Agency & Partnerships Flashcards
Agency and contractual capacity?
The principal must have contractual capacity, but not the agent
When is a writing required to create agency?
Only to comply with normal statute of frauds rules and when authority is given to convey real property.
When is consideration required to create and agency relationship?
Never
How can an agency relationship be created?
By actual authority or implied authority
What is actual authority
1). Express actual authority when the principal tells the agent to act on his behalf2). Implied actual authority when the principal’s conduct leads THE AGENT to believe he has authority
How is actual authority terminated?
1). After a specified period2). by change of circumstances, like subject matter destroyed3). the agent acquires adverse interest4). The agent says so5). The principal says so, unless there is an irrevocable agency, coupled with an interest6). by death/incapacity/ bankruptcy, unless coupled with an interest
What does it mean for an agent to have an interest?
The agency relationship was created for the agent’s benefit, like having the authority to sell collateral in the event of default. A fee or commission is not considered an interest.
Can an agent delegate his authority?
Yes, if the principal consents implicitly or expressly
What are substitutes for actual authority?
Apparent authority, ratification, and adoption.
What is apparent authority?
When the principal leads a THIRD PARTY to believe that the agent has authority. The reasonably belief must be created by the principal, not by the agent alone.
How is apparent authority destroyed?
by notifiying each third party that reasonably relied on it.
What is ratification of an agency?
When the principal accepts the benefit of a contract or sues based on it. The principal must have knowledge of all the material facts, he must accept the entire transaction, and he must have capacity to contract at the time of ratification and at the time of the original contract because the ratification is retroactive.
Can a promoter bind a principal through ratification?
No, because at the time of the original contract, the principal did not exist. Therefore, it did not have capacity. It can, however, adopt the contract.
Exception to ratification of an agency?
When a BFP’s rights intervene between the original contact and the ratification, then the principal cannot cut off the BFP’s rights.
What is adoption in agency?
When a principal adopts the actions of an agent that lacked authority by accepting the benefits of the contract or suing on it. He must have knowledge of the material facts and accept the entire transaction. He does not have to have capacity at the time of the original contract.
What are an agent’s duties to the principal?
He is a fiduciary, owing a duty or loyalty, care, and obedience.
What are a principal’s duties to an agent?
Pay the agent unless it’s gratuitous, indemnify the agent, and reimburse him.
When can a constructive trust happen in agency?
When the agent breaches the duty of loyalty.
When is a third party not liable for a contract created by an agent with authority?
In the rare case that hte agent has special skills and hte principal is not disclosed.
When is an agent liable to third parties for contracts created within his authority?
Only when the agent has an interest in the relationship.
When is a principal bound for the tort actions of its actors?
Use Master-servant language: When the servant was acting within the scope of his employment in committing the tort. Not when he is an indepdendent contractor.
When is a servant an employee as opposed to an independent contractor?
6 Factors:1). The employer has the right to control how the employee does the job2). The employer supplies the tools and workplace3). It is a part of the employer’s regular business4). It is long-term5). There is little skill involved6). regularly-intervaled pay
What are deviations from a servant in the scope of his employment?
Minor deviations still bind the principal, and they are detours, while substantial deviations, frolics, are outside his employment
Master-servants and intentional torts?
Masters are normally not bound by servants’ intentional torts unless force is used to further the master’s business, the mater ratifies it, or the master authorized it.
What is a borrowed servant?
When a servant leaves one master and gives another the right to control him during his employment. The second master is liable for his actions as long as he has the right to control during the time of the tort.
When is the Master liable for his own negligence?
For a failure to train or supervise or negligent hiring for failing to check criminal record or job history.
