M - 4 - Agency

Question 1

What are the three parities in an agency relationship?

Answer 1

Principle - Hires an agent to work on behalf on the principle. Think of an athlete hiring an agent to negotiate contracts on their behalf.

Agent - This is the person that acts on behalf of the principle. Think of the agent acting on the athlete’s behalf.

Third Party - This is everyone else who the agent is working with on behalf of the principle. Think basketball teams that the agent is negotiating contracts with.

Question 2

What are requirements for a principle?

Answer 2

The principle cannot be a minor or incompetent.

Question 3

Does the agency relationship require writing to be enforceable? What are the exceptions?

Answer 3

No, normally the principle agency relationship does not require writing. Consideration is also not required since the agent can do the work for free.

Under the MYLEGS acronym, the Y and the L are the exceptions where writing is needed.

L - When you hire an agent to buy and sell land on your behalf. Now if you hire someone to build a house or find someone to find you land, this would not require writing as long as it can be completed within one year.
Y - If the agreement cannot be completed within one year.

Question 4

What are the requirements for a agent?

Answer 4

The agent does not really have any requirements. The agent can be a minor or mentally incompetent, as long as the principle is not a minor or mentally incompetent.

As with the principle, consideration is not required to form an agency relationship.

Question 5

What is a power of attorney?

Answer 5

A power of attorney is a principle agency relationship that was put into writing. Once it is written, the agent is referred to as the attorney in fact. Just means that they can act on behalf of the principle.

Normally, on the principle is required to sign since they are giving this agent some power over something. Agent signature is not required.

Question 6

What are the duties of an agent to the principle?

Answer 6

The agent has to perform whatever duties are expressed in the contract via writing or orally. The also have four implied duties as well.

L - Duty of loyalty, the agent has to act on behalf of the principle and be loyal to them. They cannot act on their best interest or represent someone else. No kickbacks, no self dealings, etc.

O - Duty of obedience, need to follow all reasonable directions of the principle weather it is oral written. As long as it is legal and doable.

R - Duty of reasonable care, held to a reasonable person standard. Do not be reckless.

A - Duty of Account, keep good books and records. Make sure to notify the principle all the money that came in, and all the expenses that went out for whatever your task you were hired for may be.

Question 7

What is a subagent?

Answer 7

This is when an agent hires someone to work under them and help them out. This subagent owes a duty of care to both the agent and the principle.

So think of a store manager, that hires an employee to stock the shelves. These are subagents.

Question 8

Why would a principle need a remedy?

Answer 8

Agent breaches a contract or agreement. They broke the LORA agreement as an example.

Question 9

One of the principle’s remedies is Tort Damages against an agent, what is that?

Answer 9

Tort Damages - A tort is a wrongful act. It could be negligent and intentional. Principle can sue and recover money damages for the agent comitting the wrongful act.

Question 10

Can the principle also sue the agent for contract damages?

Answer 10

A contract needs to have capacity and exchange of consideration. So if the agent was getting compensation, then you can sue for contract damages. If they were not getting paid, then you cannot.

Question 11

What are some of the things an agent can do to breach their duties?

Answer 11

Recovery of Secret Profits - Getting a kickback from deals, secret profit, the principle can normally get this profit back by imposing a constructive trust.

Withhold Compensation - If the agent is getting paid, you can withhold their pay if they are breaching the principle and agent relationship.

Question 12

What are the duties of the principle to the agent that are implied by law?

Answer 12

Unless the otherwise agree, the agent has to receive compensation.

Principle has to reimburse the agent for expenses incurred to carry out the agency.

Question 13

What are the remedies of the agent?

Answer 13

Normally it has to do with pay. If the principle is not paying you, you can stop working and sue them for breach of agreement.

Question 14

What is the difference between the power to terminate vs the right to terminate?

Answer 14

For principle and agency, either party has the power to terminate the contract, but they may not have the right to do so.

For example, someone hires an agent to be their agent for 9 months. Both parties have the power to terminate the contract the next day, but they don’t have the right since it is a 9 month agreement. Due to this, if they did terminate the next day, this would be a breach of contract.

