Principal_Agent

Question 1

When is a principal liable for Ks entered into by its agent?

Answer 1

Principal “AUTHORIZED” the agent to enter into the K

I.e. Principal is liable ONLY FOR its “authorized Ks”

Question 2

What are 4 types of authority (that will render a principal liable for an agent’s Ks)?

Answer 2

1) Actual express authority: principal used WORDS to express authority to agent

Can be oral and private (few ppl know), BUT is narrowly construed

EXCEPTION: if the K ITSELF must be in writing (b/c of SOF), the express authority must ALSO be in writing (e.g. when an agent is negotiating a land K)

Express authority will be revoked by: (i) Unilateral act by EITHER the principal or agent; OR

(ii) Death of the principal (EXCEPT if the principal give the agent the pwr of atty that EXPRESSLY survives death)
(iii) Incapacity of the principal (NOTE: in NY a pwr of atty WILL survive incapacity unless it expressly states otherwise)

2) Actual implied authority: authority which the principal gives the agent thru CONDUCT or CIRCUMSTANCES

Necessity: there is an implied authority to do all tasks that are NECESSARY to carry out an expressly authorized task

Custom: there is an implied authority to do all tasks that by CUSTOM are performed by agent’s title or position (e.g. a lawyer)

Prior dealings b/t the principal and agent: there is an implied authority to do all tasks that the agent believes to be authorized to do from “prior acquiescence” by the principal

3) Apparent authority: 2 things…

(i) Principal “cloaked” agent with the appearance of authority; AND
(ii) Third party reasonably relies on appearance of authority

4) Ratification: Authority can be granted AFTER the K has been entered IF…
(i) Principal has knowledge of all material facts re: the K;
(ii) Principal has accepted its benefits; AND
(iii) Ratification did NOT alter the terms of the K

Question 3

What is the effect of a principal authorizing a K?

Answer 3

Principal liable on its authorized Ks →agents are NOT LIABLE for their authorized Ks

EXCEPTION: if the principal is PARTIALLY DISCLOSED (only the identity of the principal concealed) or UNDISCLOSED (fact of principal concealed)→ authorized agents may NONETHELESS be liable at the election of the 3d party

Question 4

When is a principal vicariously liable for torts committed by an agent?

Answer 4

1) A PRINCIPAL-AGENT RELATIONSHIP exists; AND

2) Tort commited by agent within SCOPE of relationship

Question 5

What 3 things are necessary for a principal-agent relationship?

Answer 5

1) Assent: an informal agmt b/t a principal (who has capacity) and an agent
2) Benefit: the agent conduct must be for the principal’s benefit
3) Control: the principal must have “the right to cntrl the agent by having the pwr to supervise the manner of the agent’s performance”

NOTE: these are ALSO the reqs for liability for “sub-agents” (hired by the agent) & “borrowed agents” (borrowing from another principal)

Question 6

What is the rule for vicarious liability and independent contractors?

Answer 6

IC = an agent MINUS the ability to cnrtl (i.e. supervise the performance)

RULE: No vic. liability for an IC’s torts

EXCEPTIONS:

1) Inherently dangerous activity and IC commits a tort
2) Estoppel: If you “hold out” your IC w/ the appearance of agency→will be estopped from denying liability on that ground

Question 7

When is an agent’s activities w/in the “scope” of the relationship?

Answer 7

1) Was the conduct “of the kind” that the agent was HIRED to do (i.e. w/in the job description)?

YES→ WITHIN SCOPE

2) Frolic vs. detour?

Frolic = new/independent journey→ OUTSIDE SCOPE

Detour = a mere departure of an assigned task→ WITHIN SCOPE

3) Did agent INTEND to benefit the principal?

YES→ WITHIN SCOPE

4) Did the agent commit an INTENTIONAL TORT?

YES→ GENERALLY OUTSIDE SCOPE

EXCEPTIONS→ WITHIN SCOPE (i) Action authorized by the principal

(ii) Action is “natural” from the nature of the employment (e.g. a bouncer)
(iii) Action was”motivated” by desire to serve principal

Question 8

What are the 3 duties that an agent owes to a principal?

Answer 8

In return for (i) reasonable compensation and (ii) reimbursement of expenses, agents owe…

1) Duty of care
2) Duty to obey REASONABLE instructions (i.e. lawful)
3) Duty of loyalty: Agent cannot engage in…

(i) Self-dealing: receiving a benefit to the detriment of the principal
(ii) Usurping the principal’s opportunity
(iii) Secret profits: making a profit at the principal’s expense w/o disclosure