R5 M4 - Agency (Notes) Flashcards
What is a principal?
What is an agent?
- Hires an agent to act on their behalf
-An agent negotiates with a third parties on behalf of the principal
A Principal can’t be a minor and he cannot be mentally incompetent.
An agent can be a minor or mentally incompetent.
A principal agency relation does not require to be written. He can choose to work for free no consideration is required.
What are the exception Principal and agent needs contract to be in writing
1) If the agent buys or sell land for the principal.
2) Agent agreement can’t be performed in a year.
A contract to find a buyer or seller (normal real estate broker’s agreement) and a contract to build a house can be done in one year. An oral agency contract will be sufficient.
Consideration is required for a legally enforceable agreement but not for an agency relationship
Power attorney –> Agent is known as attorney in fact
–> Written authorization of agency
–> Only the principal has to sign the power attorney. The agent does not have to sign.
It gives the agent limited power for specific transactions.
What duties does the agent owe the principal ?
Fiduciary Duties
1) Loyalty
2) Obey your principal as long as he does not make you do unethical things
3) Duty of reasonable care (Don’t sabotage the business)
4) Duty to account (Don’t mix your asset with your principal asset [ steal]
Agent can hire a subagent (assistant)
- The subagent owes a duty of care to the agent and the principal.
Principal Remedies
- If the agent breaches the contract or agreement
What are the 2 types of damages (Breaches)
Tort Damages
1) You did something by mistake or accident (negligent)
2) Intentionally did something wrong (fraud)
The principal has the right to sue for damages
Can you sue the agent for breach of contract?
If the agent got secret profit behind your back, you could get that profit or withhold the agent from getting compensated.
Duties of Principal to the agent
Implied by law
- Agent can be compensated by the principal
- Reimburse for any expense the agent incurred or if he is being sued it is the job of the principal to cover the cost (indemnify) the agent
Remedies of the Agent
What if the principal breaches his or her duties
- Agent can stop working for the principal
- Sue the principal
- Stop accepting (receiving) payment on behalf of the principal .
You agree Bill represents you in Pet shop for 9 months for a salary of 750 / month. You have the power to terminate him the next day, but you don’t have the right to because you agreed to hire him for 9 months. Breach of contract
Agency Coupled with interest
What is an agency coupled with an interest?
Agent (creditor) lend money to the principal (debtor) to buy property if you defaults on it the agent can get the property.
Only the agent has the power to terminate the relationship between each other. Even the death, incapacity , bankruptcy cannot end the relationship.
Slide 3 9:45
When does the agent have the power to bind a principal?
1) Agent has actual authority ( power and right).
2) Apparent authority ( Agent has the power but not the right). This still bind the principal.
3) Ratification ( Agent has no power and right) to bind the principal. However, if the deal is good the principal can ratify the agent’s power to give him the right.
How do you terminate actual authority?
1) Agent quits or get fired
- Principal fired an agent is called revocation
- Agent resigns it is called a renunciation.
2) Accomplish the objective or expired contract
- If not time is stated a reasonable time period is fair.
3) Automatic termination of actual authority due to the fact its now illegal ( by operation of law)
-No notice is required to 3rd party if it was a court order termination
BID LID
- Bankruptcy of principal [Principal]
- Incapacity of the principal [Principal]
- Death of principal or agent [Principal or Agent]
- Failure to acquire necessary license
- Illegal ( it was legal one time and now it is not )
- Destruction of subject matter ( I hired an agent to sell a puppy and the puppy died)
Apparent authority (Power but doesn’t have the right)
An agent can have apparent authority based on the principal conduct that has caused 3rd party to believe he has authority.
For example: This can be the title or position the principal gives the agent.
If a principal fires an agent and does not give notice to third party. It is believed that the agent still has authority in the eyes of the 3rd party.
What is the difference between an agent having actual vs apparent authority?
Apparent authority (Power but no right), the principal can sue for damages (breach of fiduciary duty, tort, breach of contract).
If the agent has actual authority (power and right), the principal cannot sue the agent.
The principal can limit the authority of an agent but for that to come into effect, the principal has to notify 3rd parties on the authority of the agent. If not they will have the apparent authority in the eyes of the 3rd parties.
What are two different types of agent?
General agent vs Special agent
General agent –> broad apparent authority
Special Agent –. specific to the task at hand
How would the principal ratify?
Expressed either orally or written or by conduct – meaning by accepting the cash (implicitly).
Ratification needs to be done before the 3rd party withdraws
-If the contract is illegally, you can’t ratify
-Only the principal can ratify the contract. The principal needs to know for ratification to take place, if the principal is undisclosed you cannot ratify.
- The principal cannot ratify a contract unless people know who he is (disclosed).
Contractual Liability
What action by the agent will bind the principal to the contract?
1) Agent acted with actual authority (has Power (authority) and has the right)
2) Apparent authority (Has the power (authority), but does not have the right to execute)
3) If the principal ratifies the transaction.
3rd Party can avoid being bound to a contract if the agent lied about having a principal (Fraudulently concealed).
What is a tort liability?
A wrongful act.
Unintentional (negligence) Vs intentional (fraud)
What is a doctrine of respondeat superior?
This is when the employer is liable for the wrongful act of the employee which was done within the scope of work (employment).
-Both the agent and principal will be liable in this case if the relationship is employer-employee, and the principal has control of his work
Principal will not be held liable for tort of an independent contractors.
Exceptions:
If the employer authorized, it
Ultrahazardous activities
