Business Law- Agency

Question 1

What is an agency relationship?

Answer 1

Acting on behalf of another with authority

Question 2

What are examples of agents?

Answer 2

General- control income, negotiate contracts, help with business

Special- Limited purpose, perhaps just for the contract

Universal- Represents principle in all locations, property contracts, tariffs, customs

Subagent- Real estate actions, they also contract with other agents

Power of Attorney

Independent contractors

Question 3

What is agency coupled with interest?

Answer 3

Agent who has interest in PROPERTY (lien on property, co-owner in the property) .

Harder to terminate this type of agent.

Question 4

What are the generals for forming an express agency?

Answer 4

General Requirements:

1) Usually don’t have to be in writing, EXCEPT when the agent’s contracts must be in writing
2) Capacity of the principle (important- they ask this a lot)

Not required:

1) Capacity of the agent
2) Consideration- can be a gratuitous agency

Question 5

Does an express agency also include implied agency?

Answer 5

Yes

Question 6

What is apparent authority (scary one)?

Answer 6

Apparent agency- carries the trappings of being an agent. Comes about because Principle has lead people to believe that someone is your agent (let them use your office, let them use business cards, let them use admin assistant). People outside don’t understand the technicality of the relationship.

Question 7

What is lingering apparent authority? Also called agency by estoppel or ostensible authority

Answer 7

Lingering apparent agency- carries over after termination when there is not notice.

Company has to let customers know that the agent has been terminated.

Question 8

What are the principals duties to the agent?

Answer 8

1) . Compensation
2) Reimbursement- Expenses (reasonable)
3) To comply with agency agreement
4) Indemnification

Question 9

What are the agents duties to the principle (IMPORTANT):

Answer 9

1) Fiduciary duty- act in the best interest of the principle and not engage in self-dealings
2) Duty of loyalty
3) No conflicts of interest
4) No appropriation of business opportunities
5) No disclosure of confidential or proprietary information
6) Duty of obedience
7) Duty of reasonable care
8) Duty of accounting- for expenses and payments
9) Duty of disclosure- letting principle know relevant information

Question 10

How does a termination occur in an agency relationship?

Answer 10

Fulfillment of agreement 
Lapse of time 
Specified event 
Mutual agreement 
Unilateral act "you're fired"

Question 11

What are the limits of terminating a agency?

Answer 11

Agency coupled with interest - those who have interest in PROPERTY

Question 12

What type of authority lingers?

Answer 12

Apparent- you have to give notice to clients who interacted with clients. You are BOUND by these trappings of authority until you give notice!!

Question 13

What are examples of termination of agency by operation of law?

Answer 13

• Death (when the principle dies, you are no longer an agent)
• Insanity/lack of capacity (if the principle doesn’t have capacity, it’s over)
• Bankruptcy (principle is out, it’s over)
• Breach of fiduciary duty
• Changes in the law (if it now illegal, it’s over)
• Circumstances change or subject matter is destroyed

Question 14

What are the three types of principles for agency purposes?

Answer 14

1) Disclosed
2) Partially disclosed
3) Undisclosed

Question 15

If a third party sues in a contract involving an agent WITH ACTUAL AUTHORITY and a DISCLOSED PRINCIPLE, who may the third party sue?

Answer 15

ONLY the PRINCIPLE

Question 16

If a third party sues in a contract involving an agent WITH APPARENT AUTHORITY BUT NOT ACTUAL AUTHORITY, who is liability?

Answer 16

PRINCIPLE IS LIABLE, BUT PRINCIPLE CAN GO AFTER AGENT BECAUSE THEY OVER-STEPPED THEIR BOUNDS

Question 17

If a third party sues in a contract involving an AGENT WITH NO ACTUAL AUTHORITY OR APPARENT AUTHORITY, who can the third party sue?

Answer 17

ONLY THE AGENT

Question 18

If a third party sues in a contract involving an AGENT WITH ACTUAL AUTHORITY for a UNDISCLOSED OR PARTIALLY DISCLOSED PRINCIPLE, who can the third party sue?

Answer 18

Third party can enforce against principle and agent

Principle CAN indemnify the agent

Question 19

If a third party sues in a contract involving an AGENT OUTSIDE OF ACTUAL AUTHORITY for a UNDISCLOSED OR PARTIALLY DISCLOSED PRINCIPLE, who can the third party sue?

Answer 19

Only the agent

No indemnification

Question 20

When do you hold the principle liable for the tort of the agent?

Answer 20

1) When the principle instructs the agent to perform the act
2) Lack of qualifications of the agent
3) Failure to screen agent
4) Negligent supervision (complaints about agent and you don’t take any action)
5) Scope of employment (Whether they are an independent contractor or an employee- remember the control principle in determining the category)