Class 5: Agency Law Flashcards
1
Q
“____” - A person who agrees to represent or act on behalf of a Principal and subject to their control.
A
An Agent
Becomes a fiduciary to the Principal because the relationship involves being placed in a position of trust.
2
Q
“____” - The person on whose behalf the agent works in respect of 3rd parties.
A
The Principal
3
Q
Following are examples of “____”:
- Corporation (P) and Officers (A)
- Employer (P) and Employee (A)
- Homeowner (P) and Real Estate Broker (A)
A
Agency Agreements
4
Q
Almost all employees who deal with 3rd parties are deemed to be “____” of employer.
A
Agents
5
Q
The following are helpful in distinguishing between “____” and “____”.
- Label given by the parties through K doesn’t always control.
- Key is whether the hiring party has right to control hired person’s conduct in performance of their duties.
- Also consider whether worker is in separate occupation (IC), duration (longer tends to be E), specially skilled (less tends to be E), payment (per job tends to be IC, per hour tends to be E)
A
Agent or IC (Independent Contractor)
6
Q
True/False:
Label given by the parties through Contract (Agent or IC) always controls employment status.
A
False.
Label given by the parties through Contract doesn’t always control employment status.
7
Q
Whether the hiring party has “right to control” hired person’s conduct in performance of their duties is key in determining…
A
Agent Vs. Independent Contractor (IC)
8
Q
Agent or IC?
- Long occupation duration
A
Agent
9
Q
Agent or IC?
- Specially skilled work
A
IC
10
Q
Agent or IC?
- Paid per job
A
IC
11
Q
Agent or IC?
- Shorter occupation duration
A
IC
12
Q
Agent or IC?
- Paid per hour
A
Agent
13
Q
“____” relationships are generally created by consensual agreement between the parties.
A
Agency
14
Q
To create an agency relationship, “____” must have contractual capacity, but even a minor can be considered an agent.
A
Principal
15
Q
True/False:
Agency relationship can be formed for any purpose.
A
False.
Must be a “LAWFUL purpose”
16
Q
The four ways to form an agency agreement are…
A
- By Agreement (express or implied) – aka Actual Agency.
- By ex post ratification by principal.
- By estoppel – aka Apparent agency.
- By operation of Law.
17
Q
What are the two types of Actual Agency?
A
- Express Agency
2. Implied Agency
18
Q
The following involves “____” Agency:
- When expressly authorized, the A also has implied authority to do what is reasonable and necessary to complete authorized tasks.
- Was the agent acting within the “usual and customary” authority given to someone in that position.
A
Implied Agency
19
Q
The following involves “____” Agency:
- Words of agreement between principal and agent.
- May be written, or oral (unless the agreement to be entered by A on behalf of P is required to be in writing under the Statute of Frauds, i.e., the equal dignity rule)
- May also sometimes be evident through conduct (i.e., P sends A a check for A to forward on to 3rd party)
A
Express Agency
20
Q
The following exemplifies “____” Agency:
- Even if a person is not actually an agent of another person (P) at the time they take an action or make a contract, the other person (P) can subsequent affirm the Agent’s behavior as his own.
A
Agency by Ratification
Ex: Alex mentions to his friend Lucy that he is having difficulty finding a reliable babysitter to watch his children on Friday nights. 3 days later, Lucy tells Alex that she identified a great babysitter (Rodrigo) who charges $20/hr and she set up a recurring babysitting gig on Alex’s behalf. Rodridgo will come to Alex’s house every Friday for 3 hours. Alex can “ratify” this agreement.
21
Q
The following exemplifies “____” Agency:
- If principal causes 3rd person to reasonably believe that another person is the principal’s agent (even though she is not), and the 3rd party reasonably relies to their detriment on that appearance, then the principal cannot deny the agency agreement.
A
Agency by Estoppel
- Focus is on the acts of the Principal:
Did the principal clothe the would-be agent in the appearance of agency?
Allow the “agent” to use the principal’s logo/uniform?
Failure to notify 3rd parties of agent’s termination?
