Third Restatement Agency (Statute Breakdowns)

Question 1

1.01 Agency Defined

Answer 1

Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.

Question 2

1.02 Parties’ Labeling and Popular Usage Not Controlling

Answer 2

An agency relationship arises only when the elements stated in 1.01 are present. Whether a relationship is characterized as agency in an agreement between parties or in the context of industry or popular usage is not controlling.

Question 3

1.03 Manifestation

Answer 3

A person manifests assent or intention through written or spoken words or other conduct.

Question 4

1.04(1) Coagents

Answer 4

Have agency relationships with the same principal. This may be appointed by the principal or by another agent actually or apparently authorized by the principal to do so.

Question 5

1.04(2)(a) Disclosed Principal

Answer 5

A principal is disclosed if, when an agent and a third party interact, the third party has notice that the agent is acting for a principal and has notice of the principal’s identity.

Question 6

1.04(2)(b) Undisclosed Principal

Answer 6

A principal is undisclosed if, when an agent and a third party interact, the third party has no notice that the agent is acting for a principal.

Question 7

1.04(2)(c) Unidentified Principal

Answer 7

A principal is unidentified if, when an agent and a third party interact, the third party has notice that the agent is acting for a principal but does not have notice of the principal’s identity.

Question 8

1.04(3) Gratuitous Agent

Answer 8

An agent that acts without a right to compensation.

Question 9

1.04(4) Notice

Answer 9

This happened if the person knows the fact, has reason to know the fact, has received an effective notification of the fact, or should know the fact to fulfill a duty owed to another person.

Question 10

1.04(5) Person

Answer 10

An a) individual; b) an organization or association that has legal capacity to possess rights and incur liabilities; c) a government, political subdivision, or instrumentality or entity created by government; or d) any other entity that has legal capacity to possess rights and incur obligations.

Question 11

1.04(6) Power Given as Security

Answer 11

A power to affect the legal relations of its creator that is created in the form of a manifestation of actual authority and held for the benefit of the holder or a third person. It is given to protect a legal or equitable title or to secure the performance of a duty apart from any duties owed the holder of the power by its creator that are incident to a relationship of agency under 1.01.

Question 12

1.04(7) Power of Attorney

Answer 12

An instrument that states an agent’s authority.

Question 13

1.04(8) Subagent

Answer 13

A person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal and for whose conduct the appointing agent is responsible to the principal. This relationship is created as stated in 1.01.

Question 14

1.04(9) Superior and Subordinate Coagent

Answer 14

A superior cogent has the right, conferred by the principal, to direct a subordinate coagent.

Question 15

1.04(10) Trustee and Agent-trustee

Answer 15

A trustee is a holder of property who is subject to fiduciary duties to deal with property for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee. An agent-trustee is a trustee subject to the control of the settlor or of one or ore beneficiaries.

Question 16

2.01 Actual Authority

Answer 16

An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.

Question 17

2.02(1) Scope of Actual Authority

Answer 17

An agent has actual authority to take action designated or implied in the principal’s manifestations to the agent and acts necessary or incidental to achieving the principal’s objectives, as the agent reasonably understands the principal’s manifestations and objectives when the agent determines how to act.

Question 18

2.02(2) Scope of Actual Authority

Answer 18

An agent’s interpretation of the principal’s manifestations is reasonable if it reflects any meaning known by the agent to be ascribed by the principal and, in the absence of any meaning known to the agent, as a reasonable person in the agent’s position would interpret the manifestations in light of the context, including circumstances of which the agent has notice and the agent’s fiduciary duty to the principal.

Question 19

2.02(3) Scope of Actual Authority

Answer 19

An agent’s understanding of the principal’s objectives is reasonable if it accords with the principal’s manifestations and the inferences that a reasonable person in the agent’s position would draw from the circumstances creating the agency.

Question 20

2.03 Apparent Authority

Answer 20

The power held by an agent or other actor to affect a principal’s legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations.

Question 21

2.04 Respondeat Superior

Answer 21

An employer is subject to liability for torts committed by employees while acting within the scope of their employment.

Question 22

2.05 Estoppel to Deny Evidence to Agency Relationship

Answer 22

A person who has not made a manifestation that an actor has authority as an agent and who is not otherwise liable as a party to a transaction purportedly done by the actor on that person’s account is subject to liability to a third party who justifiably is induced to make a detrimental change in position because the transaction is believed to be on the person’s account, if:

1) the person intentionally or carelessly caused such belief, or
2) having notice of such belief and that it might induce others to change their positions, the person did not take reasonable steps to notify them of the facts.

Question 23

2.06(1) Liability of Undisclosed Principal

Answer 23

An undisclosed principal is subject to liability to a third party who is justifiably induced to make a detrimental change in position by an agent acting on the principal’s behalf and without actual authority if the principal, having notice of the agent’s conduct and that it might induce others to change their positions, did not take reasonable steps to notify them of the facts.