Question 15

What is an agency coupled with an interest?

Answer 15

This is the exception to when either party has the power to terminate the contract.

This is when the agent can terminate an agency, but the principle does not have the power or the right to terminate an agency.

For example, if you are a creditor, and you give the principle a loan, you want some security. You ask for some collateral, and the principle says I will give you the building. If you default on your loan, the creditor can take that house, and sell it to satisfy the debts of the principle. This is an agency relationship where the principle cannot get out of it.

Question 16

What are the three ways an agent can bind a principle?

Answer 16

A grant of actual authority - Agent has the power and the right

Apparent Authority - Agent has the power but not the right

Ratification - Agent has not power or right, but principle chooses to be bound by the unatorhized act.

Question 16

What are the two types of actual authority?

Answer 16

You have express and implied.

Express - Is the oral or written agreement of what the agent needs to do on behalf of the principle.

Implied authority - This was not oral or written, but the authority is implied like a grocery store manager would hire, fire, buy inventory, pay bills etc. This may not be expressed but it is implied.

Question 17

How to terminate actual authority?

Answer 17

Act of the parties - Agent quits or gets fired. Could be damages is the right to terminate was not there.

Accomplishment of objective or expiration of stated period - You did your job, sold what you needed to do, or your contract expired. Or after reasonable period of time, whatever the industry standard is.

Automatic termination of actual authority by law - (BID LID) - Terminates both actual and apparent authority.

Question 18

What does BID LID stand for?

Answer 18

B - Discharge in bankruptcy of the principle.

I - Incapacity of the principle.

D - Death of either of the principle or agent

L - Agent does not have the required license, that may be needed.

I - Illegality, you sell something Illegal for example.

D - Destruction of the subject matter.

Question 19

What is the difference between actual authority and apparent authority?

Answer 19

In actual authority - The agent has reasonable belief that the agent has the power to bind the principle. Ex: The principle gave the agent the title of president, or director, then the agent can assume they can do a majority of what the principle does to carry out the business. Principle cannot sue the agent in this scenario.

In apparent authority - Third parties have reasonable belief that the agent had the power to bind the principle. For ex: the agent quits, and the principle does not let the third parties know, but they assume they had the power to bind the principle. Principle can sue the agent in this scenario.

Question 20

When does actual authority normally occur?

Answer 20

It’s when you give an agent a fancy title, so it is implied that they can do more because of that title than maybe they actually can.

Question 21

What are secret limiting instructions?

Answer 21

This is when the principle limits the agents actual authority but it does not limit the apparent authority. Apparent authority is destroyed once the principle notifies third parties of this limitation.

Question 22

Give an example of apparent authority?

Answer 22

Pam hires Alex to be the store manager. Right off the bat, their actual authority is to purchase pets, but Pam tells Alex, he cannot purchase pets over 200 dollars.

Customer walks in and offers some dogs for 250. Alex accepts. Alex does not have actual authority to purchase those pets, but he does have apparent authority, since the customer assumed that the manager has the role to purchase pets. Pam will pay the customer for the puppies, but can hold Alex liable for any loss that results.

Question 23

Difference between a general agent and a special agent?

Answer 23

General Agent - These agents perform a series of transactions involving a continuity of service (for ex: store managers, CEO, president’s etc. ). They have more apparent authority.

Special Agent - These agents perform one or more transactions involving one or more service (ex: relator). Less apparent authority since someone would know that this person is only here to sell a house, not your clothes.

Question 24

What is the general rule to terminate the apparent authority?

Answer 24

Give notice to third parties. For all the customers the agent has worked with before, actual notice (oral notice).

Everyone else would be constructive notice, just something notifying everyone like an ad in a newspaper.

Question 25

What if the agent’s authority is terminated by law?

Answer 25

Agent’s apparent and actual authority is terminated. No notice is needed to be given to customers.

Question 26

What is Estoppel to deny existence of agency?

Answer 26

This is when someone claims to be your agent but they are not. If the principle does not speak up and notify people that this guy is not my agent, the principle will be estopped from denying an agency relationship.

