Agency Law Flashcards
R3 § 1.01 Agency Relationships
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.
Key Points
“Fudiciary Relationship”
A- Assent
B- Behalf
C-Control
A Assent arises when P manifest assent to A
B that A will act on P’s behalf
C and subject to P’s control
and Consent
CASE: Duty of Loyalty
Quality Cardiovascular Care, LLC
v
Casey Connecticut 2013
***Fiduciary Duties owed by an agent to the principal
Issue:
whether an office manager breached her duty of loyalty to her employer by using confidential information to compete against the company.
Facts: Anne Casey served as the office manager for Quality Cardiovascular Care, LLC (QCC). QCC alleged that Casey breached her duty of loyalty by misappropriating confidential trade secrets to unfairly compete with the company. Casey contended that she owed no duty of loyalty, arguing that such a duty arises solely from contractual obligations and that her employment contract was based on misrepresentations by QCC.
QUIMBEE
Court’s Analysis: The court reaffirmed that an employee owes a fiduciary duty of loyalty to their employer, independent of any contractual agreement. This duty obligates employees to act in the best interests of their employer and prohibits them from using the employer’s confidential information for personal gain or to the employer’s detriment. The court found that Casey, as an office manager, held a position of trust and thus owed a duty of loyalty to QCC.
QUIMBEE
Conclusion: The court concluded that Casey breached her duty of loyalty by using QCC’s confidential information to compete against the company. This case underscores the principle that employees, especially those in positions of trust, have an inherent duty to act loyally toward their employers, regardless of explicit contractual terms.
When can AGENT sign a contract that BINDS
P?
- Actual authority, Principals mind
- apparent authority, 3rd party’s mind
- inherent authority, OR 3rd party
- Ratification by P after contract principals mind
R3 § 2.01 - Actual Authority
Actual Authority principals mind
An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.
Key Points
Actual authority exists if
* “at the time of taking action that has legal consequences for [P], . ..
* [A] reasonably believes,
* In accordance with the [P]’s manifestations to the [A],
* That the [P] wishes the [A] so to act
R3 § 2.02 - Scope of Actual Authority
Scope of Actual Authority principal and agent’s mind
(1) An agent has actual authority to take action designated or implied in the principal’s manifestations and acts necessary or incidental to achieving the principal’s objectives, as the agent reasonably understands them.
(2) An agent’s understanding of the principal’s objectives is subject to any relevant facts of which the agent has notice.
Key points
SCOPEof actual authority:
“action designated or
Implied in the
[P’s] manifestations
To the agent
And
Acts necessary or
Incidental
To achieving the [P’s] objectives
R3 § 3.01 - Creation of Actual Authority Principal’s mind
Creation of Actual Authority
Actual authority, as defined in § 2.01, is created by a principal’s manifestation to an agent that, as reasonably understood by the agent, expresses the principal’s assent that the agent take action on the principal’s behalf.
Key Points
Creation:
“created by a [P’s] manifestation
To an agent that,
As reasonably understood by the [A],
Expresses the [P’s] assent
That the [A act] on the [P’s] behalf”
Express or Implied authority Principal’s mind
Express- explicity granted by P to A often in writing or verbally. R# § 2.01
Implied- authority inferred from agents position actions or circumstances, even if not explicitly granted. R3 § 2.02
§ 2.03 - Apparent Authority 3rd party’s mind
Definition:
Apparent authority is the power held by an agent or other actor to affect a principal’s legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations.
Key points
“when a third party
*Reasonably believes
*The actor has authority to act
*On behalf of the [P] and
*That belief is traceable
*to the [P]’s manifestations”
§ 3.03 - Creation of Apparent Authority 3rd party’s mind
Apparent authority is created by a principal’s manifestation that, as reasonably understood by a third party, indicates that the agent is authorized to act for the principal.
Key Points
created by a person’s
manifestation
That another has authority to
act with legal consequences [for
them] . . .,
When a third party reasonably
believes the actor to be
authorized and
The belief is traceable to the
manifestation”
R2 § 8A Inherent authority 3rd party’s mind
Inherent authority is the power of an agent that arises solely from the agency relationship and exists for the protection of third parties who reasonably believe the agent has authority.
Key Characteristics of Inherent Authority:
Role-Based: Derived from the agent’s position within the organization (e.g., a manager’s inherent authority to make operational decisions).
Reasonable Expectations: Protects third parties who reasonably assume that the agent has authority to act, based on the agent’s role.
Policy-Driven: Exists to ensure fairness and prevent principals from avoiding liability when they knowingly allow an agent to act in a way that suggests authority
R3 § 4.01 Ratification Principles mind
Ratification is the affirmance of a prior act done by another, whereby the act is given effect as if done by an agent acting with actual authority.
Key Elements:
Principal’s Intent: The principal must affirm the agent’s act.
Knowledge of Material Facts: The principal must have full knowledge of all material facts surrounding the act being ratified.
Capacity: The principal must have existed and had capacity to act both at the time of the agent’s act and at the time of ratification.
CASE: Stein Erikson Lodge Assn, Inc. v. MX
Technologies, Inc. (Ct. App. UT 2022
** What happens when principla does not exist
Events Mgr signs contract with Stein (hotel) for “rooms, food, and
services” to hold a conference. 350K
Mgr had been “asked by her superiors to help plan a . . . Conference”
MX decided not to hold the conference, claimed the contracts were void bc Mgr didn’t have authority
Hotel sues MX for breach of contract.
Result?