22
Q
The following exemplifies “____” Agency:
- Certain family relationships
- Emergency situations
A
Operation of Law Agency
EX: Husband spends money on wife’s credit card for his basic necessities.
23
Q
What are the 5 Fiduciary Duties of an Agent to a principal?
A
- Care
- Must use reasonable skill and ordinary care; no negligence, recklessness or intentional misconduct. - Notification
- Agent must timely notify the principal of all matters concerning the agency. - Loyalty
- No self-dealing, conflicts, or unauthorized disclosures - Obedience
- Agent must follow all lawful and clear instructions of P - Accounting
- A must make and keep accounts of all P’s property and funds received/paid on behalf of principal.
- No comingling of A’s funds and P’s funds.
24
Q
The following involves which of the 5 Fiduciary Duties of Agents?
- Agent must timely notify the principal of all matters concerning the agency.
A
Notification
25
The following involves which of the 5 Fiduciary Duties of Agents?
- Agent must follow all lawful and clear instructions of P.
Obedience
26
The following involves which of the 5 Fiduciary Duties of Agents?
- Must use reasonable skill and ordinary care; no negligence, recklessness or intentional misconduct.
Care (Most often attacked, along with Loyalty).
27
The following involves which of the 5 Fiduciary Duties of Agents?
- A must make and keep accounts of all P’s property and funds received/paid on behalf of principal.
- No comingling of A’s funds and P’s funds.
Accounting
28
The following involves which of the 5 Fiduciary Duties of Agents?
- No self-dealing, conflicts, or unauthorized disclosures.
Loyalty (Most often attacked, along with Care).
29
What are the 4 Duties the Principal owes to the Agent?
1. Compensation
2. Reimbursement and Indemnification
3. Cooperation
4. Safe Working Conditions
30
The following describes which of the 4 Duties the Principal owes to the Agent?
- P must timely pay A for services rendered.
Compensation
31
The following describes which of the 4 Duties the Principal owes to the Agent?
- P must not prevent A from doing her job on P’s behalf
- In exclusive agency agreements with A, P cannot hire another agent to do the work that the original A is supposed to do
Cooperation
32
The following describes which of the 4 Duties the Principal owes to the Agent?
- If A lays out funds to do perform P’s work, then P must be timely reimbursed.
- P must generally hold A harmless and repay any losses incurred by A because P failed to perform on a valid obligation entered into by A on P’s behalf.
Reimbursement and Indemnification
33
The following describes which of the 4 Duties the Principal owes to the Agent?
- P must inspect working areas and warn A about any unsafe working conditions.
Safe Working Conditions
34
(Meinhard v. Salmon) Rule of undivided loyalty between partners applies:
"The punctilio (utmost) of an honor the most sensitive"
35
Scope of P’s liability for A’s acts depends upon the scope of A’s authority to act on behalf of P.
If A has "________", then P is bound.
Actual Authority (express or implied)
Exceptions:
- Even if there was no actual or implied agency, if P ratifies A’s conduct, then P is bound.
- P’s actions give rise to A’s apparent authority.
36
If an agent is given authority to carry out a task, they also have "_____" authority to take steps that are reasonably necessary to accomplish that task, even if it is not expressly stated.
Implied authority
Ex: CEO has authority to manage the day-to-day operations of a Corporation that sells widgets. She also has implied authority to hire/fire employees, buy equipment and advertising.
37
True/False
If P’s acts lead a 3rd party to reasonably believe that a person has authority to act on P’s behalf, then P will generally be liable to the 3rd party to the extent of the 3rd party’s reasonable reliance.
True (Apparent Authority).
Mere use of P’s email address, however, may not be enough.
38
True/False?
If A is acting within the scope of her authority when she forms a contract with 3rd party behalf of P, then P is obligated to perform the contract, regardless of whether P was disclosed, known but unidentified, or undisclosed.
True.
Conversley, If agent acts outside of her express or implied authority, P cannot be held liable on a contract theory unless P (1) ratified the contract, or (2) clothed the Agent in apparent authority.
39
P can demand performance by the 3rd party if principal was:
1. disclosed.
2. known but unidentified.
