Agency & Partnerships Flashcards
Agency definition
Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.
Consent req
Consent of both the principal and the agent is necessary to form an agency relationship. Consent may be established expressly (written or oral statements), or by implication from the parties’ conduct.
On behalf of req
The agent must be acting primarily for the benefit of the principal, rather than for the benefit of the agent or some other party.
Control req
The agent must act subject to the principal’s control, but the degree of control exercised by the principal does not have to be significant. Can be simply the fact that the principal has specified the task that the agent should perform, even if principal did not give details of how the task should be accomplished.
Do the parties need capacity to contract?
Only the principal needs capacity. Agent does not because agent is just intermediary in contract btw principal and third person.
When is a writing required to form agency relationship?
SOF. If AP relationship is w/in SOF or if agent is to enter into a contract that reqs statute of fraud, agreement must be in writing.
Is consideration required to form agency relationship?
Consideration is not required for the creation of an agency relationship.
Agent’s fiduciary duties to the principal
- Duty of care (carry out work with reasonable care)
- Duty of loyalty (account for profits, act solely for benefit of principal, refrain from working with adverse party, not compete with principal on subject matter of agreement, or use principal’s property for own purposes).
How do courts remedy breach of fiduciary duty
Court has wide discretion to institute equitable remedies and “do justice” in the situation.
Duty of obedience
An agent must obey all reasonable directions of his principal. While the principal may be liable for the agent’s acts in violation of directions (apparent authority), the agent will be liable to the principal for any loss that the principal suffers.
Principal’s duty to agent
No fiduciary duty, but if an agent incurs expenses or suffers other losses in carrying out the principal’s instructions, the principal has a duty to indemnify the agent. And unless the circumstances indicate otherwise, it will be inferred that the principal agreed to compensate the agent for his services.
Actual authority
Authority that the agent reasonably thinks she possesses based on the principal’s dealings with her. Can be express (oral or writing) or implied.
Implied includes:
- Incidental to express authority
- Arising out of custom known to the agent
- Prior acquiescence of principal
- Emergencies
- Pay for and receive goods when had authority to buy
When does actual authority terminate? (5)
(1) after a specified time or event, or after a reasonable time (if there is no specified time or event);
(2) by a change of circumstances (e.g., the subject matter of the agency is destroyed);
(3) by a breach of the agent’s fiduciary duty;
(4) by a unilateral act of either the principal or the agent; or
(5) by death or incapacity of the principal or the agent.
Apparent authority
If the principal’s words or conduct would lead a reasonable person in the third party’s position to believe that the agent has authority to act on the principal’s behalf. Must be PRINCIPAL’s assertions, not agents.
Power of position
An agent’s title might confer apparent authority if authority is typically bestowed upon person with that title. Can also confer actual authority if agent reasonably believes he has authority to act based on hist title.
Ratification of contract
Even if agent had not authority, principal still bound if principal ratifies contract. Substitute for pre-transaction authority.
How to ratify:
Express (oral/written) or implied (P accepts benefits)
Requirements for ratification
- Principal must have knowledge of all material facts
- Principal must accept ENTIRE transaction
- Cannot alter rights of intervening parties.
Who’s liable on contract if no ratification or authority? And exception
Principal, not agent. EXCEPT if P is undisclosed (3rd party doesn’t know agent is acting on behalf of principal) OR partially disclosed (3p knows agent acting for principal, but doesn’t know who. In this case, both principal and agent liable.
Vicarious liability: Master
A principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.
VL: Servant
A servant (i.e., an employee) is an agent so employed by a master.
VL: Independent Contractor
A person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.
Vicarious liability tests
A master is liable for torts committed by a servant within the scope of the servant’s employment. The master and the servant are both jointly and severally liable.
A principal is generally not liable for torts committed by an independent contractor in connection with his work unless P KNOWINGLY selected incompetent contractor (negligent = personal liability), gave a nondelegable duty, or it was an ultrahazardous activity
Servant v. IC
If a person is subject to the control of another as to the means used to achieve a particular result, he is a servant. By contrast, if a person is subject to the control of another as to his results only (but not over how to achieve those results), he is an independent contractor.
Factors to consider when assessing servant v. IC
(1) skill required—where great skill is required, more likely IC;
(2) tools and facilities—if the principal supplies the tools and facilities, more likely employee;
(3) period of employment—if period is indefinite and/or long, more likely employee;
(4) basis of compensation—if compensation is on the basis of time, more likely employee; if compensation is paid based on the job, more likely IC;
(5) business purpose—if hired to perform an act in furtherance of principal’s business, more likely employee;
(6) distinct business—a person who has her own business or occupation is more likely IC
Detour and frolic
A minor deviation from the employer’s directions is usually within the scope. This is called a detour. A substantial deviation is usually outside of the scope. This is called a frolic.
Intentional torts and scope of employment?
Intentional torts usually not w/in scope of employment unless nature of job is torts, its motivated to serve the employer, or was specifically authorized or ratified by employer.
Employer lends employee to another. Employee commits tort. Which employer is liable?
Whoever has primary right of control? Usually original employer.
