Biz Law - Agency

Question 1

Agency

Answer 1

A fiduciary relationship between two persons where the agent acts for the benefits and under the control of the principal.
The relationship is consensual, and can be expressed or implied.

Question 2

Power of attorney

Answer 2

Formal instrument, usually acknowledged by a notary public, to confer auhority on an agent. The agent is referred to as an attorney-in-fact.

Question 3

Agency creation by contract

Answer 3

Both principal and agent contractually agreed to the relationship

Question 4

Agency creation by agreement but not contract

Answer 4

Both principal and agent agreed to the relationship but is not a contract since it lacks some of the required elements. Agreement can be shown by the principal’s and agent’s conduct.

Question 5

Agency creation by ratification

Answer 5

Principal gives approval of an act previously done by the purported agent for the principal without the authority. When act happens, it must have been done for the purported principal, not for the purported agent. The ratification must also occur within a reasonable time.

Question 6

Agency creation by estoppel

Answer 6

A.k.a. creation of agency by apparent authority. When the principal leads a third-party to reasonably believe that a person acts as the principal’s agent. Principal is prohibited from denying the existence of agency if third-party deals with person as principal’s agent.
It must be principal not agent that leads third-party to believe agency exists.

Question 7

Agency creation by operation of law

Answer 7

Agency relationship can be imposed by operation of law in some unusual circumstances. Examples: Necessity in an emergency situation.

Question 8

Agency creation by marriage

Answer 8

Marriages itself does not create an agency relationship. One of the spouses can act as an agent for the other spouse, but it is not because of the marriage that the agency exists.

Question 9

General agent

Answer 9

An agent who is authorized to do a series of transactions for the principal for continued period of time. As much implied authority. Example, manager of the store.

Question 10

Special agent

Answer 10

An agent who conducts some specific transactions for the principal over a limited period of time. A special agent has less implied authority then a general agent. Examples include: broker, factor, lawyer, auctioneer.

Question 11

Gratuitous agent

Answer 11

Person who agrees to act as an agent without expectation of compensation. Agent has no obligation to act for the principal Unless the agent has caused the principal to reasonably rely on the agent to perform the act.

Question 12

Compensated agent

Answer 12

Person who agrees to act as an agent with expectation of compensation

Question 13

Sub agent

Answer 13

Person appointed by authorized agent to act for agent.
If agent is authorized to appoint a sub agent, the acts of the sub agent are binding on the principal.
If agent lacks authority, subagents acts are not binding on the principal.

Question 14

Disclosed principal
Partially disclosed principal
Undisclosed principal

Answer 14

Third-party at time of contracting with agent knows:
Existence and identity
Existence but not identity
Not existence nor identity

Question 15

Agency purpose

Answer 15

Purpose of agency must be legal.

Any agreements lacking a legal purpose: courts will not adjust equities between the parties.

Question 16

Agency coupled with an interest

Answer 16

Relationship where agent has interest in subject matter of agency. Subject matter is property interest or security interest.
Principal acting alone cannot terminate agency. Death, insanity, or bankruptcy of principal does not terminate agency.

Question 17

Express authority

Answer 17

Authority that is stated in spoken or written word by the principal.

Question 18

Implied authority

Answer 18

Authority that is commonly and customarily needed to conduct the purpose of the agency. It is needed to fill in the gaps to carry out the agent’s express authority.
It cannot come from words or conduct of the agent. It can vary from one location to another. It can vary among different types of businesses.

Question 19

Actual authority

Answer 19

The combination of express and implied authority

Question 20

Apparent authority

Answer 20

Aka ostensible authority.
Appearance of authority from words or actions of principal that lead a third-party to reasonably believe and act upon belief that actual authority exists in purported agent. Belief and reliance are shown when third-party makes contract with purported agent. Apparent authority is determined from view of the third-party.

Question 21

Power to appoint subagents

Answer 21

As general rule, agent can appoint subagents because principal selected agent based on personal qualifications. Exception is sometimes allowed for sure the ministerial, mechanical, or routine duties.

Question 22

Financial powers of an agent

Answer 22

Agent who sells goods for cash and has possession of the goods, has the authority to collect the cash. Agent has no implied authority to except credit in place of cash. Payments to agent lacking authority to accept payment does not discharge the debt; third-party still required to pay principal.

Question 23

Agency termination/constructive notice

Answer 23

Agents actual authority ceases when agency terminated; but agent still has apparent authority from third-party viewpoint. Third parties must be given notice of termination.
Constructive notice adequate to end apparent agency for third parties who have not dealt with the agent. Publishing termination in newspaper having general circulation is adequate.

Question 24

Agency termination: revocation by the principal

Answer 24

Principal acting alone can revoke authority of agent.
Exception is agency coupled with an interest.
Principal can still be liable on agency relationship because agent still has apparent authority.
Principle can be liable for breach of contract.

Question 25

Agency termination: renunciation by the agent

Answer 25

Agent acting alone withdraws from agency.

Agent can be liable for breach of contract.

Question 26

Agency termination: mutual agreement

Answer 26

If principal and agent mutually agree to end the agency relationship, it ends.

Question 27

Agency termination: accomplishment of agency purpose

Answer 27

When purpose of agency is done, the agency relationship terminates

Question 28

Agency termination: time period ends

Answer 28

If agency is agreed to end after express period of time, lots of that time will terminate the relationship.

Question 29

Agency termination: operation of law

Answer 29

Operation of law means automatically without any action needed by the parties. All authority of agent is terminated, even apparent authority. Examples:
- Death of principal or agent
– Insanity of principal or agent
– Bankruptcy of principal
– Impossibility of performance
– Performance becomes illegal

Question 30

Agent is personally liable on contracts when:

Answer 30

• Agent contracts in own name. Principal is either undisclosed or partially disclosed.
  – Agent guarantees performance of principal and principal fails to perform
  – Agent contracts for nonexistent principal
  – Agent acts without authorization from principal in making the contract

Question 31

Agent is not personally liable on a contract when:

Answer 31

– Agent contract for disclosed principal

• Principal ratifies unauthorized contract made by agent for principal
• Third-party elects to hold newly discovered principal liable on contract made by agent for undisclosed or partially disclosed.

Question 32

Agent’s liability for torts

Answer 32

Agent/employee is liable for his own torts. Liability exists even though agent is working for principal when tort occurs.

Question 33

Agent’s liability for crimes

Answer 33

Agent/employee is liable for his own crimes.

Question 34

Principal’s liabilities for contracts

Answer 34

• When agent has actual authority, principle is liable
• When agent did not have authority but act was later ratified by principal, principal is liable
  – When purported agent has apparent authority, principle is liable

Question 35

Principal’s liability for torts of the agent/employee

Answer 35

Principle is liable for torts of agent if agent was acting in scope of and in course of agency when tort happened.
This vicarious liability is called the doctrine of respondeat superior.
Is agent is not asking for principal, agent is on a detour or on a “frolic of their own” and is only person liable.

Question 36

Principal’s liability for torts of independent contractor

Answer 36

Generally not liable except:
– Work that is inherently dangerous
– Work that is illegal
– Work that is inseparable from the principal's operation
– Work that cannot be delegated by law

Question 37

Principal’s liability for crimes of the agent

Answer 37

Principal is not liable for crimes of agent unless principal actually participated in crime.