II. Business Law-Agency Flashcards
- Types of Agency Relationships and Creation
Types of Agents
- Special Agent - to conduct a single transaction or series of related transactions
real estate agent /estate liquidating company / bankrupt liquidating company
- General Agent - to conduct all necessary personal or business transactions
hired manager
- Universal Agent - to do all acts that can be legally delegated
- Subagent - hired by another agent on behalf of the principal
- Agency Coupled with an Interest — This is an agency in which the agent holds a property right in the subject matter of the agency
book agent
* A power of attorney usually limits an agent’s authority to specific transactions.
- Types of Agency Relationships and Creation
III. Creation of an Express Agency Relationship
actual agency relationship
- Express authority
- Implied authority
- Types of Agency Relationships and Creation
IV. Creation of an Apparent Agency Relationship
By perceptions of third parties that have been created or allowed by the principal
- Apparent Agency
- Lingering Apparent Agency
- Agency by Estoppel or Ostensible Authority
- Types of Agency Relationships and Creation
V. Creation of an Agency Relationship by Ratification
- In this situation, the agent does not have express, implied, or apparent authority, but he or she enters into a contract on behalf of an assumed principal. The principal is not bound, but ratification gives the principal a choice.
- If your agent or someone else enters into a contract for you without authority, you, as the principal, can choose to be bound by the agreement.
- Types of Agency Relationships and Creation
Statute of frauds requires writing for contracts for;
- for sale of goods of $500 or more,
- real estate,
- contracts impossible to perform in one year,
- a promise to answer the debt of another, and
- an executor’s promise to be personally liable for the debt of an estate
- Types of Agency Relationships and Creation
Which of the following conditions must be met to form an agency?
- An agency agreement must be in writing.
- An agency agreement must be signed by both parties.
- The principal must furnish legally adequate consideration for the agent’s services.
- The principal must possess contractual capacity.
4.
The principal must have the ability to enter into contracts.
- Duties of Agents and Principals
B. Termination by Act of Parties
Express and implied authority, not apparent authority.
D.Termination by operation of law
Ends ALL authority: express, implied, and apparent.
- Principal has a duty to notify third parties about the termination in order to halt the agent’s authority. Third parties would include customers, vendors, and others who have dealt with the agent.
- Agent has a duty to honor the termination and not use apparent authority to continue benefiting from the relationship.
- Lingering apparent authority that exists after termination by act of the parties can be ended as follows:
a. Actual notice (which is a direct notification by letter, e-mail, or phone call) to third parties that the agent no longer has authority
b. Constructive notice—Publication or general mailings that indicate the agency relationship has been terminated
- Duties of Agents and Principals
aq. duties.agents.001_2-18
Ozgood is a principal and Flood is his agent. Ozgood is totally dissatisfied with the agency relationship and wishes to terminate it. In which of the following situations does Ozgood not have the power to terminate the relationship?
- Ozgood and Flood have agreed that their agency is irrevocable.
- Flood has been appointed as Ozgood’s agent pursuant to a power of attorney.
- Flood is an agent coupled with an interest.
- The agency agreement is in writing and provides for a specific duration, which has not elapsed.
Where the agency is an agency coupled with an interest (i.e., where the agent owns part of the subject matter), the principal does not have the power to terminate the relationship).
Normally a principal has the power to terminate an agency relationship even though doing so would constitute a breach. Also, if the agent breaches his fiduciary duties, the principal has the right of termination even with a specific duration. For example, a real estate agent who disguises an offer that is actually from her would have breached her fiduciary duty and could be terminated even if the listing agreement still had time to run.
- Contract Liability of Agents and Principals
type of authority the agent had / whether the principal was disclosed to the third party
- Disclosed Principal with Actual Authority (Express or Implied)—In this situation, the principal only is liable to the third party
- Disclosed Principal with Apparent Authority—In this situation, the principal only is liable to the third party, but the agent is also liable to the principal for acting as an agent without express or implied authority
- Liability of Disclosed Principal—Agent has no Actual or Apparent Authority—In this situation, the agent only is liable to the third party; the principal has NO liability.
Alex goes to a new town and represents to a hotel manager that he is there to book the hotel for the upcoming convention of the National Association of Realtors (NAR). Alex presents no authority, the manager does not check with the NAR, and the manager reserves the hotel for the NAR. The NAR is not liable to the hotel for the deposits and damages for no convention, but Alex is (if the hotel can find Alex!). - Partially Disclosed Principals—If an agent is acting for a principal under actual authority, but does not identify the principal, then both the principal and the agent are liable to the third party
- Undisclosed Principals—If an agent with actual authority does not disclose to the third party the fact that he or she is acting on behalf of a principal, and the third party believes the agent is acting on his or her own behalf, the agent and principal are both personally liable on the contract
- Contract Liability of Agents and Principals
aq. contract.liab.004_0818
Which of the following authorities cannot exist in an undisclosed principal/agent relationship?
- Apparent authority.
- Implied authority.
- Express authority.
- There is no authority that the agent has because the agency relationship is undisclosed so the agent is acting for himself or herself.
Because the existence of the principal (as well as identity) is not known, it is not possible for a third party to rely on representations or appearances to create authority.
- Contract Liability of Agents and Principals
AICPA.910502REG-BL
Kent, without authority, contracts to buy computer equipment from Fox Corp. for Ace Corp. Kent tells Fox that Kent was acting on Ace’s behalf.
For Ace to ratify the contract with Fox,
- Kent must be a general agent for Ace.
- Ace must know all material facts relating to the contract at the time it is ratified.
- Ace must notify Fox that Ace intends to ratify the contract.
- Kent must have acted reasonably and in Ace’s best interest.
To ratify such a contract, the principal must know all material facts, affirm the entire contract, have capacity to ratify the contract, act within certain time constraints, and follow the same formalities (as far as a writing requirement) that the original contract had to follow.
- Tort Liability of Agents and Principals
III. Principal’s Liability for Negligent Torts of the Agent or Acts of the Agent
B. Requirements for Vicarious Liability
- Existence of a master-servant relationship
- Scope of Employment
C. Deviations from the scope of employment will not alter the principal’s liability if:
i. They are minor; or,
ii. After deviation, A is returning and “reasonably close” to the point of departure,
iii. Frolic and detour—Agent has diverted from the principal’s business and is completing personal tasks while working on principal’s business–no liability for principal’s during the frolic and detour.
iv. Return from frolic and detour—Agent gets back to the business of the principal after personal business is complete; liability returns.
