Agency/Partnership

Question 1

Requirements for agency relationship

Answer 1

Creating an agency relationship requires (1) Assent – principal and the agent manifest assent to work with one another (2) Benefit – the agent agrees to work for the principal’s benefit and (3) control – the agent agrees to work subject to the control of the principal. No consideration or writing is required to create an agency relationship. If an agency relationship is in dispute the Crts will look to manifestations of assent.

Question 2

Who may be a principal

Answer 2

Any person or entity that has legal capacity can be a principal. Exceptions minors and anyone incapacitated by illness or intoxication cannot be a principal. Unincorporated associations cannot be principals because they lack legal capacity.

Question 3

Who may be an agent?

Answer 3

A person or an entity who has minimal capacity and a minor may serve as an agent so long as they can (1) assent to the agency relationship, perform the tasks on behalf of the principal and are subject to the principal’s control.

Question 4

When is a principal liable for agents contract.

Answer 4

A principal is liable for contracts when the principal has authorized the agent to enter into the contract and the agent acted with legal authority.

An agent acts with legal authority when there is (1) actual express authority (2) actual implied authority (3) Apparent authority (4) Ratification.

Question 5

Actual Express Authority

Answer 5

Actual express authority is created by using written or spoken words, clear direct and definite language, or specific detailed terms and instructions. The agent must have the subjective intent that what he is doing is what the principal wants him to do. In other words, the principal makes a manifestation that causes the agent to reasonably believe that the agent is authorized to act on the principal’s behalf.

Question 6

Actual Implied Authority

Answer 6

Actual implied authority occurs when the principal communicates authority to the agent to take whatever steps are necessary to achieve the principal’s objectives. The agent has actual implied authority (unless instructions to the contrary) to act within the accepted business custom or general usage.

Answer 7

The principal creates apparent authority through words, written or spoken that cause a 3^rd party to reasonably believe that the agent can act on behalf of the principal because the principal has consented to have acts done on the principals behalf. Apparent authority exists until the principal notifies the 3^rd party of the revoked authority.

Question 8

Stopped at applied authority in torts

Answer 8

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