Agency & Partnership

Question 1

Creating Agency Relationship

Elements for Creating Agency Relationship
(ABC)

Answer 1

1. A - Assent - A and P must manifest assent through words or conduct
2. B - Benefit - A agrees to work on behalf of P and for P’s benefit; and
3. C - Control - A’s actions are subject to P’s control

Question 2

Creating Agency Relationship

Common Principal-Agent Factual Scenarios

Answer 2

• employer - employee
• corporation - director/officer
• partnership - partner

Question 3

Termination of Agency

Two Manners of Termination

Answer 3

1. by the parties
2. by operation of law

Question 4

Termination of Agency

Termination by the Parties

Answer 4

1. unilateral termination by agent or principal - termination is effective when other party receives notice of termination
2. express terms of the agrency expire
3. purpose of agency relationship is fulfilled

Question 5

Termination of Agency

Termination by Operation of Law

Answer 5

1. agent or principal dies
2. agent or principal loses capacity
3. agent materially breaches a fiduciary duty owed to the principal

Question 6

Agency: Liabilities to Third Parties

Power of Agent to Bind Principal

Contract Liability

Answer 6

A has the power to bind the principal to a K when:
1. the agent has actual or apparent authority or
2. the principal is estopped from denying the agent’s authority

Question 7

Agency: Liabilities to Third Parties

Principal’s Liability to Third Parties

Contract Liability

Answer 7

Depends upon A’s auhtority to bind P!

P IS contractually liable to a third party (3P) for acts of an A with:
* actual authority or
* apparent authority

Question 8

Liabilities to Third Parties

Types of Actual Authority

Answer 8

1. actual express authority
2. actual implied authority

Question 9

Agency - Liabilities to Third Parties

Actual Express Authority:
Creation

Answer 9

P creates actual express authority by using words, written or spoken to convey authority.

Question 10

Agency - Liabilities to Third Parties

Actual Express Authority:
Requisite Intent of the Agent

Answer 10

1. subjective intent: agent must believe that he is doing what the principal wants him to do
2. objective intent - the belief is objectively reasonable

Question 11

Agency - Liabilities to Third Parties

Actual Implied Authority

Answer 11

• allows A to take whatever reasonable steps are necessary to achieve P’s objective.
• the agent has actual implied authority (unless instructions to the contrary) to act within the accepted business custom or general usage.

it is present when A believes, based on reasonable interpretation of P’s words or conduct, that they have authority to act

Question 12

Agency: Liabilities to Third Parties

What can actual implied authority be implied by?

Answer 12

Can be implied by:
* custom
* past course of couduct by the principal
* necessity or
* emergency circumstances

Question 13

Agency: Liabilities to Third Parties

Apparent Authority: Elements

Answer 13

Apparent authority arises when:
1. the principal “holds out” the agent as having certain authority; and
2. the principals conduct, when reasonably interepreted, causes third parties to believe that the agent has such authority.

Question 14

Agency: Liabilities to Third Parties

Can apparent authority exist where there is an undisclosed principal?

Answer 14

NO! Apparant authority is based on principal’s manifestations to the third party –> there can be no apparent authority created by an undisclosed principal

Question 15

Agency: Liabilities to Third Parties

Liability of P to 3P when…
A acts w/o apparent authority but within ordinary course of business

Answer 15

can bind P if 3P lacks notice!

Question 16

Agency: Liabilities to Third Parties

Actual vs. Apparent Authority

Answer 16

• actual authority will arise through conduct or communication between P and A
• apparent authority will arise thorugh the conduct or communication between the P and a 3P

Question 17

Agency: Liabilities to Third Parties

Ratification

Answer 17

P can ratify A’s unauthorized conduct, thereby making P liable to 3Ps for Ks entered into by A if:
1. P had knowledge of the material facts (i.e., the K terms)
2. A purported to act on the P’s behalf; AND
3. P affirmed A’s conduct by manifesting an intent to treat the agent’s conduct as authorized (e.g., accepting benefits of A’s originally unauthorized action)

Question 18

Agency: Liabilities to Third Parties

Estoppel

Answer 18

P may be barred from denying an agency relationship or A’s authority if:
1. 3P detrimentally relied on the belief that the transaction enwas entered into for P and
2. (a) P’s negligence caused the belief or
(b) P knew of the mistaken belief and failed to take reasonabel steps to correct it

Question 19

Disclosure of Principals

Three Types of Principals

Answer 19

1. disclosed principal
2. partially disclosed principal
3. undisclosed principal

Question 20

Disclosure of Principals

Disclosed Principal

Answer 20

third party knows:
1. the agent is acting on behalf of a principal; and
2. the principal’s indentity

Question 20

Undisclosed Principal

Answer 20

third party knows neither agent’s status as an agent nor the principal’s identity

Question 21

Agency: Liabilities to Third Parties

A’s Liability where P is a DISCLOSED PRINCIPAL

Answer 21

if 3P had notice and knew the identity of P
–> A is NOT liable

Question 22

Agency: Liabilities to Third Parties

A’s Liability where P is a PARTIALLY DISCLOSED

Answer 22

if 3P had notice but did not know P’s identity
–> A IS liable

Question 23

Agency: Liabilities to Third Parties

A’s Liability where P is a PARTIALLY DISCLOSED

Answer 23

if 3P did not know of agency relationship at all
–> A is liabl e

Question 24

Agency: Liabilities to Third Parties

A’s Liability for Breach of Warranty of Authority

Answer 24

breached if A lacks power to bind P
–> A liable for damages

Question 25

Agency: Liabilities to Third Parties

Respondeat Superior (Vicarious Liability)

Tort Liability

Answer 25

P can be held vicariously liable for torts committed by A if :
1. P has sufficient control over A’s conduct such that the agency relationship was employer-employee (not independent contractor)
2. the tort was committed while A was actining within the scope of his employment

Question 26

Agency: Liabilities to Third Parties

Vicarious Liability:
Sufficient Control

Tort Liabilty

Answer 26

P who controls, or has the right to contorl, the physical conduct (manner and means) of A’s performance of work

Question 27

Agency: Liabilities to Third Parties

Vicarious Liability:
Conduct Within the Scope of Employment

Tort Liability

Answer 27

includes :
* conduct of the kind that A was hired to perform
* conduct that was intended to profit or benefit the employer

NOTE: careful instructions given by the employee do not protect the employer from liability even when the employee acts counter to those instructions as long as the employee is acting within the scope of employment.

Question 28

Agency: Liabilities to Third Parties

Vicarious Liability:
Frolic vs. Detour

Tort Liability

Answer 28

Frolic = significant deviation from assigned work duties or path; outside the scope of employment

Detour = minor deviation from assigned work duties or path; within the scope of employment

Question 29

Agency: Liabilities to Third Parties

Vicarious Liability:
Intentional Torts

Tort Liability

Answer 29

GENERAL RULE
* P is NOT liable

EXCEPTIONS
* The A was motivated to commit the tort in some part for the principal’s benefit;
* The act is of a kind that agent was hired to perform (P authorized it)
* The conduct occurred within the general space and time limits of employment (it arose naturally due to nature of employment) occurred within the