Agency Definitions & Concepts Flashcards
Agency Defined
Agency is the fiduciary relationship that arises when one person (a =principal=) manifests assent to another person (an =agent=) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.
Agency Elements
- Principal consents 2. Agent acts on behalf of the principal 3. Principal exercises control
Authority Used in Agency Law
Restatement 3d is the most recently published, but Restatement 2d is more widely used.
What is the difference between a fiduciary relationship and a contract relationship?
In a fiduciary relationship, the agent must act in the principal’s best interest. In contractual relationships, parties generally owe each other much lower levels of duty.
What are the key questions in analyzing whether an agency relationship exists?
Is someone the agent of a principal? If so, for what purpose or in what capacity?
Can entities act as agents?
Yes.
What is objective manifestation?
If, looking at the parties’ outward manifestation, a reasonable person would conclude that there is an agency, then the agency relationship is =objectively manifest.=
How is manifestation expressed?
Through words (written or oral) or conduct.
What types of authority are there?
- Actual Authority - Apparent Authority - Authority by Estoppel - Authority by Ratification
Elements of Actual Authority
[1] The principal provides an objective manifestation (either express or implied). [2] The manifestation leads the agent to believe that the agent is authorized to act for the principal. [3] The agent’s interpretation of the manifestation is reasonable.
When does the actual authority have to exist?
At the time the transaction took place.
What can a principal be?
- Disclosed - Unidentified - Undisclosed
If the principal is undisclosed, when is a 3rd party not bound?
A third party is not bound to a contract if the transaction: - Changes the nature of the duty to be performed (or may insist on performing duty for agent), or - The contract does not allow it, or - In a specific kind of fraud: [1] The agent fraudulently represented that the agent is not acting for the undisclosed principal; [2] The 3rd party would not have entered into the contract if he knew who the undisclosed principal was; and [3] The agent or principal knew or should have known that 3rd party would not have entered the contract.
What is apparent authority?
[1] The apparent principal makes a manifestation (which has to be traceable to the principle, not only the agent) [2] That somehow reaches 3rd party [3] Who reasonably believes, given the context or other circumstances, that the apparent agent is indeed authorized to act for the apparent principal.
Examples of Apparent Authority:
- Position principal puts one in, e.g. dry cleaning clerk. - Position in an organization, e.g. CEO.
Notice to agent is normally notice to principal if agent had actual or apparent authority to receive notice, UNLESS…
The agent, at the time he received the notice, [1] Is acting adversely to principal and [2] The 3rd party knew or had reason to know this.
Requirements of Agency by Estoppel
Agency by estoppel imposes liability on a principle if [1] The principal intentionally or carelessly caused a belief, [2] The principal has notice of the transmission of such belief, [3] And, knowing that such belief might induce others to change their positions, the principal did not take reasonable steps to notify 3rd parties of the truth.
Agency by Ratification
Principal affirms a previously unauthorized act by an agent. Ratification validates the original unauthorized act where there is no basis for estoppel, and produces the same legal consequences as if original act had been authorized. At the time of ratification, the principal must have knowledge of material facts and the 3rd party must have no intention to withdraw from the transaction.
Manifestation
A person manifests assent or intention through written or spoken words or other conduct.
Imputation of Agent’s Knowledge to Principal
- Facts known by agent imputed to principal even if agent learns them =off the job= or forgot them. - Facts agent should know but negligently did not learn are not imputed to principal.
Agency by Estoppel
The principal can be liable to a 3rd party in the absence of actual or apparent authority if [1.] The principal intentionally or carelessly causes a 3rd party to think someone is an agent, OR [2.] The principal knows that a 3rd party mistakenly and reasonably thinks agent has authority and does not tell 3rd party the facts. [Note]: The 3rd party must show detrimental reliance. [Note]: No manifestation from principal is required.
Terminating Agency Relationship
[1.] Both the principal and the agent have the power to end relationship at any time. [2.] An objective standard is used for judging whether this has been communicated. [3.] The relationship will also normally end (a) If the objective of agency accomplished (b) Upon the occurrence of an event that the parties agreed would end the agency (c) If the property underlying the agency relationship is destroyed or not legally available (d) Upon the expiration of reasonable time [Note]: If agency ends in violation of contract rights, there might be damages claim.
Effect of the Death or Mental Incapacity of the Principal (R2d vs. R3d)
R2d: Ends the agency R3d: Only ends the agency if the agent and 3rd party have notice.
What is it called when the principal exercises his power to end the agency relationship?
Revocation