3. undisclosed.
Unless for example:
(A) "__1__" principal was expressly excluded as a party to the contract between A and 3rd Party.
(B) performance of agent is “____2____" (i.e., Agent has special skills).
1. Undisclosed
2. "personal to the contract"
Worst flashcard yet. Sorry!
-Pat
40
Agent’s Liability to 3rd Parties for Contracts Formed on Behalf of Principal,
Authorized Contracts:
Agent is (liable / not liable) if principal is “disclosed”.
NOT liable.
But remember, agent is entitled to indemnification if she was authorized.
41
Agent’s Liability to 3rd Parties for Contracts Formed on Behalf of Principal,
Authorized Contracts:
Agent is generally (liable / not liable) if principal is “unidentified”.
generally liable.
But remember, agent is entitled to indemnification if she was authorized.
42
Agent’s Liability to 3rd Parties for Contracts Formed on Behalf of Principal,
Authorized Contracts:
Agent is (liable / not liable) if principal is “undisclosed”.
liable.
But remember, agent is entitled to indemnification if she was authorized.
43
Agent’s Liability to 3rd Parties for Contracts Formed on Behalf of Principal,
UNauthorized Contracts:
Agent is (always / never) liable to 3rd Party.
always liable.
Agent will likely have breached “implied warranty of authority” if P was disclosed or unidentified, unless 3rd party knew that A was unauthorized or uncertain about her authority.
No indemnification by P.
44
True/False, Tort Liability:
-Principal and Agent are each individually liable for their own torts.
True.
45
True/False, Tort Liability:
-Principal can be liable for her own torts when she uses an agent wrongfully.
True.
Ex: negligent, entrustment.
46
True/False, Tort Liability:
-Sometimes P may be held liable for the torts of A, regardless of whether A is an employee or independent contractor.
True.
| vicarious liability
47
True/False, P’s Liability for A’s Authorized Torts:
P may not be liable to foreseeable persons injured by A’s torts, if Principal authorizes A’s tortious conduct.
False.
P may be liable.
Ex: Tony Soprano tells Furio Guinta to go break a guy’s kneecaps. Furio is liable. So is Tony.
Ex: Homeowner tells landscaper crew to mow the lawn into the boundaries of neighbor’s home.
48
The following involves what?
P is vicariously liable for A’s torts if A was acting within the scope of his employment.
"Respondeat Superior"
(KLAW: Know the latin here)
But when is it within the “scope of employment”?
- At work
- On the job
- During business hours
- But also “detours” (short and generally work-related deviations)
- Not “frolics” (big deviations for personal business)
Note: merely having a corporate policy against the A’s wrongful actions is often insufficient to guard against liability.
49
Employers usually (liable / not liable) (but they’ll ALWAYS be SUED) for intentional torts committed by employees w/ no relation to work.
not liable.
50
Employer will be (liable / not liable) for employee’s intentional torts, if:
- Tort relates to employee’s work and intended by employer (e.g., bouncers)
- If employee is essentially alter ego of company (tiny co. CEO)
- Employee’s act resulted from employer’s negligence or recklessness.
liable.
THIS IS WHY EMPLOYERS BUY INSURANCE
Examples of employee's negligence or recklessness:
- If the employer was aware of, and fails to stop, employee’s reckless or dangerous actions (e.g., smoking in a gas station)
- Employee was aided in their wrongdoing by having apparent agency (e.g., City liable for cop rape because cop used uniform & patrol car)
51
Employers generally (liable / not liable) for independent contractor’s torts because they have no right to control the IC’s behavior.
not liable.
So, Respondeat Superior usually does not apply to IC’s
EXCEPT:
- Negligent Hiring/Entrustment
- Inherently Dangerous Activities
- Certain Non-delegable duties (e.g., hospital still liable for wrongdoing by IC surgeons)
52
The following are examples of:
- Expiration of agency agreement
- Achievement of purpose
- Occurrence of specified event
- Mutual agreement
- Termination by one of the parties
Termination of Agency
- To avoid “apparent agency” problems, employers are wise to provide notice of termination to affected 3rd parties.
