Agency Law Flashcards
What is required for Agency to exist?
Both parties must consent to the relationship and intend for an Agency relationship to exist (a meeting of the minds)
Note: Consideration is NOT needed for an agency 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
What is Agency Law?
Agency Law deals with someone’s ability to bind you to a contract with a third party
What is Actual Authority in an agency?
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
What is Apparent (Ostensible) Authority in an agency?
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
How is an Agency terminated?
- 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
- Termination by law
a. Death or insanity of either party
b. Bankruptcy of Principal
Note: Bankruptcy of Agent does NOT end agency
c. Loss or destruction of an essential subject to the agency
d. Failure to have or loss of a required license
How do you terminate Apparent Authority?
- 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
What is an Agency Coupled with an Interest?
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
Note: Death or insanity DOES NOT end this agency
What is Implied Authority in an agency?
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
When is an employee an Agent; and when does this make the employer liable?
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
When are Agents liable for torts (civil wrongs) they commit?
Agents are liable for torts (civil wrongs) committed whether they had authority or not
What is an Agent’s liability when acting for an undisclosed principle?
- 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
What are the requirements for a Power of Attorney (POA)?
Must be in writing
Must be signed by person granting the POA - only needs to be signed by the principal, NOT the agent
Ends upon death of Principal
General POA - Agent authorized to handle all affairs
Special POA - Agent authorized to handle only specific affairs
Note: Agent does NOT have to be an attorney at law
Are Agents who act outside of their authority liable?
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
Which kind of principals can normally ratify an unauthorized contract made by an agent?
Fully disclosed and Partially disclosed principal can ratify an unauthorized contract made by an agent
What is required in order for a Principal to ratify a contract made by an Agent?
Generally, Principal is not liable for unauthorized contracts unless they ratify:
- Principal must know all material facts to ratify
- If Principal accepts the benefits of the deal = automatic ratification
- Once Principal ratifies, 3rd parties are stuck with the deal
- For Principal to ratify, Agent must have indicated that they was making the contract on behalf of the Principal
