Agency Duties, Rights, and Remedies

Question 1

Power to Bind

Answer 1

When agent acts w/in the scope of their authorized powers, agent has the power to bind the principal to contracts entered into on principal’s behalf
- No power to bind beyond actual authority granted to agent

Question 2

Actual Authority

Answer 2

Created by manifestation of principal in a particular way & that principal agrees to be bound by agent’s actions
- Express: oral/written communication
- Implied: authority to do anything necessary to accomplish principal’s express requests or things agent believes principal wishes agent to do based on reasonable understanding of principal’s expressed request

Question 3

Apparent Authority

Answer 3

Behavior of principal leads 3rd party to believe agent is acting w/ principal’s authority
- Principal is accountable for 3rd party beliefs about an actor’s authority to act as an agent when the belief is reasonable & traceable to a manifestation of the principal
Cannot apply w/ undisclosed principal

Question 4

Agent Duties - Duty of Care

Answer 4

Absent agreement, agent must:
- follow principal’s reasonable instructions
- perform w/ reasonable care, and
- indemnity principal against any loss caused by agent’s wrongful behavior or failure to act w/ reasonable care

Question 5

Agent Duties - Loyalty

Answer 5

Must:
- prefer interests of principal over those of agent or others
- avoid self-dealing, and
- neither compete w/ principal nor usurp business opportunities

Question 6

Agent Duties - Account

Answer 6

Must account for money or property received for the principal, & keep the principal’s assets separate from their own

Question 7

Agent Duties - Candor

Answer 7

Must fully disclose to principal any facts relevant to a transaction that they reasonably believe the principal might want to know

Question 8

Principal Duties - Compensation

Answer 8

Even if agency agreement does not provide, principal has quasi-contract duty to pay agent the reasonable value for services rendered, unless agreed otherwise
- Failure allows agent to seek restitutionary damages

Question 9

Principal Duties - Reimbursement

Answer 9

Principal obligated to reimburse agent for all reasonable expenses incurred in scope of agency

Question 10

Principal’s Power - Ratify

Answer 10

By ratifying a transaction entered into on its behalf, principal retroactively grants agent authority to act on behalf and effectively agrees to be bound to the contract
Provided the principal has knowledge of all material facts, principal ratifies otherwise unauthorized transaction by either:
- manifesting assent that shall affect the principal’s legal relations
- conduct that is justifiable only on assumption that principal consents to be bound

Question 11

Liability to Third Parties

Answer 11

Agents will be liable to 3rd parties for harm caused by their negligence or intentionally tortious conduct whether or not they are acting within the scope of the agency relationship
Agent’s Contractual Liability:
- Fully Disclosed Principal: A principal whose existence and identity are known to the third party.
- In general, if an agent enters into a contract on behalf of a fully disclosed principal, the agent will NOT be personally liable on the contract
- Not Fully Disclosed Principal:
- In general, if an agent enters into a contract on behalf of a principal that is not fully disclosed, either partially disclosed or undisclosed, the agent will be personally liable on the contract (along with the principal)
- To escape personal liability, agent must make clear to the third party that the agent is representing a principal and that the agent is not a party to the contract

Question 12

Principal’s Tort Liability - Respondeat Superior

Answer 12

Employer is vicariously liable (strictly) for torts of employee where committed within the scope of employment
- The liability of the employer is in addition to, not instead of, the employee’s liability (jointly and severally liable)
- A principal is generally not vicariously liable for torts of non-employees
- Exception: A principal can be vicariously liable to a third party for torts committed by a non-employee agent where the agent acts with apparent authority
- Scope of Employment: performing tasks assigned by the employer or engaging in a course of conduct subject to the employer’s control considering:
- extent to which the conduct is the kind of work the employee was hired to perform;
- extent to which the conduct occurred substantially within the time and space authorized by the employer; and
- extent to which the conduct was intended to serve the interests of the employer.
- Employers will not be held liable for the intentional torts of an employee unless the intentional tort is accomplished:
- in the course of doing the employer’s work; and
- for the purpose of accomplishing such work.
- generally no defense to the employer that it had previously instructed the employee not to use force in the performance of the employee’s duties
- Generally, an employer is NOT liable for damages resulting from the tortious conduct of an independent contractor
NOTE: The rationale for not making principals vicariously liable for the tortious conduct of independent contractors hired by them is that independent contractors are not under the principal’s control to the extent that employees are.
NOTE: There are some rarely tested exceptions to the general rule: inherently dangerous activities; nondelegable duties; and negligent selection of a contractor

Question 13

Principal’s Tort Liability - Frolic & Detour

Answer 13

An employer will not be liable if the employee has substantially deviated from the authorized route (frolic), but will be liable if the deviation is slight (detour)
An employee can return to the scope of employment after a frolic occurs.

Question 14

Principal’s Tort Liability - Negligent Supervision

Answer 14

A principal is liable to a third party for harm caused by the principal’s negligence in selecting, training, retaining, supervising, or otherwise controlling the agent

Question 15

Principal’s Contract Liability (actual authority)

Answer 15

Principals liable on contracts with 3rd parties when agents, acting with actual authority, enter into those contracts on their behalf
Principals liable on contracts entered into on their behalf even when the agent’s authority to do so was only retroactively granted
Principals liable on a contract when an authorized agent enters into a contract on the principal’s behalf without disclosing the principal if, subsequent to the transaction, the 3rd party discovers the identity of the principal

Question 16

Principal’s Contract Liability (apparent authority)

Answer 16

A party liable on a contract as if it were principal to an agent who acted with actual authority when the party’s words, actions, or failure to act causes a third party to reasonably but mistakenly believe that another acts as an authorized agent
Implied Warranty of Authority: if a person who purports to contract with a 3rd party on behalf of another has no power to act for the other, the person is liable to the 3rd party for breach of implied warranty of authority
- However, if a principal is bound to a 3rd party on the basis of an agent’s apparent authority, the agent is not subject to liability to the 3rd party on the agent’s implied warranty of authority, although the agent acted without actual authority