Agency - general creation Flashcards
An agency relationship is created when
a principal and an agent mutually agree that the agent will act on behalf of the principal and is subject to the principals control
3 requirements of an agency relationship to exist:
- There must be mutual agreement
- The agent must be acting on behalf of the principal
- the agent must act subject to the principal’s control
Creaion of the agency relationship
not the elements
- fiduciary relationship
- manifestation (outward display of consent by another)
- Agent manifests consent
Because the agent acts on the principal’s behalf, the agent owes -what- to the principal?
fiduciary duties
Because the agent is doing the principal’s business, the principal may be liable for
the agents actions in contract and tort
Contracts and creation of an agency relationship
2 answers
The agreement that creates an agency relationship may, but need not, involve a contract
In some circumstances (ex. statute of frauds), the law requires a writing to create enforcable rights and obligations
When a writing is required to make an agency relationship (ex. statute of frauds), the principal’s conferral of authority upon an agent is usually
required to be in writing as well
- This is known as the “equal dignity” rule
Without a contract, the agreement that creates an agency relationship may be
informal
As long as the requisite elements are present, it is irrelevant whether the parties
understood that they were creating an agency relationship, or desired to create such a relationship.
The existance of the agency may be proved by circumstantial evidence that
shows a course of dealings between 2 parties
Gay Jensens Farms Co. v. Cargill
When an agency relationship is to be proven by circumstantial evidence, the principal must be shown to have
consented to the agency
Gay Jensens Farms Co. v. Cargill
A creditor who assumes control of debtors business may
become liable as principal for the acts of the debtor in connection with the business
Gay Jensens Farms Co. v. Cargill
Factors indicating that one is a supplier, rather then an agent are:
3 answers
- that he is to recieve a fixed price for the property irrespective of the price paid by him (most important)
- that he acts in his own name and recieves the title to the property which he is thereafter is to transfer
- that he has an independant business in buying and selling similar property
Gay Jensens Farms Co. v. Cargill
The one who action is to be taken is
the principal
The one who acts
the agent
Control by the principal
A principal has the right to control the conduct of the agent with respect to matters entrusted to him
Security holder becoming a principal
- A creditor who assumes control of his debtors business
- for the mutual benefit of himself and his debtor
- can become a principal with liability for the acts and transactions of the debtor in connection with the business
Manifestation of Consent
- An Agency relationship exists only if there has been a manifestation
- By the principal to the agent
- that the agent may act on his account
- and consent by the agent so to act
Parties labeling and popular usage
is not controlling
- call it what you want, if the elements are there it is still an agency relationship
A person manifests assent or intention through
written or spoken words, or other conduct
Gratuitous Agent
acts without right to compensation
Escrow holder as an agent
is not an agent of the parties to the escrow contract bc the escrow holder is not under their control
Insurance agent offering policies from multiple insurance companies as an agent
Is the agent of the insured not of the insurers.
Receipt and installation of office equipment subject to a finance agreement and the payment of numerous installments over a 7 month period, pursuant to the finance agreement amounted to
ratification of the underlying contract
“Coming and going” rule
an employee who has an accident traveling to or from work is not acting within the scope of his employment
bailment
rightful possession of goods by one who is not the owner
Gratuitious Bailment
the transfer or use of property without compensation
For an agency relationship to be created you only need the factual elements, meaning that
it can be unwillingly or unknowingly created
To find mutual consent, look at
words and conduct
Not required to form an agency relationship
6 answers
- consideration
- subject to statutory requirement (statute of fraud), written agreement
- knowledge that they are entering into an agency relationship
- Intent to enter into an agency relationship
- Positive Outcomes/ benefits for principal
- Human principals
A principal has the right to control the conduct of the agent with respect to matters entructed to him. That control can be
shown through instructions
Principals do not have to ultilize all of their
control rights
Compensation and agency relationships
not required
Veto powers within limits does not equal
control
Assuming ability to manage debtors business does equal
control
we care because they become liable
General Expressions and paricularized authorization
unless otherwise agreed, general expressions used in authorizing an agent are limited in
application to acts done in connection with the act or business to which the authority primarily relates
General Expressions and paricularized authorization
The specific authorization of particular acts tend to show
a more general authority is not intended
meaning of principals words
words have ordinary/common meaning unless
- past dealings
- agreement to modify meaning
meaning of principals words
trade/industry meaning are not automatically implied. consider:
- the background of the agreement
- the purposes of the parties as known to eachother
- whether the parties, or one of them, are in business
Factors for determining authorization
An authorization is interpreted in light of all accompanying circumstances, including among other matters:
- The soclution of the parties, their relations to one another, and the business in which they are engaged (relationship/dealings)
- the general usage of business, the usages of trades or employment of the kind to which the authorization relates, and the business methods of the principal (trade terms or methods)
- Facts of which the agent has notice respecting the objects which the principal desires to accomplish (principals goals)
- the nature of the subject matter, the circumstance, under which the act is to be performed and the legality or illegality of the act (assumption against certain actions)
- the formality or informalitym and the care, or lack of it, with which an instrument evidencing the authority is drawn (more formality - more thought)
Just because the principal authorized does not mean that the agent
has to do it
Interpretation of authority and apparent authority
applicability of rules for interpretation of agreements
except to the extent that the fiduciary relation between principal and agent requires special rules, the rules for the interpretation of contracts apply to the interpretation of authority
Interpretation of apparent authority compared with interp of authority
The rules applicable to the interpretation of authority are applicable to the interpretation of apparent authority except that:
- manifestations of the principal to the other party to the transaction are interpreted in light of what the other party knows or should know instead of what the agent knows or should know
- If there is a latent ambiguity in the manifestations of the principal for which he is not at fault, the interpretation of apparent authority is based on facts known to the principal
