Rights and Duties between Principal and Agent Flashcards
Actual Authority
authority that AGENT reasonably thinks she possesses based on PRINCIPAL’s dealings with her
Can be express or implied
Express Authority
Subset of actual authority.
Authority conveyed by the principal expressly in words or within the four corners of a document
Implied Authority
Subset of actual authority
Authority that agent REASONABLY BELIEVES she has as a result of the principal’s actions
Can stem from express authority, custom, prior ACQUIESCENCE, general warranties, etc.
Termination of Actual Authority
May terminate by:
(1) lapse of a SPECIFIED or REASONABLE time (if no specified time);
(2) by a change of circumstances (destruction of subject matter; insolvency; etc.)
(3) Breach of the agent’s fiduciary duty
(4) unilateral termination by either party (but can be a breach of K)
(5) Death or loss of capacity by either party, unless if irrevocable
Irrevocable Agencies
Agencies coupled with an INTEREST or a SECURITY may NOT be unilaterally terminated by the principal if the agency was given to protect the agent’s rights and is supported by consideration
Survives death or lost capacity if principal
Apparent Authority
When principal directly or indirectly holds out another as possessing certain authority, thereby inducing reasonable reliance by others on that authority
No need for actual authority. Can have Apparent with no Actual
Unilateral acts of agent or another actor CANNOT create apparent. Must be manifestations from the principal
Power of Position
Apparent authority may be established through an agent’s TITLE or POSITION
Lingering Apparent Authority
When apparent authority LINGERS after actual authority ends
Notice may be necessary to third parties to show actual authority terminated
Death does not automatically terminate apparent authority
Ratification
Substitute for a lack of authority before at transaction was made
Can be express or implied. Either affirmation of a K or when P begins to ACCEPT THE BENEFITS of the K or remains SILENT
Requirements: (1) P must have KNOWLEDGE of all material facts regarding the K; (2) P must accept the ENTIRE transaction (can’t ratify a portion); (3) ratification cannot ALTER the rights of intervening parties
Principal and Agent Liability to Third parties
if actual, apparent, or ratification exists, PRINCIPAL IS LIABLE ON THE K AND THE AGENT IS NOT
Exception: if principal UNDISCLOSED (third party has no notice that agent is acting for a principal) or PARTIALLY DISCLOSED (third party knows that agent is acting for principal, but no notice of principal’s identity), agent is jointly and severally liable.
Third Party Liability to Principal and Agent
If DISCLOSED principal, ONLY PRINCIPAL may enforce K and hold third party liable
If UNDISCLOSED or PARTIALLY DISCLOSED, EITHER principal or agent may enforce K and hold third party liable
Fiduciary Duties Owed by Agent
Owed by agent to principal
Duty of Care, Duty of Loyalty, Duty of Obediance
Duty of Care
Agent owes a duty to her principal to carry out her agency WITH REASONABLE CARE
Can shift up and down depending on agent’s special skillls
Duty of Loyalty
Undivided loyalty to Principal: Includes:
(1) A must account to P for any PROFITS made while carrying out the P’s instructions;
(2) A must act solely for the BENEFIT of the P and not to benefit himself or a third party;
(3) A must refrain from dealing ADVERSELY with P or acting on behalf of an adverse party;
(4) A may not COMPETE with his principal concerning teh subject matter of the agency; and
(5) Agent may not use P’s PROPERTY (including confidential info) for agent’s own purposes or third party purposes
May receive damages and DISGORGEMENT of profits made by agent
Duty of Obedience
Agent must obey ALL REASONABLE DIRECTIONS of his principal
Triggered when agent intentionally or accidentally binds principal via apparent authority
