Agency Flashcards
elements of an agency relationship
o governing rule: an agency relationship requires:
(1) the manifestation of consent by one person (P) that another (A) act:
> > > on P’s behalf (i.e. agent must be acting PRIMARILY for the benefit of the principal), and
> > > subject to P’s control (degree of control need not be significant - a simple specification of the task and NOT specifying the WAY it should be done is sufficient), AND
i.e. you could be an employee or IC and still be considered an agent
(2) consent by A to so act
**consent can be express or implied
governing rule for P liability to 3p in contract
o governing rule: if actual, apparent, or ratified authority exists, P is liable to 3p in contract, and A is NOT
**remember: If P is liable to 3p, 3p can be liable to P – it goes both ways!
liability of P for A’s contracts: actual authority
(1) ACTUAL authority: that authority A reasonably believes she possesses based P’s dealings with her
> > > i.e. REQUIRES some manifestation by P
> > > so, here we are looking at how P’s manifestations affect the reasonable AGENT
actual express authority (P-A): oral/written communication
actual implied authority (P-A): authority conferred via P’s actions or acquiescence, custom, or those acts incidental to the grant of authority
»> i.e. if A is given authority to “manage the building,” they can impliedly hire a janitor
3 governing rules for undisclosed principals and contract liability of agents
governing rules:
• (1) if 3p had reason to know that A was acting on P’s behalf, (i.e. the P-A relationship was DISCLOSED), A will NOT be held liable;
• (2) if 3p DID NOT KNOW that A was acting as an agent (i.e. the P-A relationship was UNDISCLOSED), P and A can BOTH be held liable;
»> A must have had authority in this case
• (3) if 3p knew that A was acting as an agent, but didn’t know who for (so the relationship was PARTIALLY DISCLOSED), P and A can BOTH be held liable;
»> A must have had authority in this case
**remember, whomever is liable, enforceability goes both ways! so if both P and A are liable, both P and A can enforce the contract against 3p
liability of P for A’s contracts: ratification
ratification: P’s express/implied affirmance of a prior act which did not bind him, but which was done (or professedly done) on his behalf by A
»> effectively serves as a substitute for “before the transaction authority” - think of it as “after the fact actual authority”
for ratification to occur, P must:
> > > accept the ENTIRE transaction,
> > > have knowledge/reason to know of ALL material facts (simply receiving a benefit does not necessarily satisfy this element), AND
> > > have capacity
4 examples of ways P can ratify a A-T contract
transactions can be ratified by:
- (1) express affirmation by P
- (2) implied affirmation through acceptance of the benefits of the transaction at a time when it was possible to decline them
- (3) implied affirmation through silence/inaction, or
- (4) implied affirmation through bringing a lawsuit to enforce the contract
**remember, you still need all the ratification elements!
distinguish the 2 defining relationships in agency tort liability & the resulting liability of the employer
(1) ER-EE agency relationship:
• EE has agreed to work on behalf of ER
• the MANNER in which the job is performed is subject to ER’s control
»> ex) here is the task i want you to do, AND here is how i want you to do it
• **implicates respondeat superior (VICARIOUS liability) - EE and ER will be jointly and severally liable for the tort if committed within the scope of employment
»> always for negligence
»> intentional torts too if used to further the employer’s objectives (like a bouncer)
(2) EE-IC agency relationship
• IC has agreed to work on behalf of ER
• **IR is NOT SUBJECT to ER control (ER might control RESULT, but not MANNER to achieve result)
»> ex) here is the task i want you to do, but HOW you accomplish that task is up to you
• ER will NOT be subject to tort liability UNLESS activity was inherently dangerous, this was a nondelegable duty, or the principal knowingly selected a negligent contractor (results in DIRECT liability)
»> BUT because of the actual authority still given, ER can still be liable in BOC
what test is used to determine relationship of parties in a tort liability inquiry? what are some of the factors?
o test: courts will use the CONTROL TEST to determine relationship and liability regardless of what your agreed-upon relationship is
we are talking control over the MANNER AND METHODS used to achieve the result
the agency relationship CANNOT simply be disclaimed
factors:
• **extent of control (whether expressly in contract or by action of sending managers/inspectors to oversee)
• **direction by employer (ER tells person what to do)
• skill required
• distinct occupation
• who supplied the instrumentalities/tools/place of work
• length of time
• method of payment
• whether this is part of employer’s regular business
• belief of parties
• whether P is or is not in business
how long can fiduciary duties in the agency relationship potentially last?
o **these obligations arise upon formation of the agency relationship and can continue after the EE-ER relationship has termed (think trade secrets and noncompetes)
fiduciary duties - what it means; 2 main ones owed by agent to principal
bonus points - what is the third duty owed to the principal
FIDUCIARY DUTY: highest duty of care under the law - agent must be acting PRIMARILY for the benefit of the principal. includes:
o duty of CARE: the care, competence, and diligence normally exercised by agents in similar circumstances (similar to negligence duty standard)
o duty of LOYALTY: take no advantage from acts relating to the interest of P without P’s knowledge and consent
> > > this duty is the more important one and you generally just can’t do things that give the sense of unfairness
> > > includes duty not to act as, or on account of, an adverse party; duty not to compete; duty to deal fairly; duty to fully disclose to P info about matters affecting company business, those sorts of things
BONUS: agent is also on the hook for express contractual duties!
4 common red flag breach of fiduciary duty situations
o Common Red Flag Situations
A received payment from 3p in connection w transaction involving P
A transacts w P as an adverse pty
A uses position to make a personal profit in transaction unrelated to P
A using P’s ppty for A’s own purpose or that of a 3p
better to sue for BOFD or BOC?
o **note: probably a better idea to sue under a breach here rather than trying to prove BOC – you’ll get better damages (punitive), and the burden will be on the other party
requirement of capacity to contract - who needs it
only the PRINCIPAL needs capacity (not the agent)
is there a writing requirement to make an agency relationship?
only if required by statute of frauds (MYLEGS)
remedies for BOFD
technically an equitable suit, so you can get:
damages suffered by the breach, as well as disgorgement of any profits made by the agent