For example, Tom tells everyone that he is Pete’s agent, but Pete knows this is not true. If everyone believes that Tom is actually Pete’s agent, and Tom buys some land on Pete’s behalf, then they denial would be estopped since Pete did not notify people that he is not his agent, even thought Pete knew Tom was saying this.

Question 27

What is ratification for agency principle relationship?

Answer 27

This is an interesting one. This is when someone let’s say Tom negotiates a deal on behalf of Pete, but Tom is not Pete’s agent. Tom ends up getting Pete this heck of a deal, and Pete says, you know what, I’ll do it. This is ratification.

For example, Tom calls an employer and says, I would like to negotiate a salary for my principle Pete. The employer says ok, and Tom get’s Pete a heck of a salary. Pete has no idea who Tom is, but loves the deal he got him. He says alright.

Question 28

For ratification of a principle and agency relationship, how would the principle ratify?

Answer 28

They can either do it expressly or implicitly.

Expressly - Verbal or in writing

Implicitly - by accepting with implication. Cashing in the salary checks.

Question 29

What kind of contract’s cannot be ratified?

Answer 29

Illegal, or before the offer is withdrawn.

Question 30

If there is a breach of contract, and the third party knows who the principle and agent are, can the agent be held liable for those performances? What are the exceptions?

Answer 30

No they cannot. If you represent an athlete, and the athlete does not show up, do they want the agent playing instead? No, they do not.

If the third party does not know who the principle is, or they do not even know that you are an agent, the agent can be held liable of the contract.

Question 31

If you falsely make a statement that you are the agent of someone, but you are not, are there any consequences?

Answer 31

Yes, the agent can be held liable by the third party for any damages caused by this breach.

Question 32

What is the difference between unidentified vs undisclosed?

Answer 32

Unidentified - The principal’s identity is not disclosed to the third party

Undisclosed - Neither the existence or the identity of the principle is disclosed to the third party.

There could be some penalties for doing this.

Question 33

What is a third party election?

Answer 33

This is when a third party can hold either the principle or the agent liable if the principle was undisclosed or unidentified.

Question 34

If the agent gets into a contract on behalf of the principle, and the third party does not perform, who can hold the third party liable? The principle or agent?

Answer 34

Principle

Question 35

What are the two types of torts?

Answer 35

Unintentional (negligence) or Intentional (fraud)

Unintentional pay compensatory damages and intentional is for both compensatory and punitive.

Question 35

Under the general rule, if the agent commits the tort, who is responsible? The agent or the principle? What is the exception?

Answer 35

The agent

If the tort is committed by the agent and it was committed on the scope of employment, then the employer could be liable only if they were an employer. This does not relieve the agent of their reliability.

Question 36

What are the factors that you need to look at to determine if an agent is an employee or an independent contractor?

Answer 36

Biggest factor is control.

If you are an employee - the employer has more control of the employee’s work.

If you are an employer - An employer has little control over the contractors work.

Other factors include:

• Worker has a business of their own, who provides their own tools and facilities, length of employment, basis of compensation, degree of supervision.

Question 37

One you figure out it the person is an employee or a contractor, what is the second step?

Answer 37

You need to know if the person committed the tort during working hours. They make it pretty obvious in the exam apparently.

Question 38

Would the employer be held liable on an intentional tort?

Answer 38

If the employee committed an intentional tort and actually wanted to defraud, then the employer would not be held liable. They are more so held liable during unintentional torts.

Question 39

When can an employer be held liable if the act involved time and location?

Answer 39

For example, if a UPS driver went off their route to pick something up personally, UPS would still be liable.

If the UPS driver, took the truck and went to New Jersey to tan during work hours, UPS would not be liable.

Question 40

Would the employer still be held liable if they had an agreement with an employer and still breached it? For example, they told all their UPS drivers not park on people’s driveways, and they do it anyway and run someone over?

Answer 40

Yes UPS will still be liable.

Question 41

When can the employer be liable for torts from independent contractors?

Answer 41

Employer authorized the act

Work involved ultra-hazardous activity.