Ch.15 Law of Agency

Question 1

Laws of agency:

Answer 1

Deals with relationship between an individual (principal) who either expressly or impliedly uses services of another (agent) to carry out a specific task on his or her behalf

Principal - person on whose behalf on agent acts

Agent - person appointed to act for another, usually in contractual matters

Purpose is to enable principal to accomplish some particular purpose, usually formation of a contract

Question 2

Agent

Answer 2

person appointed to act for another, usually in contractual matters

Question 3

Principal

Answer 3

person on whose behalf on agent acts

Question 4

The Nature of the Relationship

Answer 4

Governed by tort law, contract law, and equity

Agent is empowered on behalf of another

Agent is conduit by which a contract can be effected between principal and third party

Acts of agents bind principals if done within scope of power

Can act for more than one principal at the same time (insurance agents)

Minors can act as agents

Question 5

Express agreement

Answer 5

agency relationship established by an express oral or written agreement

Question 6

Agency by conduct

Answer 6

agency relationship inferred from the actions of a principal

Question 7

Agency by estoppel

Answer 7

representation by words or conduct that a person is an agent cannot later be denied if a third party relies on the representation

Question 9

Agency by Conduct or Estoppel

Answer 9

Actions which convey impression that one is an agent for another or has conferred authority to act on one’s behalf

Question 10

Estoppel

Answer 10

rule whereby a person may not evade a promise or evade truth of a statement of fact made by him or her when another person has relied and acted upon the promise or statement

Question 11

Types of authority:

Answer 11

Actual - where expressly given

Apparent - implied from actions
- Example: spouse presumed at law to have authority to purchase goods and services for household use as agent of other spouse

Question 12

Apparent authority

Answer 12

ability of an agent to bind a principal where the principal has not notified third parties of restrictions or terminated authority of the agent

Question 13

Relationship between principal and agent:

Answer 13

Both parties must act in good faith

Principal’s duties:
- Pay for services rendered
- Indemnify agent for reasonable expenses

Agent’s duties:
- Obey lawful instructions of principal and keep information confidential
- Inform principal of any important developments

Question 14

Operation of Law

Answer 14

agency that may arise in certain circumstances out of necessity where it is not possible to obtain the authority of the principal to act

Today such situations are limited because of modern communication

Agency by necessity
- Example: shipmaster presumed to have power to bind the shop owner in contract in event of emergency to preserve ship

Question 15

Third Parties and the Agency Relationship

Answer 15

Disclosed agency:
Undisclosed agency:
Fictitious agency:

Question 16

Disclosed agency:

Answer 16

Agent should indicate only acting as agent

Agent signs on behalf of principal in principal’s name - only principal is liable under the contract, not the agent

If principal wishes not to have identity revealed agent can:
- Enter in agent’s own name OR
- Enter as agent for unnamed principal

Question 17

Undisclosed agency:

Answer 17

Agent fails to disclose they are acting as an agent

Agent may be liable

Agent can also enforce contract against third party

Question 18

Fictitious agency:

Answer 18

Agent contracts on behalf of a fictitious or non-existent principal

Third party may sue for breach of warranty of authority
- Same if agent enters for a principal for whom the agent does not have authority to act

If intention by agent was to deceive will be liable for fraud (remedy of deceit)

Question 19

Liability of Principal and Agent to Third Parties in Tort

Answer 19

Rule - principal may be held liable for tort committed by agent if committed in ordinary course of carrying out agency agreement

Often based on fraudulent misrepresentation ie. tort of deceit

If third party entered contract as a result of fraud by agent, then both principal and agent will be liable

If fraud committed outside scope of agent’s employment only agent liable

Question 20

Termination of the Principal Agent Relationship

Answer 20

Agency relationships created by express agreement usually provides for termination

Must give other party a particular period of notice
- Termination at expiry of notice period

Fixed or implied

Must inform third parties of termination

Question 21

Other ways agency may terminate:

Answer 21

Task is completed

Incapacity of principal or agent

Bankruptcy of principal