R5 M4 - Agency (Notes)

Question 1

What is a principal?

What is an agent?

Answer 1

• Hires an agent to act on their behalf

-An agent negotiates with a third parties on behalf of the principal

Question 2

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

Answer 2

1) If the agent buys or sell land for the principal.

2) Agent agreement can’t be performed in a year.

Question 3

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

Answer 3

Question 4

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.

Question 5

What duties does the agent owe the principal ?

Answer 5

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]

Question 6

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)

Answer 6

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

Question 7

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.

Answer 7

Question 8

Duties of Principal to the agent

Answer 8

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

Question 9

Remedies of the Agent

What if the principal breaches his or her duties

Answer 9

• Agent can stop working for the principal
• Sue the principal
• Stop accepting (receiving) payment on behalf of the principal .

Question 10

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

Question 11

Agency Coupled with interest

What is an agency coupled with an interest?

Answer 11

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

Question 12

When does the agent have the power to bind a principal?

Answer 12

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.

Question 13

How do you terminate actual authority?

Answer 13

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)

Question 14

The principal will always be liable to a bind contract whether the agent has apparent or authoritative power.

Question 15

The firing of an agent is known as revocation. This would not automatically terminate the agent and principal relationship. A notice would have to be sent to clients.

Question 16

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.

Answer 16

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.

Question 17

What is the difference between an agent having actual vs apparent authority?

Answer 17

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.

Question 18

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.

Answer 18

Question 19

What are two different types of agent?

Answer 19

General agent vs Special agent

General agent –> broad apparent authority

Special Agent –. specific to the task at hand

Question 20

How do you terminate an apparent authority?

Answer 20

The principal must give notice to the 3rd party. It can be done (orally or written) must be given to terminate apparent authority to old customers/current

• Potential customer who may have heard of the agent but have not done business with them , a constructive notice will suffice ( Advertisement in the newspaper or magazine) will do.

Question 21

What is an estoppel to Deny existence Agency

Answer 21

This is when Tim who claims to be an agent to Sabi. If Sabi does not correct this claims and says nothing to make others reasonably believe that Tim is Sabi’s agent than in the future, Sabi is estopped from denying Tim’s as agent.

He can’t refute this claims any more.

Question 22

What is ratifications?

Answer 22

The agent has no power or right but because the deal the agent got for the principal is good. The principal chooses to be bind by the deal

For the deal to be binding the principal must know or have:

1) All material facts
2) The principal must ratify the entire transaction or not accept it at all. ( There is no such things as partial acceptance its all or nothing).
3) No consideration is needed for ratification.

Question 23

How would the principal ratify?

Answer 23

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).

Question 24

Contractual Liability

What action by the agent will bind the principal to the contract?

Answer 24

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.

Question 25

Agent’s liability to the third parties for contract duties?

If ever the third party sue and finds out the agent’s principal they will have to choose who they would like to sue if it is the agent or the principal not both.

Question 26

3rd Party can avoid being bound to a contract if the agent lied about having a principal (Fraudulently concealed).

Answer 26

Question 27

What is a tort liability?

Answer 27

A wrongful act.

Unintentional (negligence) Vs intentional (fraud)

Question 28

Answer 28

Question 29

What is a doctrine of respondeat superior?

Answer 29

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

Question 30

Principal will not be held liable for tort of an independent contractors.

Exceptions:

If the employer authorized, it

Ultrahazardous activities

Answer 30

Question 31

Generally, an agency relationship is terminated by operation of law in all of the following situations, except the:

A.	Agent's failure to acquire a necessary business license.
B.	Agent's renunciation of the agency.
C.	Principal's incapacity.
D.	Principal's death.

Answer 31

Choice “B” is correct. Either party has the power (but not necessarily the right) to terminate an agency relationship; the agent’s termination is called renunciation. Renunciation would terminate the agency not by operation of law but by the act of a party.

Choice “A” is incorrect. The failure to acquire a license will terminate the agency by operation of law relationship because the agent would be acting unlawfully without a necessary license.

Choice “C” is incorrect. A principal must be capable of carrying out the agency relationship; his incapacity terminates the relationship by operation of law.

Choice “D” is incorrect. A principal’s death terminates the relationship by operation of law, although in some states, the termination is not effective until the agent learns of the principal’s death.