Definitions-Agency and Partnership Flashcards
Agency-Three Elements
- Consent
- On behalf of
- Control
Three types of Agency
- Actual
- Apparent
- Inherent
Actual Agency Relationship
Exists when there has been express or implied consent by the principal and agent that agent will act on behalf of principal and under principal’s control.
Apparent Agency Relationship
Exists when a principal has allowed a third party to reasonably believe that a non-agent has actual agency authority.
Inherent Agency Power
A term used to indicate the power of an agent which is derived not from authority, apparent authority or estoppel, but solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent.
Equal Dignity Rule
When the Statute of Frauds would apply to a contract executed by an agent:
1. The agent’s authority to bind the principal must also be in writing or the principal is not liable.
Exceptions: Corporate officers or General partners
Ratification
Occurs whenever a principal elects to validate an agent’s previously unauthorized act done on the principal’s behalf. The result is that the act will be treated as if it had been authorized originally. It will relate back in time to the original act.
Six Types of Agency Relationships
- General Agent
- Special Agent
- Co-Agent
- Dual Agent
- Subagent
- Agent’s Agent
General Agent
Conducts a continuous series of transactions for the principal and the principal is bound by all the usual and customary transactions of the agent.
Special Agent
Conducts either a single transaction or small series of transactions for the principal and teh principal is only bound for the acts that are necessary to accomplish the specific agency purpose.
Co-Agent
A principal may delegate as many agents as he wishes and each agent is a co-agent with the other. The co-agents are no responsible for the acts of the other co-agents.
Dual Agent
An agent who represents two or more principals that are dealing at arm’s length. This creates a conflict of interest but is acceptable as long as:
- The agent provides full disclosure of material fact and;
- There is informed consent, usually in writing.
Sub-Agent
Appointed by the agent with the authorization of the principal.
Agent’s Agent
An agent appointed by an agent to perform functions for the agent and not for the benefit of the principal. The principal is never responsible for the agent’s agent.
Two Types of Actual Authority
- Express
- Implied
Both can occur in the same fact pattern and if that occurs, I need to discuss both.
Apparent Authority
Results from the appearance of actual authority in the agent created by some word or act on the part of the principal toward a third party.
An undisclosed principal can never create apparent authority.
Inherent Authority
Imposes liability on someone who put a potential “agent” in position to harm third parties, even though the “agent” does not have actual or apparent authority.
Disclosed Principal
The principal is disclosed to the third party relieving the agent from all liability.
Partially Disclosed Principal
The third party is aware that the agent is acting as an agent but whom does not know the identity of the principal. Both the agent and principal can be bound by the agents’s actions.
Undisclosed Principal
The third party is unaware that the agent is acting on behalf of a principal. If the agent has actual authority, both the principal and agent can be bound by the agent’s actions.
Respondeat Superior
An employer is responsible for the torts committed by an employee during the course and scope of his employment.
Seven Duties of an Agent to Principal
- Duty of Obedience
- Duty to Avoid Conflicts of Interest
- Duty to Not Take Secret Profits
- Duty of Confidentiality
- Duty of Full Disclosure and Notification
- Duty to Account
- Duty not to Commingle Property.
Duty of Due Care
Every agent is required to act with due care and to execute the agency duties with the skill and diligence of a reasonable, prudent person.
Remedies Available to Principal if Agent Violates their Fiduciary Duty
- Damages: Punitive damages may be available where breach was extremely serious and willful.
- Equitable accounting: Agent must fully account for all of the principal’s assets, expenses and profits during the term of the agency.
- Restitution: Disgorgment of profits wrongfully obtained.
- Constructive Trust
- Equitable Lien