Week 7: Chapters 15, 16, 17 Flashcards
Principle definition (of an agency relationship)
A person on whose behalf the agent acts
Agent Definition
A person appointed to act for another, usually in contract matters
What is the nature of the agency relationship?
Principal -> Agent -> 3rd party
Acts of the agent bind the principal
Agent acts for the principal in contractual relations with 3rd parties, creating a contract between the principal and the 3rd party
Does a real estate agent meet the definition of an agent?
No
When an agent is acting within their scope of authority it binds the principal and 3rd party
Real estate agents actions don’t do this
Agency by express agreement:
An agency agreement established by an express oral or written contract
Duties of the principal in an agency relationship
Act in good faith
Principal to pay agent fee fixed or reasonable amount
Principal obligated to indemnify (repay) agent for reasonable expenses
At common law, agents paid immediately on performance
Duties of the Agent in an agency relationship
Act in utmost good faith of principle
Obey all lawful instructions
Keep confidential information given by principal
Keep in contact with principal
If a professional, they must adhere to profession’s standards
- Breach of standard means the agent is liable to principal
if agent receives money on behalf of the principle they must keep it in a seperate trust account
What is Agency by conduct?
An agency relationship inferred from the actions of the principal
The impression allows the “agent” to contract with third party, principal cannot then deny contract
Agency by estoppel
When a person permits affairs to occur that result in an agent entering a contract with a 3rd party based on the representation that the person was actually acting as agent
can’t be later denied if the 3rd party relies on that representation
Agent has apparent authority
What happens when the principle fails to notify termination of agency to 3rd parties
If principal does not notify third parties regarding limits on authority or liability, breaches of authority will render agent liable for damages to principal
Agency by operation of law
Agency that may arise in certain circumstances out of necessity where it isn’t possible to obtain the authority of the principle to act
Cases of emergency - possible to obtain authority from principal
eg, ship-master - preservation of ship and cargo, where can’t contact owner
Ratification by the principal to 3rd party in agency
Where agent had no actual authority but now the principal may wish to ratify, to bind third party
Must ratify within a reasonable time
Can be express or implied
Failure to promptly repudiate where agent exceeded authority may imply acceptance and bind the principal
Ratification effective from the time agent enters agreement with third party
Disclosed Agency: (how agent signs contract, rights of agent in contract)
agent discloses acting for principal, binds principal and third party
Signs principal’s name and affix own name “as agent” of
Disclosure of agency means third party has no remedies against agent
An agent has no rights to benefit of principal contract
Liabilities of the Agent: Think about Authority
- When an agent does not have the authority claimed, either actual or apparent, sthey may be sued by the third party for breach of “warranty of authority”
- An agent who intentionally misleads the third party into believing that they have authority, when they do not, may be sued by the third party for the tort of deceit
- Agents who inadvertently exceed their authority can be sued for the tort of negligence
Liability of the Principal for the Agent in Tort
The principal is liable for tortious acts of agent if done when carrying out duties of agency agreement
Termination of the Agency Relationship (why/how does this happen)
Can be express or implied
Must have notice
If the agency agreement is for a particular act, agency automatically expires after act
Incapacity (death, bankruptcy, etc.) can terminate (except where minor is concerned)
Bankruptcy of the principle in an agency relationship
This terminates agency agreement
If the agent contracts after bankruptcy of its principal, liability of agent to 3rd party for breach of warranty of authority
For ongoing agency relationships, principal must inform 3rd parties of termination of agency agreement
Failure to inform creates liability on principal as 3rd party can rely on apparent authority of agent
Sole proprietorship
A business where the sole owner is responsible for the management, debts, and liabilities of the business
Easy to start
Partnership
A legal relationship between 2 or more people for the purpose of carrying out a profitable business
Easier to raise capital
Partnership vs Joint Ownership
Partnership is a contractual relationship
Partnerships as personal relationships, not freely alienable, whereas joint ownership can be
Partners are agent of other partners, co-owners are not
Partners share in assets can only be determined by liquidation (unless agreement provides otherwise)
Partnership by estoppel
When someone holds themselves out to be partner to third parties and the real partners don’t refute, the relationship cannot be denied
The person becomes “liable as a partner” under the Act
Liability of partners (3 types)
Liability through agency:
Every partner has authority to bind the firm (for activities in course of business)
Vicarious liability:
- whole firm is liable for tortious acts committed in regular business
Unlimited liability:
- personal and business assets are exposed in liability
Jointly and Severally liable
Under joint liability, all parties must be sued together; partners may face joint liability for debts of the firm
Under several liability, each partner can be sued separately
Rights and duties between partners as defined by the partnership act
If not otherwise stated in the partnership agreement:
all property brought into partnership by partners is partnership property, and must be used to the benefit of the partnership
Land brought into partnership is presumed to be in trust for benefit of partnership unless established otherwise
Can only expel partner by dissolution and formation of new partnership
Partners are in a contract of utmost good faith