Agency Law

Question 1

What is Agency Law?

Answer 1

Agency Law deals with someone’s ability to bind you to a contract with a third party

Question 2

What is required for Agency to exist?

Answer 2

Both parties must consent to the relationship and intend for an Agency relationship to exist

Agent owes Principal fiduciary duty

Principal doesn’t owe Agent fiduciary duty

A contract is NOT required and an Agency agreement is not based on Contract Law; Exception - If duties cannot be performed within a year; a signed writing is required

Question 3

What is Actual Authority in an agency?

Answer 3

Actual Authority is what is expressly granted or is implied by the duties you expect the Agent to perform and is necessary to carry them out

Question 4

What is Implied Authority in an agency?

Answer 4

When authority is expressly granted; it is implied that the agent has the authority to carry out the duties

Does not include authority to sell or alter a business

Question 5

What is Apparent (Ostensible) Authority in an agency?

Answer 5

Apparent Authority is based on the third party’s perspective - they believe that the Agent has the
authority to enter into a contract based on:

• Prior dealings with agent
• Agent’s title leads the third party to believe they can enter into a contract
• The Principal hires the Agent to carry out duties that normally carry with them the rights to enter into contracts

Question 6

How is an Agency terminated?

Answer 6

• Both Agent and Principal agree to terminate
• Principal fires Agent
• Agent fires Principal
• Agent breaches their contract by doing something like violating their obligation to act as a fiduciary to Principal

Question 7

How do you terminate Apparent Authority?

Answer 7

• Let the public know
• Let the people or entities that the Agent previously interacted with know
• In cases of death; or Principal is otherwise not competent to contract; ALL authority is revoked

Question 8

What is an Agency Coupled with an Interest?

Answer 8

Agent acquires an ownership interest in the Agency

Can only be terminated early (before the interest expiration date) by the Agent

Unless the Agency has a specific time limit spelled out in a contract; the Agent’s authority is irrevocable
by the Principal

Question 9

When is an employee an Agent; and when does this make the employer liable?

Answer 9

Employees are agents while acting within the scope of their duties.

For employees who injure third parties while acting within the scope of their duties; both Employee and Employer are liable

Question 10

When are Agents liable for torts (civil wrongs) they commit?

Answer 10

Agents are liable for torts (civil wrongs) committed whether they had authority or not

Question 11

Are Agents who act outside of their authority liable?

Answer 11

Agents who act outside of their authority will be liable for the act

Exception - Principal ratifies the contract which relieves Agent of liability

In order to ratify; Principal must know all of the facts and must ratify before third party cancels agreement

If Principal keeps the benefits of the contract; ratification is implied

Contract must be 100% ratified or there is no contract

Question 12

What is an Agent’s liability when acting for an undisclosed principle?

Answer 12

• Agent liable to third party even if acting within authority
• Third party can sue both Principal and Agent if Principal becomes disclosed
• Agent can then sue Principal

Question 13

What are the requirements for a Power of Attorney (POA)?

Answer 13

Must be in writing

Must be signed by person granting the POA

Ends upon death of Principal

General POA - Agent authorized to handle all affairs

Special POA - Agent authorized to handle only specific affairs

Question 14

Agency Relationship

Answer 14

Writing generally not required, unless to buy or sell land or impossible to perform in a year. Necessary if it is a land deal.

Agent does not have to have capacity, only the principal have to be competent. Minors can be agents.

Consideration not required.

Power of attorney - only the principal is required to sign. The agent has the power to act on behalf of the principal.

Question 15

Rights and Duties

Answer 15

In addition to contract duties, the agent owes a duty of loyalty, duty of obedience, duty of reasonable care, duty of account.

Question 16

Agent Breaches Duties

Answer 16

Principal entitle to: Tort Damages, Contract Damages, Recovery of Secret Profits and/or withhold compensation.

Question 17

Agency Relationship Termination

Answer 17

It is consensual; Either party has the power to terminate at any time; But can’t terminate if the agent has an interest, only the agent can terminate that relationship.

Question 18

Agency Power

Answer 18

Can arise through actual authority, apparent authority or estoppel, ratification

Question 19

actual authority

Answer 19

real authority the agent believes he possess, agent has right to bind principal) can be expressed or implied. Termination can come if principal revokes or renunciation from the agent. Can come through death of either party, incapacity of principal, discharge in bankruptcy, failure to acquire necessary license, destruction of subject matter, subsequent illegality.

Basically actual authority is the belief of the agent that he has the power to bind the principal.

Question 20

Apparent Authority

Answer 20

Agent has the power but not the right to bind the principal. Based on third party’s reasonable belief. Examples here will be like titles and positions.

Limitations set by the principal are not effective because the third party will not know.

Termination here is set by operation of law, no notice is required if the person dies or principal dies, incapacity of the principal and discharge of BK from court.

Question 21

Ratification

Answer 21

Allows a principal to choose to become bound by a previously unauthorized act of his agent.

But first the agent must have said he was acting on behalf of the principal, all the facts must be disclosed to the principal, and principal must ratify the entire transaction, no partial ratification.

Can be expressed or implied.

Only a disclosed principal may ratify.

Question 22

Principal Liability

Answer 22

• principal will be bound if eh agent acted with actual authority or apparent authority or principal ratify the transaction.

Only principal can hold a 3rd party liable.

Question 23

Agent’s Liability

Answer 23

Disclosed Principal -Agent is not liable if it was authorized
Partially Disclosed (identity is not known) and Undisclosed Principal (Identity nor existence) - agent will be liable