Agency & Partnerships Flashcards
Agency Checklist
(1) Formation
(2) Principal’s Liability to 3rd Parties
(3) Authority
(4) IC/Employee
Agency Formation
A relationship that arises when one person (principal) manifests an intention that another person (the agent) act on the principal’s behalf.
Requires three elements: (1) capacity, (2) consent, and (3) control.
Capacity, Consent, and Control
Capacity - age of majority & mental capacity. For A, ONLY minimum mental capacity is required.
Consent - oral or written agreement
Control - consider control of manner of completing work, supply of tools, direction etc.
Liability of P on Negligence Claim
Employee - YES VL in within course and scope of agency, unless frolic.
Independent Contractor - YES VL if inherently dangerous activity or nondelegable
Liability of P on Intentional Tort Claim
P is generally not vicariously liable for A’s intentional tort, whether employee or IC unless
(1) force is authorized in the agency;
(2) friction is generated by the agency; or
(3) the agent is furthering the business of the employer.
EACH OPTION REQUIRES AUTHORITY.
Liability of P on Contract Claim
DEPENDS ON AUTHORITY. Talk about at least 3
Express Authority
Agent expressly has the authority from Principal to act in the manner the Agent ACTUALLY acted in.
Implied Authority
The nature of A’s position implies authority to act in a particular matter – either from custom or usage, or by acquiescence (including failure to enquire), or because of emergency or necessity.
Apparent Authority
P communicates by some statement or act to a third party the apparent authority of the agent to act on behalf of the principal with respect to that third party.
Ratification
P knowingly agrees to be bound by the unauthorized acts of A, OR series of occasions of acquiescence.
ONLY discuss when there is actual knowledge of unauthorized acts.
Agent Duties Checklist
(1) Undivided Loyalty
(2) Licensed Person
(3) Strict Obedience
(4) Reasonable Care
Remedies for Breach by Agent
(1) damages,
(2) accounting for agent’s secret profits,
(3) withholding of compensation.
Principal’s Duties to Agent
(1) Compensation - duty to reasonably compensate and reimburse for losses reasonably incurred
(2) Contract
(3) Cooperate
Remedies for Breach by Principal
(1) damages for breach of contract (subject to duty to mitigate),
(2) an agent’s lien in any property the agent holds
Termination of Agency Relationship
(1) lapse of time,
(2) happening of an event,
(3) change of circumstances,
(4) breach of fiduciary duty,
(5) unilateral acts, or
(6) operation of law.
Termination of (Express/Implied) Authority
Actual (express or implied) authority terminates when the agent knows or should have known of the termination.
Termination of Apparent Authority
Where there’s a writing by principal given to agent manifesting their authority and that is meant to be shown to third parties, the apparent authority will not be terminated with respect to the third parties who see and rely on such writing until principal communicates termination to third parties.
(P must communicate termination to third parties.)
Irrevocable Agency
(1) Agency coupled with interest
(2) Power given as security
Disclosed Principal
When 3rd party knows who the P is
Agent - Not liable on contract to third party
Principal - Liable on contract when A acts for improper purpose or for someone else’s purpose, unless that person KNOWS A is going rogue
Partially Disclosed Principal
A P exists, but identity unknown.
Agent AND Principal are liable on contract entered into by an authorized agent on behalf of a partially disclosed principal, unless the third party has notice that the agent is not acting for the principal’s benefit
Undisclosed Principal
The third party believes A is the contracting party and has no knowledge of the existence of a principal.
A and P are both liable to third party on contract entered into by an authorized agent on behalf of an undisclosed principal.
BUT P is not liable when Agent goes rogue. Otherwise liable - still getting benefit.
Secret Limiting Instructions
Where P gives secret limiting instructions to A, P is bound even if A acts beyond the scope of the limiting instructions.
BUT P can sue agent for breach of duty of obedience and recover difference.
Agency and Partner Liability
Partnership is liable for acts and omissions of any partner acting
(1) in the ordinary course of the partnership business or
(2) with authority of the other partners.
Apparent Authority of Partner
If third party reasonably believes a partner is acting for the partnership, that partner will have the apparent authority to bind to partnership.
