Agency Creation Flashcards
For a valid agency relationship to exist check for:
- Capacity - Principal must have full capacity. Agent must have minimal mental capacity.
- Consent of both parties.
- Writing if required by Statute of Frauds (equal dignities rule).
Capacity required of Principal to create agency relationship
Principal must have contractual capacity. Minors and most unincorporated organizations cannot be principals. In many jurisdictions partnerships and other organized business entities can be principals.
Capacity required of Agent
Agent only needs to have minimal capacity (but needs some) Minors can be agents.
Disqualification of Agents
An agent may be disqualified for representing both parties or failing to have a required license.
Formalities of Agency
- Consent
- Consideration not required.
- Writing if required by Statutes of Fraud (ie. land transactions).
Modes of Creating Agency Relationship
- Acts of the parties - agreement or ratification
- Operation of law: Estoppel (like apparent authority) & Statue (ie. statue appointing secy of state as agent for service of process).
Agent’s Duties
- contractual duties
2. fiduciary duties of loyalty, obedience to reasonable directions and reasonable care under the circumstances
Principal’s Remedies
- contract action (compensated agents)
- tort actions
- actions for secret profits
- equitable action for accounting
- withholding of compensation for intentional torts or intentional breaches of fiduciary duty.
The principal may recover the actual profits or properties held by the agent whether or not the agent’s profit has caused principal any loss.
Liability of Agent for Subagents
An agent has absolute liability to principal for breaches by a subagent.
Subagent’s Duties -
A properly appointed subagent owes the principal the same duties as the agent.
An unauthorized subagent owes duties to the agent, but not to the principal.
Agent’s Remedies - compensated agents
- Usual contract remedies (duty to mitigate)
2. Right to a possessory lien for any money due from the principal (including payment for services).
Principal’s duties
- Contract duties
- Reasonable Compensation
- Reimbursement for expenses
and generally - Cooperate with the agent
- No unreasonably interfere with the agent’s performance.
What compensation is the agent entitled to if the agency agreement is silent on compensation?
Reasonable compensation.
What is the principal’s duty to compensate a subagent?
Principal generally owned no duty to compensate a subagent even if the agent had authority to hire the subagent.
Agent’s Remedies v. Principal
- Contract remedies (with duty to mitigate)
2. Right to possessory lien for any money due from the principal including compensation owed for services.
Nonexclusive Real Estate Brokers’ Contracts
Entitle the agent to compensation upon his production of a ready, willing and able buyer, even though the sale is not consummated.
Exclusive Real Estate Brokers’ Contracts
Enable the broker to get his commission if anyone produces a ready, willing and able buyer.
Actual Authority
Authority the agent reasonably believes she possess based not eh principal’s dealings with her. Can be express or implied.
Express Authority
Authority actually contained within the four corners of the agency agreement. It is effective even if it was granted mistakenly or beaus of misrepresentation.
Implied Authority
Authority which the agent reasonably believes she has as a result of the principal’s actions.
Types of Implied Authority
- incidental to express authority
- Arising out of custom known to the agent.
- Resulting from prior acquiescence by the principal
- To take emergency measures
- To delegate authority for ministerial acts in certain circumstances
- Pay for and Accept delivery of goods where there is authority to purchase
- to give gen. warranties for fitness and quality (auth to sell)
- Grant customary covenants in land sales (auth to sell)
- collect payment and deliver where there is auth. to sell
10 manage investments with “prudent investor” std
When does an agent have implied authority to delegate?
In cases of ministerial acts where
- circumstances require
- performance is impossible without delegation
- delegation is customary
Termination of Actual Authority
- lapse of a specified or reasonable time
- happening of a specified event
- A change in circumstances
- agent’s breach of fiduciary duty
- either party’s unilateral termination (could be breach of contract)
- operation of law
Change of circumstances warranting termination of actual authority
Includes:
- destruction of the subject matter of the authority
- insolvency of the agent or principal
- change in law or business conditions
Operation of law warranting termination of actual authority
includes death or loss of capacity of either party except where a durable power of attorney (written authority) is present and says it will not terminate on the principal’s disability.
Irrevocable Agencies
- Agency coupled with an interest &
- Power given as security
cannot be unilaterally terminated by he principal if - given to protect the agent’s (or 3rd party’s ) rights and 2. is supported by consideration
AND can’t be terminated by operation of law.
