Agency & Partnership

Question 1

Requirements for an agency relationship

Answer 1

1) Consent by both the principal and the agent that the agent will act for the principal’s benefit
2) That the agent is subject to the principal’s control

Question 2

Define: Actual Authority

Answer 2

Actual authority can be:
1) express: agent is expressly given authority to act for the principal

2) implied: present when the principal’s conduct lead’s the agent to believe it has authority.

Question 3

Define: Apparent Authority

Answer 3

1. The person dealing with the agent must do so with a reasonable belief in the agent’s authority
2. The belief must be generated by some act or neglect on the part of the principal

Question 4

Define: Ratification

Answer 4

Even if the agent did not have authority to enter into a transaction, the principal can ratify the acts (and thus become liable) by expressly or impliedly affirming or accepting the benefit of the acts, so long as the principal knew the material facts and had capacity.

Question 5

Is an agent liable if the principal is undisclosed?

Answer 5

Yes.
This applies to principal’s who are both completely undisclosed and only partially disclosed (i.e., the third party knows the agent is acting on behalf of another but does not know the identity of the principal.

Question 6

Define: Vicarious Liability

Answer 6

The employer is liable in tort for the acts of an agent or employee if the agent or employee:

• was acting in the scope of employment
• made a minor deviation (a detour) from employment (rather than a frolic); or
• committed an intentional tort only if it was for the principal’s benefit, because the principal authorized it, or one that arose naturally due to the nature of employment.

Question 7

Can a principal recover against an agent if they act beyond their authority?

Answer 7

Yes.

The principal can recover against the agent for indemnification if the agent acts beyond his authority.

Question 8

When is a principal directly liable for an agent’s actions?

Answer 8

1. He negligently hired the agent;
2. Failed to fire the agent; or
3. Failed to properly supervise the agent.

Question 9

What are an agent’s duties to their principal?

Answer 9

1. Duty of care
2. Duty of loyalty

(i.e., not to engage in self-dealing, not to profit without disclosure, and a duty to follow instructions)