Principal_Agent

Question 1

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

Answer 1

Principal is liable for Ks entered into by its agent IF the principal “AUTHORIZED” the agent to enter into the K i.e. the 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 EXECPTION: 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: Unilateral act by EITHER the principal or agent; OR Death of the principal (EXCEPT if the principal give the agent the pwr of atty that EXPRESSLY survives death) 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 through CONDUCT or CIRCUMSTANCES Necessity: there is an implied authority to do all tasks that are NECESSARY to carry out an expressly authrized 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 acquiescense” by the principal

3) Apparent authority:
Principal “cloaked” agent with the appearance of authority; AND
Third party reasonably relies on appearance of authority

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

Question 3

What is the effect of a principal authorizing a K?

Answer 3

The principal is 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

Principal will be liable for torts commited by agent IF:

1) A PRINCIPAL-AGENT RELATIONSHIP exists; AND
2) The tort was commited by the agent within the SCOPE of that 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: there can be no vic. liability for an IC’s torts

EXCEPTIONS: liability for ICs attaches… 1) For inherently dangerous activity and IC commits a tort 2) With 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

Factors include…

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 Action authorized by the principal (e.g. bouncer) Action is “natural” from the nature of the employment (e.g. debt collector, bouncer)
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 reasonable compensation and 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… Self-dealing: receiving a benefit to the detriment of the principal
Usurping the principal’s opportunity
Secret profits: making a profit at the principal’s expense w/o disclosure