Agency

Question 1

First question when you are faced with an agency question.

Answer 1

Is it liability in contract or tort?

Question 2

Who must have contractual capacity? (principal, agent?)

Answer 2

The principal must have contractual capacity, but the agent need NOT b/c just an intermediary.

Question 3

Is consideration required for an agency relationship? Is a writing required?

Answer 3

No. No consideration needed. No writing needed unless to satisfy the Statute of Frauds

Question 4

How can actual authority be created?

Answer 4

Expressly or impliedly

Question 5

What is express authority?

Answer 5

When the principal tells agent to do something.

Question 6

What is implied actual authority

Answer 6

When principal’s conduct leads agent to believe agent has authority (agent bought stuff and principal paid for it)

Question 7

How can actual authority terminate?

Answer 7

1. certain period of time or reasonable time
2. by change of circumstances
3. if agent acquires adverse interest
4. when agent says so
5. when principal says so (unless the power is coupled with an interest - then irrevocable)
6. by death/incapacity/bankruptcy

Question 8

Example of coupled with an interest?

Answer 8

Collateral for a loan

Just giving someone a commission is not “coupled with an interest.”

Question 9

Can an agent delegate?

Answer 9

Yes if P consents (express or implied)

Question 10

What if there is no actual authority? Look for ______

Answer 10

apparent authority

Question 11

What is apparent authority?

Answer 11

Actions by principal cause the third party to mistakenly believe the agent has authority

Question 12

Can apparent authority continue even after actual authority is gone?

Answer 12

Yes. Make sure to look at it from third party’s perspective - you must tell 3rd parties directly that the agent no longer has authority

Question 13

What actions result in the principal ratifying?

Answer 13

Accepting the benefits
Suing on the contract
Expressly affirming the contract

Question 14

What must principal do to ratify?

Answer 14

1. have knowledge of all material facts
2. must completely ratify (no half and half)
3. principal must have had capacity to ratify at the time the contract was originally made

Question 15

When won’t principal be allowed to ratify?

Answer 15

Principal can’t ratify if there has been a bona fide purchaser in the meantime.

Example: A offers to sell car to Bob for $100. P, not knowing of the other offer, offers to sell car to Kelly for $50. P later wants to ratify A’s offer b/c it’s more money. NO

Question 16

What is the difference between adoption and ratification

Answer 16

Adoption = NOT retroactive. Liable from that point on
Ratification = retroactive. Liable from date of contract

Question 17

Does adoption of a contract relieve the original contractor?

Answer 17

No - both are liable (think promoter and corporation)

Question 18

What duties does an agent owe to principal?

Answer 18

1. duty of loyalty
2. duty of care
3. duty of obedience

Question 19

What duties does the principal owe the agent?

Answer 19

Duty to compensate, reimburse, and indemnify the agent.

Question 20

What happens if agent violates duty? Possible remedy if agent takes principal’s property for his own?

Answer 20

Could impose a constructive trust in care of the principal

Question 21

When is a third party not liable to the principal?

Answer 21

When there’s an undisclosed principal and an agent has special skills.

Ex: Third party hires Rachel Ray, who the third party doesn’t know is actually an agent for a not good cook. Will third party have to pay third party? NO

Question 22

Liability in tort: respondeat superior 2 step analysis

Answer 22

1. employee? (or independent contractor)

2. tort committed w/in scope of employment?

Question 23

Independent contractor vs employee factors

Answer 23

CONTROL

who supplied the equipment, tools? was the job long term? was it a salary or lump sum? how much skill was required?

Question 24

When will the principal not be liable for a tort?

Answer 24

When employee is on a frolic

Question 25

When will a principal be liable for agent’s intentional torts?

Answer 25

ONLY if:
force is used to further principal’s business
principal ratifies use of force
principal authorizes employee to commit the tort

Question 26

Who is liable when an employee commits a tort w/in scope of employment?

Answer 26

Employee and employer are JOINTLY AND SEVERALLY LIABLE. If employer is sued, can later seek indemnification from employee.

Question 27

What if the lawsuit releases the employee who allegedly committed the tort. Can the employer still be tried on a vicarious liability theory?

Answer 27

Yes. Minority rule

Question 28

What happens if another employer “borrows” an employee and the employee commits a tort?

Answer 28

See which employer had control over employee when the tort was committed

Question 29

When can an employer be DIRECTLY LIABLE?

Answer 29

Negligent hiring
Negligent entrustment
Employer fails to supervise or train employees