Question 24

2.06(2) Liability of Undisclosed Principal

Answer 24

An undisclosed principal may not rely on instructions given an agent that qualify or reduce the agent’s authority to less than the authority a third party would reasonably believe the agent to have under the same circumstances if the principal had been disclosed.

Question 25

2.07 Restitution of Benefit

Answer 25

If a principal is unjustly enriched at the expense of another person by the action of an agent or a person who appears to be an agent, the principal is subject to a claim for restitution by that person.

Question 26

3.01 Creation of Actual Authority

Answer 26

Actual authority is created by a principal’s manifestation to an agent that, as reasonably understood by the agent, expresses the principal’s assent that the agent take action on the principal’s behalf.

Question 27

3.02 Formal Requirements

Answer 27

If the law requires a writing or record signed by the principal to evidence an agent’s authority to bind a principal to a contract or other transaction, the principal is not bound in the absence of such a writing or record. A principal may be estopped to assert the lack of such a writing or record when a third party has been induced to make a detrimental change in position by the reasonable belief that an agent has authority to bind the principal that is traceable to a manifestation made by the principal.

Question 28

3.03 Creation of Apparent Authority

Answer 28

Apparent authority is created by a person’s manifestation that another has authority to act with legal consequences for the person who makes the manifestation, when a third party reasonably believes the actor to be authorized and the belief is traceable to the manifestation.

Question 29

3.04(1) Capacity to Act as Principal

Answer 29

An individual has capacity to act as principal in a relationship of agency as defined in 1.01 if, at the time the agent takes action, the individual would have capacity if acting in person.

Question 30

3.04(2) Capacity to Act as Principal

Answer 30

The law applicable to a person that is not an individual governs whether the person has capacity to be a principal in a relationship of agency as defined in 1.01, as well as the effect of the person’s lack or loss of capacity on those who interact with it.

Question 31

3.04(3) Capacity to Act as Principal

Answer 31

If performance of an act is not delegable, its performance by an agent does not constitute performance by the principal.

Question 32

3.05 Capacity to Act as Agent

Answer 32

Any person may ordinarily be empowered to act so as to affect the legal relations of another. The actor’s capacity governs the extent to which, by so acting, the actor becomes subject to duties and liabilities to the person whose legal relations are affected or to third parties.

Question 33

3.15(1) Subagency

Answer 33

A subagent is a person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal and for whose conduct the appointing agent is responsible to the principal. The relationship between a subagent and the appointing agent and between the subagent and the appointing agent’s principal are relationships of agency as stated in 1.01.

Question 34

3.15(2) Subagency

Answer 34

An agent may appoint a subagent only if the agent has actual or apparent authority to do so.

Question 35

3.16 Agent for Coprincipals

Answer 35

Two or more persons may as coprincipals appoint an agent to act for them in the same transaction or matter.

Question 36

4.01(1) Ratification Defined

Answer 36

Ratification is the affirmance of a prior act done by another, whereby the act is given effect as if done by an agent acting with actual authority.

Question 37

4.01(2) Ratification Defined

Answer 37

A person ratifies an act by:

a) manifesting assent that the act shall affect the person’s legal relations, or
b) conduct that justifies a reasonable assumption that the person so consents.

Question 38

4.01(3) Ratification Defined

Answer 38

Ratification does not occur unless:

a) the act is ratifiable as stated in 4.03,
b) the person ratifying has capacity as stated in 4.04,
c) the ratification is timely as stated in 4.05, and
d) the ratification encompasses the act in its entirety as stated in 4.07.

Question 39

4.02(1) Effect of Ratification

Answer 39

Subject to the exceptions stated in subsection (2), ratification retroactively creates the effects of actual authority.

Question 40

4.02(2) Effect of Ratification

Answer 40

Ratification is not effective:

a) in favor of a person who causes it by misrepresentation or other conduct that would make a contract voidable;
b) in favor of an agent against a principal when the principal ratifies to avoid a loss; or
c) to diminish the rights or other interests of persons, not parties to the transaction, that were acquired in the subject matter prior to the ratification.

Question 41

4.03 Acts that May be Ratified

Answer 41

A person may ratify an act if the actor acted or purported to act as an agent on the person’s behalf.

Question 42

4.04(1) Capacity to Ratify

Answer 42

A person. may ratify an act if:

a) the person existed at the time of the act, and
b) the person has capacity as defined in 3.04 at the time of ratifying the act.

Question 43

4.04(2) Capacity to Ratify

Answer 43

At a later time, a principal may avoid a ratification made earlier when the principal lacked capacity as defined in 3.04.

