Agency Creation

Question 1

For a valid agency relationship to exist check for:

Answer 1

1. Capacity - Principal must have full capacity. Agent must have minimal mental capacity.
2. Consent of both parties.
3. Writing if required by Statute of Frauds (equal dignities rule).

Question 2

Capacity required of Principal to create agency relationship

Answer 2

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.

Question 3

Capacity required of Agent

Answer 3

Agent only needs to have minimal capacity (but needs some) Minors can be agents.

Question 4

Disqualification of Agents

Answer 4

An agent may be disqualified for representing both parties or failing to have a required license.

Question 5

Formalities of Agency

Answer 5

1. Consent
2. Consideration not required.
3. Writing if required by Statutes of Fraud (ie. land transactions).

Question 6

Modes of Creating Agency Relationship

Answer 6

1. Acts of the parties - agreement or ratification
2. Operation of law: Estoppel (like apparent authority) & Statue (ie. statue appointing secy of state as agent for service of process).

Question 7

Agent’s Duties

Answer 7

1. contractual duties

2. fiduciary duties of loyalty, obedience to reasonable directions and reasonable care under the circumstances

Question 8

Principal’s Remedies

Answer 8

1. contract action (compensated agents)
2. tort actions
3. actions for secret profits
4. equitable action for accounting
5. 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.

Question 9

Liability of Agent for Subagents

Answer 9

An agent has absolute liability to principal for breaches by a subagent.

Question 10

Subagent’s Duties -

Answer 10

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.

Question 11

Agent’s Remedies - compensated agents

Answer 11

1. Usual contract remedies (duty to mitigate)

2. Right to a possessory lien for any money due from the principal (including payment for services).

Question 12

Principal’s duties

Answer 12

1. Contract duties
2. Reasonable Compensation
3. Reimbursement for expenses
   and generally
4. Cooperate with the agent
5. No unreasonably interfere with the agent’s performance.

Question 13

What compensation is the agent entitled to if the agency agreement is silent on compensation?

Answer 13

Reasonable compensation.

Question 14

What is the principal’s duty to compensate a subagent?

Answer 14

Principal generally owned no duty to compensate a subagent even if the agent had authority to hire the subagent.

Question 15

Agent’s Remedies v. Principal

Answer 15

1. Contract remedies (with duty to mitigate)

2. Right to possessory lien for any money due from the principal including compensation owed for services.

Question 16

Nonexclusive Real Estate Brokers’ Contracts

Answer 16

Entitle the agent to compensation upon his production of a ready, willing and able buyer, even though the sale is not consummated.

Question 17

Exclusive Real Estate Brokers’ Contracts

Answer 17

Enable the broker to get his commission if anyone produces a ready, willing and able buyer.

Question 18

Actual Authority

Answer 18

Authority the agent reasonably believes she possess based not eh principal’s dealings with her. Can be express or implied.

Question 19

Express Authority

Answer 19

Authority actually contained within the four corners of the agency agreement. It is effective even if it was granted mistakenly or beaus of misrepresentation.

Question 20

Implied Authority

Answer 20

Authority which the agent reasonably believes she has as a result of the principal’s actions.

Question 21

Types of Implied Authority

Answer 21

1. incidental to express authority
2. Arising out of custom known to the agent.
3. Resulting from prior acquiescence by the principal
4. To take emergency measures
5. To delegate authority for ministerial acts in certain circumstances
6. Pay for and Accept delivery of goods where there is authority to purchase
7. to give gen. warranties for fitness and quality (auth to sell)
8. Grant customary covenants in land sales (auth to sell)
9. collect payment and deliver where there is auth. to sell
   10 manage investments with “prudent investor” std

Question 22

When does an agent have implied authority to delegate?

Answer 22

In cases of ministerial acts where

1. circumstances require
2. performance is impossible without delegation
3. delegation is customary

Question 23

Termination of Actual Authority

Answer 23

1. lapse of a specified or reasonable time
2. happening of a specified event
3. A change in circumstances
4. agent’s breach of fiduciary duty
5. either party’s unilateral termination (could be breach of contract)
6. operation of law

Question 24

Change of circumstances warranting termination of actual authority

Answer 24

Includes:

1. destruction of the subject matter of the authority
2. insolvency of the agent or principal
3. change in law or business conditions

Question 25

Operation of law warranting termination of actual authority

Answer 25

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.

Question 26

Irrevocable Agencies

Answer 26

1. Agency coupled with an interest &
2. Power given as security
   cannot be unilaterally terminated by he principal if
3. 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.