Business Associations - Agency

Question 1

When Is An Agency Relationship Is Formed?

Answer 1

“ABC”
1. Agreement between the parties that agent’s conduct must be for the
2. Benefit of principal, and the principal has right to
3. Control of the agent.

All contact formalities not required.

Question 2

Duties of the Principal?

Answer 2

As required by the contract/agreement.

Question 3

Five Duties of the Agent?

Answer 3

1. Duty of Care
2. Duty of Loyalty
3. Duty of Obedience
4. Duty to Communicate
5. Express Contractual Duties (if any)

Question 4

Agent’s Duty of Care?

Answer 4

Act as a reasonably prudent person would act under similar circumstances. BJR may apply in some jurisdictions for business judgments, which provides presumption unless action is unreasonable.

Question 5

Agent’s Duty of Loyalty?

Answer 5

Further the Principal’s interests over the Agent’s own interest.

1. No conflicts of interest - No Self-Dealing
2. No conflicts of interest - No usurping principal’s opportunities
3. No conflicts of interest - No secret profits
4. No commingling funds

Similar to Partner’s Duty of Loyalty

Question 6

Agent’s Duty of Obedience?

Answer 6

Must follow all reasonable instructions given by the principal.

Question 7

Agent’s Duty to Communicate?

Answer 7

Must communicate relevant information that would affect the principal.

Question 8

Agent is personally liable for third-party contracts only if:

Answer 8

1. Agent acts with no authority;
2. Principal’s identity is unrevealed;
3. Principal’s existence and identity are undisclosed; or
4. All parties intended so.

Question 9

Principal is liable for agent contracts if:

Answer 9

1. Actual express authority;
2. Actual implied authority;
3. Apparent Authority; or
4. Ratification.

Question 10

Agent’s Actual Express Authority?

Answer 10

Authority specifically granted to the Agent by the Principal; may be oral but writing required if Statute of Frauds applies.

Question 11

Agent’s Actual Implied Authority?

Answer 11

When the Agent reasonably believes the Principal gave her authroity because of necessity, custom, or prior dealings.

Question 12

Termination of Actual Express or Actual Implied Authority?

Answer 12

1. Breach of the Agent’s duty;
2. Lapse of state period (if any) or lapse of reasonable time;
3. Operation of law;
4. Changed circumstances;
5. Happening of specified event; or
6. Unilateral termination by either party.

Question 13

Agent’s Apparent Authority?

Answer 13

When the Principal has provided the Agent with the appearance of authority on which a third party reasonably relies.

Arises when:
1. Notice not given (but required to terminate) to third party when the Agent had actual authority;
2. Written “lingering” authority when third party relies on written authority of agent; or
3. Agent exceeds authority but agent in a position that would normally have such authority (e.g., corporate officer) or the Principal previously allowed similar excess authority.

Question 14

Principal Liability for Agent’s Torts?

Answer 14

Normal Tort: Liable if tort is within the scope of the agency relationship; not liable during Agent’s frolic but still liable on Agent’s detour (determined by amount of devation in the Agent’s conduct).

Intentional Torts: Not liable except if conduct was specifically authorized (i.e., force is authorized), if conduct was natural result from nature of employement (e.g., a bouncer), or if conduct was motivated by desire to serve the Principal.

Question 15

Principal Liability for Independent Contractor’s Torts?

Answer 15

Generally not liable except for:
1. Ultrahazardous activity;
2. Nondelegable duties;
3. Negligent selection; or
4. Estoppel if independent contractor is held out as an agent.

Question 16

Principal Liability for Intentional Torts?

Answer 16

Not liable except:
1. Specifically authorized
2. Natural course of employment (I.e, bouncer)
3. Agent motivated to benefit principal.