Question 44

4.05 Timing of Ratification

Answer 44

A ratification of a transaction is not effective unless it precedes the occurrence of circumstances that would cause the ratification to have adverse and inequitable effects on the rights of third parties. These circumstances include:

1) any manifestation of intention to withdraw from the transaction made by the third party;
2) any material change in circumstances that would make it inequitable to bind the third party, unless the third party chooses to be bound; and
3) a specific time that determines whether a third party is deprived of a right or subject to a liability.

Question 45

4.06 Knowledge Requisite to Ratification

Answer 45

A person is not bound by a ratification made without knowledge of material facts involved in the original act when the person was unaware of such lack of knowledge.

Question 46

4.07 No Partial Ratification

Answer 46

A ratification is not effective unless it encompasses the entirety of the act, contract, or other single transaction.

Question 47

4.08 Estoppel to Deny Ratification

Answer 47

If a person makes a manifestation that the person has ratified another’s act and the manifestation, as reasonably understood by a third party, induces the third party to make a detrimental change in position, the person may be estopped to deny the ratification.

Question 48

5.01(1) Notifications and Notice - In General

Answer 48

A notification is a manifestation that is made in the form required by agreement among parties or by applicable law, or in a reasonable manner in the absence of an agreement or an applicable law, with the intention of affecting the legal rights and duties of the notifier in relation to rights and duties of persons to whom the notification is given.

Question 49

5.01(2) Notifications and Notice - In General

Answer 49

A notification given to or by an agent is effective as notification to or by the principal as stated in 5.02.

Question 50

5.01(3) Notifications and Notice - In General

Answer 50

A person has notice of a fact if the person knows the fact, has reason to know the fact, has received an effective notification of the fact, or should know the fact to fulfill a duty owed to another person.

Question 51

5.01(4) Notifications and Notice - In General

Answer 51

Notice of a fact that an agent knows or has reason to know is imputed to the principal as stated in 5.03 and 5.04.

Question 52

5.02(1) Notification Given by or to an Agent

Answer 52

A notification given to an agent is effective as notice to the principal if the agent has actual or apparent authority to receive the notification, unless the person who gives the notification knows or has reason to know that the agent is acting adversely to the principal as stated in 5.04.

Question 53

5.02(2). Notification Given by or to an Agent

Answer 53

A notification given by an agent is effective as notification given by the principal if the agent has actual or apparent authority to give the notification, unless the person who receives the notification knows or has reason to know that the agent is acting adversely to the principal as stated in 5.04.

Question 54

5.03 Imputation of Notice of Fact to Principal

Answer 54

For purposes of determining a principal’s legal relations with a third party, notice of a fact that an agent knows or has reason to know is imputed to the principal if knowledge of the fact is material to the agent’s duties to the principal, unless the agent:

a) acts adversely to the principal as stated in 5.04, or
b) is subject to a duty to another not to disclose the fact to the principal.

Question 55

5.04 An Agent Who Acts Adversely to a Principal

Answer 55

For purposes of determining a principal’s legal relations with a third party, notice of a fact that an agent knows or has reason to know is not imputed to the principal if the agent act adversely to the principal in a transaction or matter, intending to act solely for the agent’s own purposes or those of another person. Nevertheless, notice is imputed:

a) when necessary to protect the rights of a third party who dealt with the principal in good faith; or
b) when the principal has ratified or knowingly retained a benefit from the agent’s action.

A third party who deals with a principal through an agent, knowing or having reason to know that the agent acts adversely to the principal, does not deal in good faith for this purpose.

Question 56

6.01 Agent for Disclosed Principal

Answer 56

When an agent acting with actual or apparent authority makes a contract on behalf of a disclosed principal,

1) the principal and third party are parties to the contract; and
2) the agent is not a party to the contract unless the agent and third party agree otherwise.

Question 57

6.02 Agent for Unidentified Principal

Answer 57

When an agent acting with actual or apparent authority makes a contract on behalf of an unidentified principal,

1) the principal and third party are parties to the contract; and
2) the agent is a party to the contract unless the agent and third party agree otherwise.

Question 58

6.03 Agent for Undisclosed Principal

Answer 58

When an agent acting with actual authority makes a contract on behalf of an undisclosed principal,

1) unless excluded by the contract, the principal is a party to the contract;
2) the agent and third party are parties to the contract; and
3) the principal, if a party to the contract, and the third party have the same rights, liabilities, and defense against each other as if the principal made the contract personally, subject to 6.05-6.09.

Question 59

6.04 Principal Does Not Exist or Lacks Capacity

Answer 59

Unless the third party agrees otherwise, a person who makes a contract with a third party purportedly as an agent on behalf of a principal becomes a party to the contract if the purported agent knows or has reason to know that the purported principal does not exist or lacks capacity to be a party to a contract.

