Creation of an Agency Relationship

Question 1

First Step for an Agency Analysis

Answer 1

Is to always look to see whether an agency relationship was created.

Question 2

Requirements of Agency: Mutual Assent

Answer 2

To create an agency relationship there must be both a manifestation of the principal’s intent and of the agent’s consent. Assent can be expressed or implied.

Question 3

Requirements of Agency: Capacity

Answer 3

Both the principal and agent must have the requisite capacity to offer assent.

Question 4

Principal’s Requisite Capacity

Answer 4

K capacity (capacity to enter into transactions, control one’s business affairs).

• excludes mentally incompetent individuals and minors (unless the latter contracts for necessaries)
• only includes corporations as to matters within its corporate powers

Question 5

Agent’s Requisite Capacity

Answer 5

Minimum mental capacity to consent. Therefore minors and incompetents can act as agents.

Question 6

Agency By Ratification

Answer 6

Ratification allows a principal to grant retroactive authority for his agent’s earlier unauthorized actions.

Question 7

Requirements for Ratification (At Time of Ratification)

Answer 7

Principal must have:

• the requisite K capacity to authorize the agent’s actions
• knowledge of all material facts concerning the transaction

Question 8

Requirements for Ratification (Time of Performance)

Answer 8

The ratified act must be one that the principal could have authorized at the time of the act, meaning the principal must have been in existence and had the capacity to enter into the agreement.

Question 9

A Person Ratifies an Act When:

Answer 9

Include:

• by manifesting assent that the act shall affect the principal’s legal relations; or
• through conduct that is justifiable only on the assumption that the principal consents to be bound

Question 10

Limitations on Ratification

Answer 10

Ratification is not effective:

• in favor of a person who engages in misrepresentation or other conduct that would make a K voidable
• in favor of an agent against a principal when the principal ratifies to to avoid a loss
• to diminish the rights or other interest of persons, not parties to the transaction, that were acquired in the SM prior to the ratification.

Question 11

Complete v. Partial Ratification

Answer 11

Partial Ratification is not permitted. If a principal attempts to ratify part of a K/action it will be perceived as a complete ratification.

Question 12

Can an Undisclosed Principal Ratify Conduct?

Answer 12

(Second Restatement of Agency)- says no.

(Third Restatement of Agency)- ratification is possible if agent clearly acts on behalf of the principal and the principal’s conduct justifies a reasonable assumption that he is manifesting assent to the agent’s conduct.

Question 13

Can One Be an Agent for Two Adverse Parties?

Answer 13

Only if both parties are fully advised and give their consent. The burden is upon the agent to show full disclosure and consent.

Question 14

Proving that there is an Agency (Evidence)

Answer 14

Agency can be established by circumstantial evidence. BOP is on party asserting relationship (preponderance). Relevant factors include:

• the situation of each party; and
• their words and actions

Question 15

Can One Disclaim an Agency Relationship?

Answer 15

No. Parties cannot disclaim an agency relationship, if one exists, even if the disclaimer is contained in a K between the parties.