Chapter 11: The Law of Agency

Question 1

Agent

Answer 1

a person with the authority to carry out business on behalf of another person

Question 2

Principal

Answer 2

a person for whom an agent acts

Question 3

Creation of agency

Answer 3

• Any resulting contract is binding by and against the principal
• The agent must make the principal a party to a contract it makes with a third party or no agency relationship exists

Question 4

Agency agreement created by:

Answer 4

1. Formally by deed
2. Informally by written or spoken agreement
3. By implication

Question 5

Actual authority

Answer 5

express or implied

Question 6

express

Answer 6

the power is derived from the principals explicit directions

Question 7

implied

Answer 7

the principle is deemed to have impliedly given the agent authority to accomplish anything necessary in getting the performance done of the principals directions

Question 8

agency by estoppel

Answer 8

• third party assumes that a person has the authority of an agent
• Third party can enforce contract against principal if there was nothing to alert the third party to true facts, then the principal is estopped (prevented) from denying that a relationship exists
• Then there is apparent authority

Question 9

Apparent authority

Answer 9

The agent has no real authority but it appears that they do, because of failure by the principal to give notice that it has ended or to correct the impression that it exists

Question 10

apparent exists:

Answer 10

1. An agency relationship has ceased to exist but the principal has failed to give notice of this to third parties
2. No agency relationship has ever existed, but the “principal” allows a third party to believe the “agent: was acting on the principals behalf
3. An agency relationship exists and the principal allows a third party to believe that the agents authority is greater than it is

Question 11

agency of necessity

Answer 11

(if there is an emergency)

1. One party has possession of another party’s goods an emergency occurs
2. This forces the party to take action regarding the goods for the benefit of their owner
3. It it impossible to communicate with the owner first

Question 12

if agency of necessity exists:

Answer 12

1. The agent may claim expenses
2. The agent has a defense if sued for trespass for disposing of the goods
3. A third party who has acquired goods from such an agent gets good title to the goods

Question 13

agency by ratification

Answer 13

Agency relationship created when a principal confirms and accepts a “fake” agents unauthorized act

Question 14

agency by ratification conditions (5)

Answer 14

1. The agent was indicated that it is acting as someones agent
2. The principal must both exist and have the capacity to make the contract
3. Within in reasonable time
4. Principal must agree to everything
5. Notice of ratification must be communicated

Question 15

consequences of ratification (3)

Answer 15

1. Agent is freed from any liability for acting without authority
2. Agent is entitle to be paid
3. Third party obtains title to any property which has been transferred under the contract

Question 16

undisclosed principal

Answer 16

When agent behaves as if no principal is involved even though there is

Question 17

undisclosed principal contract is binding if:

Answer 17

1. Agent was acting under the principals actual authority

2. Terms of the contract do not prevent the existence of the principal

Question 18

rights of agents

Answer 18

to payment

to indemnity

Question 19

duties of agents

Answer 19

performance
reasonable skill
accountability
avoidance of conflict of interest

Question 20

Third parties contractual duties

Answer 20

Any contract made by the agent with a third party is binding on the principal provided that it was made within the limits of the agent’s apparent authority

Question 21

Termination of agency (2)

Answer 21

operation of law

acts of the parties

Question 22

termination by operation of law (4)

Answer 22

death
mental incapacity
bankruptcy
frustration

Question 23

termination by the acts of the parties

Answer 23

performance

agreement or revocation

Question 24

irrevocable agency exists when

Answer 24

agency keeps going even after death, incapacity or bankruptcy