Principal/Agent Hypos Flashcards
A went to B to have her brakes repaired. B had an independent contractor arrangement with the C. C negligently repaired A’s brakes, resulting in an accident. Is B liable?
The issue is whether or not B is liable for A’s accident when C, an independent contractor of B, negligently repaired A’s brakes.
The general rule is that when a principal contracts with an independent contractor, the only requirements in order to validate their relationship are assent and benefit. As long as those both exist, there can be no liability for an independent contractor’s tortious act. There is an exception that exists for ultra-hazardous activities in which the principal will retain vicarious liability for the act of an independent contractor.
Here, we need to determine if the ultra-hazardous exception applies to C when they were repairing A’s brakes. In general, if an activity is public facing, it is considered to be ultra-hazardous. Because failing brakes have the potential to harm the general public, it is an ultra-hazardous activity.
Therefore, B is liable to A for C’s negligence.
A employs B. A instructs B to drive across town to deliver doughnuts to a branch office. On the way back, B stops to pick up her shirts at the dry cleaner for work the next day. In the parking lot of the dry cleaner, B hits a pedestrian. Is A liable for tort committed in parking lot ?
The issue is whether A is liable for B’s tort when B was on the job but stopped to complete a personal errand before returning to work.
The general rule is that the principal is liable for any tort committed by the agent while they are acting within the scope of their job. However, if the agent is acting outside of the scope of the job, the principal is not liable for their actions. It is most important here to determine if the agent was on a frolic or detour at the time of the tortious act. A is a new, independent journey that is outside of the scope of agency. A detour is a mere departure from an assigned task and is inside the scope of agency.
Here, when B stopped in the middle of their job to complete a personal errand before returning to work, they took a detour from their assigned task with the intent to resume their duties once completed. B was acting within the scope of their assignment when B hit a pedestrian
Therefore, A is liable for the tort committed by B while under A’s employ.
A tells B that she is an expert in negotiating real estate transactions. B orally informs A that B wants A to negotiate the sale of Blackacre. A negotiates the sale of Blackacre for B. Is B bound on the sale?
The issue is whether B is bound on a sale made by A that was authorized by an oral agreement?
The general rule is that oral agreements are sufficient to establish actual express authority on behalf of the agent acting for the principal. An exception to this rule lies within real estate transactions. Any interest in a real estate transaction lasting over 1 year must be in writing to make this relationship valid.
Here, this was a real estate transaction that would theoretically last more than 1 year. Thus, B orally informing A of their authority to negotiate the sale of Blackacre is not sufficient to establish actual express authority in A on behalf of B. A did not have the authority required to act on B’s behalf.
Therefore, B is not bound on the sale.
A collects rare books. A hires B to find a particular rare book. B searches for the rare book and finds it. As B is about to pay for the book, A dies. Is A’s estate bound by the contract?
The issue is whether A’s estate is bound by an agreement made by A prior to A’s death in which B was hired to find a rare book?
The general rule regarding apparent authority is that as long as the principal used works to express authority to the agent, the agent has authority to act on behalf of the principal. There is an exception to this rule in which the deathlike capacity of the principal invalidates the authority granted unless the agreement had conspicuous survival language.
Here, that language is not present. When A died, B’s authority was invalidated. A’s estate is not required to honor this agreement in the absence of conspicuous survival language.
Therefore, A’s estate is not bound by the contract because B no longer had authority after A’s death.
A owns a rare book store. A shipment of a rare book arrives from Paris. A tells his employee B not to sell a first edition of “The Magic Mountain” hand signed by Thomas Mann. A goes to lunch. Meanwhile, B sells the book. Is A bound on the sales contract?
The issue is whether A is bound on a sale in which A’s employee sold a book that A instructed them not to.
The general rule is that a principal is liable for a contract entered into by an authorized agent. One way to gain such authority is by apparent authority. Apparent authority requires that the principal cloak the agent with the appearance of authority and that the third party reasonably relies upon this appearance. A secret limiting instruction in which nobody else knows of the agent’s restriction of authority will leave the liability of the agent’s actions with the principal, even if their action was contrary to that instruction.
Here, although A had limited B’s authority, the third party would have no way of knowing about this limitation. The third party here reasonably relied upon B’s apparent authority as an employee of the store and entered into the sale under that assumption. Thus, A must honor the sale made by B.
Therefore, A is bound on the sales contract made by B because the limitation was secretive and unknown to the third party at the time of the transaction.
A sold chickens as B’s agent since 2000. In 2008, B finds out that A has been stealing chickens and terminates the contract with A. A continues selling chickens to customers and escapes with customer’s payments. Is B bound by contracts that A made on behalf of B after A was fired?
The issue is whether B is bound by contracts made by A, B’s former employee, when B did not make clients aware that A was no longer an employee?
The general rule is that a principal is liable for a contract entered into by an authorized agent. One way to gain such authority is by apparent authority. Apparent authority requires that the principal cloak the agent with the appearance of authority and that the third party reasonably relies upon this appearance. Lingering authority may occur when the public reasonably believes that a former agent still has their authority to act barring any knowledge that they no longer hold that authority. This can be invalidated by the principal making the public aware of the agent’s new lack of authority as to not mislead the public. If the principal fails to do so, the agent will still have lingering authority which will ensure that the principal is still liable for their actions because the third party was unaware of any change in authority.
Here, although B did fire A, B did not make their clientele aware that A was no longer an agent of B. The buyer reasonably relied on A’s lingering authority on B’s behalf and agreed to the purchase in reliance of that authority. Because B did not publicly make clients aware of A’s being fired and the third party had no way of knowing that A was no longer an employee acting with authority, B is liable to the client on A’s behalf. The fact that A stole the client’s money does not change this outcome.
Therefore, B is bound by the contract that A made on B’s behalf.
B gives A a power of attorney to purchase chickens for her restaurant. A enters into a contract with C to purchase 500 plastic hooks to hang chickens. B says to A: “great job, I really needed hooks, but I only need 300.” Is B bound by the contract with C?
The issue is whether B is bound in a contract with C when B gave A power of attorney for a different task but B would like to move forward with the deal?
The general rule is that a principal may grant authority to an agent after the contract has been entered into if the principal had knowledge of all material facts as well as accepting the benefits of the transaction. If those terms are both met, the principal may honor the contract and take on liability thus ratifying the contract. If they are not met, the agent will retain liability of any contract entered into.
Here, B gave A authority to purchase chickens for her restaurant. A purchased hook. Although B did not ask for hooks, B was made aware of the contract and all material facts and chose to accept the benefits of the contract. Thus, B ratified the contract.
Therefore, the principal is liable to C.
B authorizes A to buy diamonds. A spots choice diamonds, and secretly buys them for herself for $1 million. A then resells the diamonds for $2 million. 1. What duties, if any, has A breached? 2. What remedies, if any, does B have against A?
The issue is whether A breached their duty to B when she makes a separate deal on the side in which A benefits and B does not. And, if so, if there is anything B can do.
The general rule is that an agent owes to the principal a duty to exercise reasonable care, obey reasonable instructions, and of loyalty to the principal. The duty of loyalty specifically rejects any self-dealing, usurping, and/or any secret profits. If any of these duties are broken by the agent, the principal is able to sue the agent for breach of their contract to collect damages.
Here, by A purchasing a diamond for herself and then reselling for a profit, A was usurping. When A usurped B’s business opportunity in their own self-interest, A breached their duty of loyalty and thus breached the contract.
Therefore, B may sue A for breach of contract because A breached their duty of loyalty by usurping the principal’s business opportunity.
