Agency

Question 1

Define: Agency

Answer 1

Agency concerns the relationship that exists between an agent and principal whereby the agent acts on principal’s behalf and is subject to the principal’s control

Question 2

When is an agency relationship created?

Answer 2

• Consent: parties expressly or implicitly agree to enter an agency relationship
• Control: agent is subject to the principal’s control

Question 3

What are the three methods of creating an agency relationship?

Answer 3

Agreement by parties
Apparent authority
Ratification

Question 4

How can an agency relationship be terminated?

Answer 4

By act or agreement of the parties; or

operation of law

Question 5

When will an agency relationship be terminated due to operation of law?

Answer 5

• P/A dies
• P/A becomes incapacitated
• Agent materially breaches a fiduciary duty

Question 6

What fiduciary duties does an agent owe to a principal?

Answer 6

Duties of loyalty, obedience, and care

Question 7

What is an agent’s duty of loyalty?

Answer 7

to give undivided loyalty to P.

Question 8

When does an agent breach his duty of loyalty?

Answer 8

when he has adverse interests to P and fails to disclose them or acts/is acting on behalf of another P who has adverse interests to P

Question 9

What is an agent’s duty of obedience?

Answer 9

to obey principal’s lawful instruction (interpreted in a reasonable manner under the circumstances)

Question 10

What is an A’s duty of care?

Answer 10

to act reasonably in carrying out his agency in light of local community standards

Question 11

What three duties does a P owe an A?

Answer 11

duties of reasonable compensation, reimbursement, and cooperation

Question 12

When does an agent act with Actual Authority?

Answer 12

when agent reasonably believes that the principal wishes the agent to act (express and implied)

Question 13

When can actual authority terminate?

Answer 13

lapse of time, happening of an agreed-upon event, or change of circumstances

Question 14

When does an agent act with Apparent Authority?

Answer 14

• P holds A out as having authority to act on P’s behalf

- P’s conduct causes a 3P to reasonably rely on A’s appearance of authority

Question 15

Explain the “holding out” requirement of apparent authority

Answer 15

The P must “hold out” A as having authority to act on his behalf in some way more than A merely asserting authority

Question 16

Distinguish Actual and Apparent authority

Answer 16

Actual arises from A’s dealings w P

Apparent arises from the reasonable belief of a 3P

Question 17

What are the requirements for ratification?

Answer 17

• agent purported to act on P’s behalf
• P has knowledge of material facts (k terms)
• P affirmed A’s conduct (express or implied)

Question 18

What is a disclosed principal?

Answer 18

a principal that the third party knows of its existence and identity

Question 19

Explain parties’ liability when there is a disclosed P

Answer 19

P is liable, A is not (to the 3P)
Only P (not A) can enforce the K

Question 20

Explain parties’ liability when there is a undisclosed P

Answer 20

both A and P are liable to 3P

both A and P can enforce the k

Question 21

When are P’s held liable for the torts of their A?

Answer 21

When committed in scope of agency; or

A acted with authority

Question 22

Are P’s liable for the torts of ICs?

Answer 22

generally no

Question 23

When can a P be held liable for the torts of an IC?

Answer 23

inherently dangerous activities; or

P knowingly hires an incompetent IC