Agency

Question 1

Creation of Relationship

Answer 1

P manifests assent that A acts on P’s behalf or under his control, and A must consent.

P must have contractual capacity (age, competency, etc.)

Question 2

Termination of actual authority

Answer 2

1. after specified or reasonable amount of time
2. by change of circumstances
3. A’s breach of fiduciary duty
4. when A or P says so
5. operation of law (death/incapacity/bk)

If coupled with an interest, 4 and 5 are irrevocable.

Question 3

What if A enters into a contract with third party without any authority but P wants to accept the contract?

Adoption

Answer 3

P can adopt the transaction as if he entered into it

Unlike ratification, adoption is not retroactive so P only liability under K from time he adopts.

A would be fully liable until the adoption and jointly liable with P at time of adoption.

Question 4

*How do you determine whether an employee was acting in the scope of employment?

Answer 4

Usual task: within the scope

Detour: minor deviation, within the scope

Frolic: substantial deviation, NOT within the scope

Question 5

lingering apparent authority

Answer 5

If A actual authority has terminated, P may need to notify third party so apparent authority does not linger.

Question 6

*Determining whether A is employee or independent contractor

Answer 6

If question of whether A is employee or independent contractor, ask: Did employer have the right to control how the employee did the job (even if it was never exercised)?

Servant can be a borrowed employee if employer meets right to control test.

Question 7

*Modes of Creating Agency Relationship

Answer 7

By acts of parties: agreement between parties (actual authority), holding out by the principal (apparent authority), or ratification.

Estoppel: same as apparent authority but it requires third-party reliance on the principal’s communication

Question 8

*Agent’s Duties to Principal (e.g. partner or employee to partnership)

Answer 8

fiduciary duties of loyalty, obedience, and reasonable care under the circumstances

Question 9

Principal’s remedies against Agent for Breach

Answer 9

• contract actions (against compensated agents)
• tort
• actions for secret profits
• constructive trust where A breaches duty of loyalty (money from trust goes to P)
• equitable actions for accounting,
• and withholding of compensation for intentional torts or breach of duty

Question 10

Subagent

Answer 10

person appointed by an agent to perform functions that agent has consented to perform on behalf of the principal

agent has liability to principal for subagent’s breaches

subagent owes same duties to principal as the agent

Question 11

Principal’s Duties

Answer 11

• any duties specified in K
• reasonable compensation
• reimbursement for all expenses
• No duty to compensate subagent (that’s agent’s job)

Question 12

Agent’s remedies

Answer 12

• usual contract, remedies, but has duty to mitigate damages

- possessory lien for any money due from principal

Question 13

Types of Apparent Authority: When Agent Has No Actual Authority

Answer 13

impostors: where principal negligently permits an impostor to be in a position to appear to have agency authority

lingering apparent authority: where actual authority has terminated, he will have apparent authority to act on the principal’s behalf as to all third parties with whom the principal knows he dealt with until third parties receive actual or constructive notice of the termination.

Majority view: death or incompetency does not automatically terminate the agent’s apparent authority (still need notice)

Question 14

Situations Where Agent Exceeds Actual Authority Yet Principal Is Still Bound

Answer 14

Prior Act: where principal previously allowed agent to exceed his authority and knows that third party is aware of this

Position: where agent is in a position that customarily carries with it certain responsibilities, the principle is liable for the agent’s acts that come within those responsibilities.

Question 15

*Inherent Authority

Answer 15

occurs when no actual or apparent authority to perform the particular act exists (but principal gave some authority to agent), but court wants to protect innocent third party

eg.

respondeat superior: principal liable for torts of employee committed within scope of employment

Conduct similar to that authorized: if agent exceeds actual authority (e.g. violates orders), but the conduct is so similar

Question 16

Effect of Ratification

Answer 16

occurs when “agent” purports to act on behalf of a “principal” without any authority at all and principal subsequently validates the act (accepting the benefit of it, or suing third party on it, etc.) and becomes bound

gives the transaction retroactive effect unless the principal lacked contractual capacity at the time agent

Question 17

Prerequisites of Ratification

Answer 17

principal must know (or have reason to know) all material facts, accept the entire transaction, and have capacity.