Question 60

6.10 Agent’s Implied Warranty of Authority

Answer 60

A person who purports to make a contract, representation, or conveyance to or with a third party on behalf of another person, lacking power to bind that person, gives an implied warranty of authority to the third party and is subject to liability to the third party for damages for loss caused by breach of that warranty, including loss of the benefit expected from performance by the principal, unless:

1) the principal or purported principal ratifies the act as stated in 4.04; or
2) the person who purports to make the contract, representation, or conveyance gives notice to the third party that no warranty of authority is given; or
3) the third party knows that the person who purports to make the contract, representation, or conveyance acts without actual authority.

Question 61

6.11(1) Agent’s Representation

Answer 61

When an agent for a disclosed or unidentified principal makes a false representation about the agent’s authority to a third party, the principal is not subject to liability unless the agent acted with actual or apparent authority in making the representation and the third party does not have notice that the agent’s representation is false.

Question 62

6.11(2) Agent’s Representation

Answer 62

A representation by an agent made incident to a contract or conveyance is attributed to a disclosed or unidentified principal as if the principal made the representation directly when the agent had actual or apparent authority to make the contract or conveyance unless the third party knew or had reason to know that the representation was untrue or that the agent acted without actual authority in making it.

Question 63

6.11(3) Agent’s Representation

Answer 63

A representation by an agent made incident to a contract or conveyance is attributed to an undisclosed principal as if the principal made the representation directly when

a) the agent acting with actual authority in making the representation, or
b) the agent acted without actual authority in making the representation but has actual authority to make true representations about the same matter.

The agent’s representation is not attributed to the principal when the third party knew or had reason to know it was untrue.

Question 64

6.11(4) Agent’s Representations

Answer 64

When an agent who makes a contract or conveyance on behalf of an undisclosed principal falsely represents to the third party that the agent does not act on behalf of a principal, the third party may avoid the contract or conveyance if the principal or agent had notice that the third party would not have dealt with the principal.

Question 65

7.03(1) Principal’s Liability - In General

Answer 65

A principal is subject to direct liability to a third party harmed by an agent’s conduct when:

a) as stated in 7.04, the agent acts with actual authority or the principal ratifies the agent’s conduct and
i) the agent’s conduct is tortious, or
ii) the agent’s conduct, if that of the principal, would subject the principal to tort liability; or
b) as stated in 7.05, the principal is negligent in selecting, supervising, or otherwise controlling the agent; or
c) as stated in 7.06, the principal delegates performance of a duty to use care to protect other persons or their property to an agent who fails to perform the duty.

Question 66

7.03(2) Principal’s Liability - In General

Answer 66

A principal is subject to vicarious liability to a third party harmed by an agent’s conduct when

a) as stated in 7.07, the agent is an employee who commits a tort while acting within the scope of employment; or
b) as stated in 7.08, the agent commits a tort when acting with apparent authority in dealing with a third party on or purportedly on behalf of the principal.

Question 67

7.04 Agent Acts With Actual Authority

Answer 67

A principal is subject to liability to a third party harmed by an agent’s conduct when the agent’s conduct is within the scope of the agent’s actual authority or ratified by the principal; and

1) the agent’s conduct is tortious, or
2) the agent’s conduct, if that of the principal, would subject the principal to tort liability.

Question 68

7.05(1) Principal’s Negligence in Conducting Activity Through Agent; Principal’s Special Relationship with Another Person

Answer 68

A principal who conducts an activity through an agent is subject to liability for harm to a third party caused by the agent’s conduct if the harm was caused by the principal’s negligence in selecting, training, retaining, supervising, or otherwise controlling the agent.

Question 69

7.05(2) Principal’s Negligence in Conducting Activity Through Agent; Principal’s Special Relationship with Another Person

Answer 69

When a principal has a special relationship with another person, the principal owes that person a duty of reasonable care with regard to risks arising out of the relationship, including the risk that agents of the principal will harm the person with whom the principal has such a special relationship.

Question 70

7.07(1) Employee Acting Within Scope of Employment

Answer 70

An employer is subject to vicarious liability for a tort committed by its employee acting within the scope of employment.

Question 71

7.07(2) Employee Acting Within Scope of Employment

Answer 71

An employee acts within the scope of employment when performing work assigned by the employer or engaging in a course of conduct subject to the employer’s control. An employee’s act is not within the scope of employment when it occurs within an independent course of conduct not intended by the employee to serve any purpose of the employer.

Question 72

7.07(3) Employee Acting Within Scope of Employment

Answer 72

For purposes of this section,

a) an employee is an agent whose principal controls or has the right to control the manner and means of the agent’s performance of work, and
b) the fact that work is performed gratuitously does not relieve a principal of liability.

Question 73

7.08 Agent Acts with Apparent Authority

Answer 73

A principal is subject to vicarious liability for a tort committed by an agent in dealing or communicating with a third party on or purportedly on behalf of the principal when actions taken by the agent with apparent authority constitute the tort or enable the agent to conceal its commission.