Agent / Principal Relationships Flashcards
Are the following characteristics required, may be required, or not required to form an agency relationship?
- Mutual consent (“meeting of the minds”)
- Legal capacity of principal (only)
Required
Are the following characteristics required, may be required, or not required to form an agency relationship?
Written agreement if statute of frauds applies, such as in:
- Real estate
- Agency relatinoship to exceed one year
- Suretyship
May be required
Are the following characteristics required, may be required, or not required to form an agency relationship?
- Consideration
- Legal capacity of agent
Not required
An antique dealer (agent) is hired by an estate executor (principal) to sell an armoire from an estate. The antique dealer discloses the executor’s name to the armoire buyer (third party) and negotiates a contract for sale of the armoire for $1,700. The executor thinks the price is too low and refuses to honor the contract. Who is liable and what happens for the third party buying the armoire?
The buyer can require the executor to sell the armoire to him, and the executor is liable for damages to the buyer if there is a failure to deliver.
The antique dealer has no liability to the buyer even if the executor breaches the contract.
Lawson Furniture instructs one of its delivery drivers to deliver a truckload of furniture to a customer. The truck has a flat tire on the delivery route. Although Lawson Furniture did not instruct the agent to do so, the driver/agent has the authority to replace the tire if it is incidental (necessary) to complete the assigned task. Who is liable for the flat tire repair?
Lawson Furniture
When the owner of Mason Drug Store is out of town, a flash flood threatens the store. The manager of the store (agent) spent a substantial amount in a good-faith effort to protect the store from flooding. Even though the agent has never been expressly authorized to do whatever is necessary in the event of a flash flood, the agent has acted with implied authority. Who is liable for the costs to protect the store?
Mason Drug Store’s owner would be liable because the agent exercised emergency authority.
Rod has been a traveling sales representative for Portable Buildings, Inc. for 10 years. Portable fired Rod for dishonesty. Rod then contacts Scrapbookers, Inc. a long-time customer of Portable Buildings to make a sale. No one at Scrapbookers had heard about Rod’s firing. Rod and Scrapbookers negotiate a contract for a steel structure for $150,000. Rod accepts a down payment of $30,000, which Rod then absconds. Who is liable?
Portable Buildings has liability under the contract because of its failure to let third parties know that Rod no longer worked for Portable.
Rod is liable to Portable for the deposit as well as any costs associated with fulfilling the contract with Scrapbookers.
Alex goes to a new town and negotiates, as a representative of the National Association of Realtors (NAR), with a hotel manager to book the hotel for the upcoming convention of the NAR. The hotel manager does not check with NAR, and the manager reserves the hotel for NAR. Who is liable?
NAR is not liable to the hotel for the deposits and damages for no convention, but Alex is.
Amanda Shields is a commercial real estate broker working as an agent for Sun Valley Homes, Inc. to purchase land for a large Sun Valley planned community in an undeveloped area 45 miles outside the city. The land prices are low in this area. Amanda has not disclosed that she is working for a principal, and landowners in the area believe that Amanda is the purchaser. Sun Valley, a major national builder, does not want its plans or name disclosed because of the effect such a disclosure would have on existing land prices. Amanda enters into a contract to purchase acreage for $12 million. Who is liable?
Both Amanda and Sun Valley are liable to the seller (third party) for damages if Sun Valley breaches the purchase contract. If Sun Valley breaches the purchase contract, Amanda can identify Sun Valley if the seller/third party pursues the claim for breach of the contract. Amanda would be entitled to reimbursement from the principal if Amanda ends up paying the seller the damages.