Question 18

Methods of Ratifying

Answer 18

Express or implied through conduct of “principal”

e.g.
acceptance of transaction’s benefits
silence if there is a duty to disaffirm
suing on the transaction

Question 19

What May Be Ratified and By Whom

Answer 19

“principal” may ratify anything unless:

(a) performance was illegal at the time of ratification
(b) third party has withdrawn

Question 20

Liability of Third Party vs. Principal

Answer 20

Principal will be liable to third party on K entered into by her agent if the agent had valid authority to act.

Question 21

Liability of Third Party vs. Agent

Answer 21

Disclosed Principal (existence and identity of principal known to third party): principal is always liable and agent is not, unless parties intended agent to be liable

Unidentified Principal (existence of principal known by 3P but not identity) and Undisclosed Principal (neither existence nor identity of principal known by 3P): liability for both principal and agent

Question 22

Third-Party Liability to Principal and Agent

Answer 22

Disclosed Principal: ONLY the principal, not the agent, may enforce the contract and hold third party liable

Unidentified and Undisclosed Principal: EITHER the principal or agent may enforce the contract and hold third party liable

Question 23

*When is principle liable for torts of her agent?

Answer 23

Two theories:

• respondeat superior
• apparent authority

vicarious liability: j+s liability will be imputed to principal

Question 24

*When is principal directly liable for her own torts?

Answer 24

• negligence in hiring, retaining, or supervising agent
• if she gave agent actual authority to commit the tort or ratified the tort, or in circumstances involving independent contractors

Question 25

*Respondeat Superior

Answer 25

employer responsible for torts committed by employee (not independent contractors) within scope of employment

Question 26

*Respondeat Superior:

Employee vs Independent Contractor

Answer 26

Determinative distinction: with an independent contractor, the principal has no right to control the manner and method in which the job is performed, while with the employee, such control is exercised.

Factors: characterization by parties, period of employment, basis of compensation (time vs. salary), degree of skill, whose facilities/tools were used

Question 27

*Respondeat Superior:

Employer-Employee by Estoppel

Answer 27

where principal creates appearance of employee-employer relationship upon which a 3P relies, the principal will be estopped from denying the relationship and will be liable under the doctrine of respondeat superior.

Question 28

Respondeat Superior:

Liability for Acts of Borrowed Employees

Answer 28

normally the original employer will be liable for tortious acts of loaned employee, but look to whether the original or principal officer has the PRIMARY right to control the employee’s action.

Question 29

Respondeat Superior:

Liability for Acts of Independent Contractors

Answer 29

principal incurs liability for acts of independent contractors only if:

(a) inherently dangerous activities are involved;
(b) duty was non-delegable; or
(c) principal knowingly selected an incompetent independent contractor

Question 30

*Scope of Employment

Answer 30

employer only liable for tort’s committed within the scope of employment of agent

employee’s conduct does not need to be authorized, just needs to be similar or incidental to that which was authorized

Question 31

*Scope of Employment:

Frolic and Detour

Answer 31

Detour: minor deviation, within the scope of employment

Frolic: substantial deviation, NOT within the scope of employment

Question 32

Scope of Employment:

Intentional Torts

Answer 32

usually not within the scope of employment unless:

(i) a natural incident of the employee’s duties;
(ii) where the employee is promoting the employer’s business; or
(iii) where the nature of the work gives rise to hostilities

Question 33

Ratification of Employee’s torts

Answer 33

employer may ratify torts of employee if normal requisites of ratification are met

• pay attention to the requirement that the employer must have had knowledge of all material facts.

Question 34

Tort Liability for Apparent Authority

Answer 34

if respondeat superior does not apply, the principal may still be vicariously liable in certain circumstances if the agent acted with apparent authority

Requirements: principal is vicariously liable where an agent appears to deal or communicate on behalf of the principal and the agent’s apparent authority enables the agent to:

(a) commit a tort; or
(b) conceal its commission.

• must be a close link between agent’s tortious conduct and agent’s apparent authority.

Question 35

*Usurpation

Answer 35

breach of the duty of loyalty when agent (employee or partner) takes advantage of a business opportunity for him/herself