Formation of the Agency Relationship and Basics

Question 1

Agency - Core Concept

Answer 1

• a fiduciary relationship that arises when one person (“principal”) appoints another to act on the principal’s behalf and the agent consents to act
• agent must also act subject to principal’s control

Question 2

Consent

Answer 2

• to form agency relationship, need consent of both agent and principal
• may be established expressly, or by implication from the parties’ conduct

Question 3

On Behalf Of

Answer 3

• requirement generally understood to mean agent must be acting primarily for benefit of the principal, rather than for own benefit or that of some other party

Question 4

Control

Answer 4

• agent must act subject to principal’s control
• BUT degree of control doesn’t have to be significant
  -> requisite level may be found merely bby virtue of principal specifying task to perform ,even if doesn’t say how to do it

Question 5

Creation of Agency Relationship

Answer 5

• consensual
• not all contractual formalities are necessary (don’t need consideration)
• need capacity (primarily of principal) and consent (of both)

Question 6

Capacity

Answer 6

• principal must have contractual capacity
  -> appointments by minors, incompetents, + most unincorporated orgs are voidable
• agent needs only minimal capacity
  -> CAN be an agent w/o contractual capacity (though not if you entirely lack mental capacity)
  -> minors can agents but not principals

Question 7

Disqualification of Agents

Answer 7

• can be disqualified for representing both parties or failing to have a required license

Question 8

Writing

Answer 8

• agency law generally doesn’t require a writing to form the relationship, but the Statute of Frauds may require one
• equal dignities rule - many states require a writing when the agent is supposed to enter into contracts w/in the Statute of Frauds (mostly land transactions)

Question 9

Modes of Creating Agency Relationship

Answer 9

• by an act of the parties
• by operation of law

Question 10

Agency Relationship - By Act of the Parties

Answer 10

• parties may create an agency relationship by agreement between the principal + agent (actual authority)
• parties may also be bound through holding out by principal (apparent authority) or ratification

Question 11

By Operation of Law

Answer 11

• estoppel (virtually same as apparent authority, in sense that it requires third-party reliance on principal’s communication)
• statute (usually designed to accomplish limited purpose)

Question 12

Contract Liability

Answer 12

To figure out whether principal is liable, ask:
- did the agent have actual or apparent authority at the time of the contract, or did the principal ratify the contract later?
- if so, the principal is liable on the contract (but usually the agent is not)

Question 13

Tort Liability

Answer 13

To figure out if liable, ask:
- was the tort committed by an employee in the scope of employment?
- if so, the employer and employee are jointly and severally liable to the third party