Appeals court voids summary judgement (“genuine disputes of fact on both (1) authority and (2)
ratification”
Holding of the Case
Authority of the Events Manager:
The court found that it wasn’t clear whether the Events Manager had the actual authority or apparent authority to sign contracts on behalf of MX Technologies.
This issue involved disputed facts (e.g., what MX allowed the Events Manager to do and how Stein Eriksen Lodge perceived her authority).
Because these facts were unclear, the court ruled that the issue could not be decided without a trial
Agent for Disclosed Principal
§ 6.01 – Disclosed Principal
A disclosed principal is one whose identity is known to the third party at the time the agent makes a contract or engages in a transaction.
Key points
DISCLOSED principal:
Parties to contract = principal and TP,
NOT agent: UNLESS agent and TP agree
otherwise
Agent’s Role:
The agent acts on behalf of a known principal, and the agent’s authority is limited to what the principal has communicated to the third party.
Third Party’s Knowledge:
The third party knows who the principal is at the time of the contract or transaction, and the third party relies on the principal being responsible for any obligations arising from the agent’s actio
§ 6.02 – Partially Disclosed Principal
A partially disclosed principal is one whose identity is not fully known to the third party, but the third party knows that the agent is acting on behalf of some principal.
Key Points
Agent’s Role:
The agent acts on behalf of a principal, but the principal’s identity is only partially disclosed—the third party knows the agent is representing someone, but does not know the full identity of the principal.
Third Party’s Knowledge:
The third party knows the agent is acting on behalf of a principal, but does not know the full identity of the principal at the time of the transaction or contract.
Parties to contract = principal and
TP, AND
AGENT IS party to contract UNLESS
agent and TP agree otherwise
§ 6.03 – Undisclosed Principal
An undisclosed principal is one whose identity is not known to the third party at the time the agent makes a contract or engages in a transaction.
Undisclosed Principal:
The third party does not know that the agent is acting on behalf of any principal—the agent is dealing with the third party as if they were acting alone.
The agent is acting on their own behalf, not revealing the principal’s involvement to the third party.
Agent’s Role:
The agent does not disclose that they are representing anyone—the agent appears to be acting on their own.
Various types of entities:
*Sole proprietorship Only one with one single owner
*Corporation
*partnership
Restatement (Third) of Agency § 6.10
In the context of an agent’s liability for misrepresentations or lack of authority in certain situations. Here’s a breakdown:
Implied Warranty of Authority
Under Restatement (Third) of Agency § 6.10, if an agent acts on behalf of a principal but lacks actual authority (and the third party is unaware of this lack of authority), the agent may be held liable for breaching an implied warranty of authority. This implied warranty essentially states that:
The agent warrants they have the authority to bind the principal in the transaction.
If the agent lacks authority, the third party may hold the agent liable for resulting losses.
Key Points:
The agent’s liability arises regardless of intent. It applies even if the agent mistakenly believed they had authority.
The third party can claim damages based on reliance on the agent’s representation of authority.
Exceptions to the Implied Warranty
An agent may not be held liable under this implied warranty if:
The agent expressly disclaimed authority.
The third party knew or should have known that the agent lacked authority.
The principal subsequently ratified the agent’s actions.
Respondeat Superior
Suing the master, the one with the most money
Restatement 3 § 7.0.3 Principals’ liability in general
- A principal is subject to vicarious
liability to a third party harmed by an agent’s conduct when
a. as state din § 7.07 the agent is an employee who commits a tort while acting within the scope of employment
A principal may be held vicariously liable for an agent’s torts even if the principal is not directly at fault, under the following conditions:
a. When the Agent is an Employee
The agent is an employee, and the tort occurred within the scope of employment (§ 7.07).
Restatement § 7.07 Employee acting within scope of employment
(2)An employee acts within the scope of employment when performing work assigned by the employer or engaging in a course of conduct subject to the employer’s control. An employee’s act is not within the scope of employment when it occurs within an independent course of conduct not intended by the employee to serve any purpose of the employer.
Conduct Outside the Scope of Employment
An employee’s conduct is not within the scope of employment if it:
Occurs independently of any intent to serve the employer.
Is done for personal reasons unrelated to work (referred to as a “frolic”).
Illustrations
Within Scope: A delivery driver causes a car accident while en route to deliver packages for their employer. The driver is acting within the scope of employment because they are performing assigned duties.
Outside Scope: An employee leaves work early to attend a personal event and causes a car accident during their detour. The accident is not within the scope of employment because the employee was pursuing personal interests.
Intentional Tort Within Scope: A nightclub bouncer uses excessive force to remove an unruly customer. The bouncer’s act, though potentially tortious, may fall within the scope of employment because it relates to their assigned duties.
Frolic / detour
Frolic is work done for personal reasons unrelated to work
Detour- employer deviates from regular duty
R-3 § 7.07 (3) Employee acting within scope of employment
For purposes of this section,
(a)an employee is an agent whose principal controls or has the right to control the manner and means of the agent’s performance of work,
and
b)the fact that work is performed gratuitously does not relieve a principal of liability.
Alms v Baums 2003
*** that employee was not acting within the scope of employment or as an agent of Ronald McDonald House during the time of the accident and could not sue under respondeat superior.
Issue
The primary issue was whether Daniel Baum, at the time of the accident, was acting as an agent of Ronald McDonald House, thereby making the organization vicariously liable for his actions under the doctrine of respondeat superior.
Holding
The appellate court upheld the trial court’s decision, affirming the summary judgment in favor of Ronald McDonald House. The court concluded that Baum was not acting within the scope
