonably believes the A possesses based on the P’s dealings with the A (btwn P & A)

Apparent Authority - authority that a 3rd party reasonably believes the A possesses based on the P’s dealings with the 3rd party (btwn P & 3rd party) (AA = not real authority!)

Question 13

Actual Express Authority

Answer 13

Authority which is actually contained in the 4 corners of the agency agreement; P used words to express authority to A

• effective even if granted by mistake or misrepresentation
• narrowly tailored to actual words used

Question 14

Actual Implied Authority

Answer 14

Authority which the agent reasonably believes she has as a result of P’s conduct OR the circumstances

• incidental to express authority (necessary to accomplish authorized task)
• arising out of custom known to agent by title/posititon
• resulting from prior acquiescence by the P (reasonably leads A to believe he has the authority to do the same in the future)
• to pay for and accept delivery of goods where there is authority to purchase
• to give general warranties as to fitness and quality and grant customary customs in land sales; collect payment; and deliver, where there is authority to sell

Question 15

Termination of actual authority

Answer 15

Several circumstances, including:

(1) lapse of reasonable time
(2) agent’s breach of fiduciary duty
(3) either party’s unilateral termination (though may constitute breach of K)
(4) operation of law (death OR loss of capacity EXCEPT where there is durable power of attny = no termination of agency)

Question 16

Apparent Authority

Answer 16

(1) P “cloaked” A with the appearance of authority (by “holding out” A as having authority); &
(2) 3rd party reasonably relied on that appearance of authority

Question 17

Common situations of apparent authority

Answer 17

(1) Agent has no authority — (A) imposters; (B) lingering apparent authority
(2) Agent exceeds actual authority — prior acquiescence (where P previously permitted A to exceed actual authority AND knows that 3rd party is aware of this, P will be bound by the unauthorized act)

Question 18

Ratification

Answer 18

Authority can be granted after K entered into if: (1) P must know all material facts re the K, (2) accept the benefit, and (3) have capacity.

In IN - must ratify the entire K as is (cannot modify the terms of the K)

Question 19

Liability of parties for K:

3rd party vs. P

Answer 19

P is liable on K’s A was “authorized” to enter into

Question 20

Liability of parties for K:

3rd party vs. A

Answer 20

Depends if P was (1) disclosed OR (2) undisclosed or partially disclosed

If P was disclosed (existence & identity known to 3rd party) –> A is generally not liable (unless parties to the K intended A to be liable)

If P was partially disclosed (existence known by 3rd party, identity unknown/witheld) OR undisclosed (neither identity nor existence disclosed to 3rd party) –> results in liability for both P and the A

Question 21

Liability of parties for K:

P/A vs. 3rd party

Answer 21

When P disclosed –> only P, not A, can enforce the K
When P undisclosed/partially disclosed –> either P or A may enforce (note if A enforced, P entitled to all the rights and benefits thereunder)

Question 22

Liability of P for torts committed by A

Answer 22

Respondeat Superior: P (ER) may be vicariously liable for torts of A (EE) if:

(1) ER/EE rltshp exists (EE vs. IC); &
(2) tort was committed within the scope of employment

Question 23

General rule re liability of P’s for torts by independent contractors; exceptions?

Answer 23

Generally, P’s are not liable for torts committed by their IC’s, b/c no right to control the manner/method of performance of IC

Exceptions:

(1) inherently dangerous activities are involved;
(2) P knowingly selected an incompetent IC (BUT if P was merely negligent in selecting IC, P is liable only for her own negligence in selection, not for IC’s negligence)

Question 24

EE vs. IC - 8 factors

Answer 24

(1) characterization by the parties
(2) whether biz is distinct
(3) customs of the locality re supervision of work
(4) degree of skill required for the job
(5) whose tools/facilities used
(6) basis of compensation (if on time, EE; if on job, IC)
(7) understanding of the parties
(8) whether person was hired to further P’s biz

Question 25

Liability of P for acts of borrowed A’s

Answer 25

Depends on whether P has the right to control the EE’s actions (manner/method of performance)
(if loaning ER retains the right of control –> no liability for P/borrowing ER)

Question 26

Within scope of employment - tests

Answer 26

3 multi-factor balancing; ask:

(1) Did tort occur “on the job” or somewhere else? (Frolic vs. Detour) (Frolic - major deviation requiring substantial departure from employment –> outside scope) (Detour - minor deviation –> inside scope)
(2) was conduct “of kind” S end hired to perform? (if in job description, likely within scope of employment)
(3) Did the A intend to benefit the P, even only in part?

Question 27

Within scope of employment:

intentional torts - general rule; exception

Answer 27

Generally, intentional torts are outside the scope of employment

Exceptions:

(1) conduct was “authorized” by the P
(2) conduct was “natural” from nature of employment (ex - bounce, security guard)
(3) conduct was “motivated”/”actuated” by desire to serve the P