Agency

Question 1

Actual Authority

Answer 1

*Actual authority must exist at the time of contract. Can be express or implied

Express: P expressly tells A to act on P’s behalf

Implied: P’s conduct leads A to believe A has authority

*Delegation - Ok if P consents

Question 2

Termination of Actual Authority

Answer 2

• Actual authority must exist when A enters a contract, since actual authority can terminate in a number of ways:
  1. After specified time/event or a reasonable time.
  2. By change of circumstances
  3. If agent acquires adverse interest
  4. When agent says so
  5. When principal says so UNLESS “coupled with an interest” (makes it irrevocable)
  6. By death/incapacity/bankruptcy UNLESS “coupled with an interest”

Question 3

Apparent Authority

Answer 3

P leads T (Third Party) to mistakenly believe A has authority

• THIS IS AN EQUITABLE DOCTRINE FOR T WHO RELIES ON P/A
• Reasonable belief must be created by P, not by A alone
• Apparent authority can linger after actual authority ends
• Much harder to destroy apparent authority since it can exist in the minds of many third parties!

Question 4

Ratification

Answer 4

Even if Agent had no authority, P can ratify by:

1. expressly affirming the contract,
2. accepting the benefit of it, or
3. suing on it .

Question 5

Requirements for effective ratification

Answer 5

1. Knowledge: P must have knowledge of all material facts
2. All or nothing: P must accept entire transaction
3. Capacity: P must have capacity both at the time of ratification and at the time of original contract b/c ratification’s retroactive.

*Since ratification is retroactive, we must protect the intervening rights of a BFP

Question 6

Adoption

Answer 6

Adoption is where the Principal is liable WITH the A. It is forward-looking and not retroactive from the point of adoption.
- Difference between adoption and ratification is that adopting party only liable from time of adoption forward.

Question 7

Principal-Agent Relationship/Liability

Answer 7

1. Agent is a fiduciary (Even if the relationship is gratuitous): Duty of care and obedience
2. Principal: Must compensate, reimburse, and indemnify A
3. Remedies: Wide range of remedies available (e.g., constructive trust)

*Keep in mind the standard of care for professionals in certain fields. Apply the sliding scale.

Question 8

Principal-Third Party Relationship/Liability

Answer 8

(assuming actual authority or a substitute)

1. Principal ALWAYS liable to third party
2. Third party ALMOST ALWAYS liable to P: Only exception is where there’s:
   - an undisclosed P, and
   - A has special skills

Question 9

Third Party-Agent Relationship/Liability

Answer 9

Generally, no liability (A is just a go-between)

Question 10

Liability in Tort

Answer 10

In these situations:
Describe - MASTER AND SERVANT (NOT P-A)
(Keep in mind that M-S are jointly and severally liable)
*Was tort committed by a servant acting within the scope of employment?
*If so, the master and servant are jointly and severally liable to the injured party.
*This is an imposition of vicarious liability
*Employer (generally) is not liable on a tort committed by an independent contractor.
- Did employer have the right to control how S did the job?
- Skill required? Payment in intervals?
- Who supplied tools/workplace?

Question 11

Direct Liability Against Principal (in Master/Servant) .

Answer 11

M is directly liable for its own negligence if M fails to train or supervise employees or check an employee’s criminal record or job history

Question 12

Three Exception to Actual Authority

Answer 12

1. Apparent Authority
2. Ratification
3. Adoption

Question 13

Factors to Determine if Independent Contractor or Employee

Answer 13

1. The way parties characterize the relationship
2. Local customs regarding the supervision of type of work to be performed
3. Which party owns the tools and facilities used to perform the job
4. The length of the employment period, and
5. The basis of compensation