Chapter 14

Question 1

Agency Relationship

Answer 1

Created among three parties which are the agent, the principal and the 3rd person.

Question 2

Agent-

Answer 2

Authorized to act for the principal. Job is to negotiate contracts on behalf of the principal with a 3rd person. (Think of a real estate agent)

Question 3

Principal

Answer 3

Gives authority to the agent to make contracts on its behalf with the 3rd person . Becomes one of the parties to a contract.

Question 4

3rd person

Answer 4

Negotiates a contract with the Agent. This becomes one of the parties to the contract with the principal

Question 5

Classifications of Agents

Answer 5

Universal Agent
General Agent
Special Agent

Question 6

Universal Agent

Answer 6

Authorized to perform all acts legally granted by the Principal ex.(DPOA)

Question 7

DPOA

Answer 7

Durable Power of Attorney

Question 8

General Agent

Answer 8

Authorized to all transactions connected with a certain business (ex. business of a hotel)

Question 9

Special Agent

Answer 9

Authorized to perform only those acts specified by the Principal (Ex. realtor selling a house)

Question 10

Creating an Agency

Answer 10

There is no formal procedure is necessary to establish an agency relationship

Question 11

Types of Agency Authorization

Answer 11

Express
Ratification
Agency by Operation of Law

Question 12

Express Authorization

Answer 12

May be oral or written, ex) SC health care power of attorney- written authorization of an agent to make health care decisions on behalf of the P

Question 13

Ratification Authorization

Answer 13

Authority created retroactively. Occurs when initially an agent makes a contact on behalf of a Principal but does not have the express authority to do so. Normally the Principal would not be bound by the agreement. The alleged principal may become bound to the contract by ratifying the agreement.

ex)friend selling your car for 8.5k while you were away , but you could ratify that and sell it for that price if you wanted to…

Question 14

Example of Ratification Authorization

Answer 14

Selling a car for 9k. A buyer looks at it while she was away , which her husband accepts. Because the husband is not an agent I am not obligated to go though the deal. I could ratify the deal by agreeing to go through the sale

Question 15

Conditions for Ratification

Answer 15

• Agent must have purported to act on behalf of or as an agent for the Principal
• Principal must have been capable of authorizing the act
• Principal must have full knowledge of all material facts
• Ex: Paul v Tom (paul is okay with this arrangement because by cashing the rent checks he is ratifying the agreement)

Question 16

Agency by Operation of Law

Answer 16

An agency relationship that comes to fruition in an emergency. (Employee buying wood for the business)

Question 17

Acts for the Principal

Answer 17

An agent’s ability to transact business on behalf of a principal depends on the scope of his authority.
The scope of the authority is: Actual authority and Apparent Authority

Question 18

Actual Authority

Answer 18

Express- P tells A (via words or in writing) to perform a certain act (apartment complex owner hires a leasing agent to rent apartments at a certain price or Ford dealer sales manager)

Implied- Often, when P receives express authority he is also given implied authority to do what is reasonable to carry on the agency purpose (a real estate agent hired to sell land, the agent would have implied authority to post a for sale sign, offer tours and advertise the property even if all the details were not laid out on how to sell it unless directed)

Question 19

Apparent Authority

Answer 19

A person cloaks the agency with the appearance of having authority that leads a 3rdd person to reasonably believe that the agent has the authority to act on behalf of the principal.
Cove Management VS AFLAC

Question 20

What are the duties of the agency parties?

Answer 20

Duty to Cooperate
Duty to Compensate Agent
Duty to Reimburse
Duty to Indemnify

Question 21

Duty to Cooperate

Answer 21

Must perform as directed under the K

Question 22

Duty to Compensate Agent

Answer 22

Unless A agrees to work for free

Question 23

Duty to Reimburse

Answer 23

For any authorized payment A made on behalf of the P

Question 24

Duty to Indemnify

Answer 24

Pay for any damages incurred by agent while acting under the authority of the P (Generally entails some kind of law suit against the A)

Ex) A principal has goods that belong to someone else and directs the agent to sell them. The agent sells the goods believing they are property of the principal. If the legal owner of the goods sues the agent, the principal must pay the agent for costs incurred in the lawsuit.

Question 25

What are the Duties to the Principal from the Agent?

Answer 25

Duty of Loyalty 
Duty of Obedience and Performance 
Duty to Exercise Reasonable Care
Duty to Account (for any funds)
Duty to Inform (duty to keep them informed for any action regarding the deal)

Question 26

Models of Disclosure of a Principal

Answer 26

Disclosed Principal
Partially Disclosed Principal
Undisclosed Principal

Question 27

Disclosed Principal

Answer 27

Principal’s identity is know by the 3rd party

Question 28

Partially Disclosed Principal

Answer 28

Agent makes known the existence of a principal but not the principal’s identity

Question 29

Undisclosed Principal

Answer 29

Agent does not disclose the agency relationship or identity of the principal

Question 30

What conditions are there to the principal being liable for contracts in the partially disclosed and undisclosed principals`

Answer 30

The principal is liable but to a degree because it is up to a 3rd party to discover if there is a principal and then they have under 3 years to find out WHO that person is.

Question 31

Differentiate Agent from :

Answer 31

Employees: An agent us hired to negotiate specific contracts on behalf of a principal . Not all employees have the power

Question 32

Independent Contractor

Answer 32

Independent is bound by a K to produce certain results but the actual work is controlled by the contractor. In contrast an agent is controlled by the principal in the performance of their work .