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CMONEY STUDIES FOR THE BAR > AGENCY > Flashcards

AGENCY Flashcards

1
Q

Definition of Agnecy Relationship:

A

Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other to so act.

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2
Q

The person who is acting for another is the _______.; the person for whom the agent is acting is the ________.

A

agent; principal

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3
Q

______of both the principal and agent is necessary to form an agency relationship. _______ may be established ______, or by _______ from the parties’ conduct.

A

Consent; consent; expressly (by written or oral statements); implication

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4
Q

The “on behalf of” requirement in the agency definition is generally understood to mean that the agent must be acting _______ for the ___________ rather than for the _______________.

A

primarily; benefit of the principal; benefit of the agent or some other party

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5
Q

The agent must act subject to the principal’s ______, but the degree of ______ exercised by the principal does not have to be significant.

A

control; control

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6
Q

The requisite level of control may be found simply by the fact that the principal has specified the task that the agent should perform, even if the principal has not prescribed the _______ of how the task should be accomplished.

A

details

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7
Q

A ________ must have contractual capacity, but the ________ does not. Why?

A

principal; agent.

Because the contract is between the principal and the 3rd party. Agent is not entering contract.

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8
Q

What is the equal dignities rule?

A

It stipulates that agency agreements must be in writing when the agent is to enter into certain contracts within the statute of frauds.

*Otherwise, there is no agency law rule that requires an agency agreement to be in writing.

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9
Q

T Swift hires Hollywood bigwig Michael Ovitz to be her agent. Is writing required?

A

Nope. Doesn’t fall w/in the statute of frauds.

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10
Q

T Swift hires Mike to be her agent for five years. Is writing required?

A

Yes, because the contract cannot be completed within 1 year–SOF.

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11
Q

T Swift authorizes Mike to convey her land to Ginger. Is a writing required?

A

Yes. Land conveyances = SOF

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12
Q

Is consideration required for the creation of an agency relationship?

A

Nope.

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13
Q

What are the types of authority created by an agency relationship?

A 
1.  Actual authority
     • express
     • implied 
2.  Apparent Authority  
3.  Ratification
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14
Q

Definition of actual authority:

A

Actual authority is authority that the agent reasonably thinks she possesses based on the principal’s dealtings with her.

  • IOW, If the principal’s words or conduct would lead a reasonable person in the agent’s position to believe that the agent has authority to bind the principal.
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15
Q

What is express actual authority?

A

Where the agent reasonably thinks she possesses authority based on the principal’s words, either oral or written.

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16
Q

What is implied actual authority?

A

Authority the agent reasonably believes she has as a result of the principal’s actions. E.g.:
• authority inferred from principal’s words or
conduct.
• from custom
• from acquiesence

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17
Q

P goes to an office where, as he knows, several brokers have desks, and leaves upon the desk of A, thinking it to be the desk of X, a note signed by P, which states “I authorize you to contract in my name for the purchase of 100 shares of WU stock @ today’s market.” Unaware of the mistake, A comes to work, finds the note, and contracts with T in P’s name for the purchase of the shares. Was A authorized to enter into this contract?

A

Yes, A has express actual authority. P’s signed note without a specific name on it would lead a reasonable person in A’s position to believe that she was authorized.

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18
Q

P authorizes A to manage his apartment building. P only states that Albert is “to manage”–nothign more. To manage the builing, A must employ a janitor, purchase fuel for heating, and occasionally redecorate an apartment. Is A authorized?

A

Yes. It is implied because these acts are necessarily incidental to (“part and parcel of”) the proper management of the building.

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19
Q

A, the office manager, for P’s company, has regularly bought office supplies for the company without previous authorization. P has never objected. Does A have authority to continue these purchases?

A

Yes. He has implied authority from acquiesence to continue these purchases. The approval by P of A’s prior transactions would lead a reasonable person in A’s position to believe he was authrorized.

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20
Q

Actual authority must exist at what time?

A

When the agent enters into a contract.

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21
Q

Actual authority will be terminated/ revoked:

A
  1. after a specified time/event, or after a reasonable time (if there is no specified time or event).
  2. by a change of circumstances (i.e. the subject matter of the agency is destroyed).
  3. by a breach of the agent’s fiduciary duty
  4. by a unilateral act by either the principal or the agent.
  5. by death or incapacity of either the principal or agent.
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22
Q

Paula collects rare books. She hires Alice to find a rare book to complete her collection. Alice searches everywhere for the rare book. As Alice is about to pay for the book, Paula dies. Is Paula’s estate bound by the contract and liable to pay for the book?

A

No, via actual authority. Actual authority was terminated upon Paula’s death.

23
Q

What is apparent authority?

A

Exists when the principal holds out another as possessing authority and a 3rd party is reasonably led to believe that authority exists.

24
Q

What is the difference between actual authority and apparent authority?

A

Actual authority is based on the principal’s manifestations (words or conduct) and how they affect the reasonable agent. Apparent authority is based on the principal’s manifestations (words or conduct) and how they affect the reasonable third party.

25
Q

What is power of position?

A

The power of position can establish either actual or apparent authority. It is the idea that a person’s title/ position led a reasonable agent (actual) or 3rd party (apparent) to believe the agent had the authority to act.

26
Q

A tells T that he is P’s agent when in fact he is not. If A contracts with T on Paulina’s behalf, will P be bound?

A

No, no manifestation by P.

27
Q

Assume A, in P’s presence tells Thomas that he is P’s agent when in fact he is not. P is silent. If A contracts with T on Paulina’s behalf, will P be bound?

A

Yes, P’s silence in the face of A’s statement will be viewed as conduct by P to T that misled T.

28
Q

What is lingering apparent authority?

A

Apparent authority can linger after actual authority is gone, or even where actual authority never existed.

Beavis bought supplies from Kmart on behalf of Butthead, but without permission by Butthead. Butthead paid KMart but told Beavis not to do it again. Beavis ignores Butthead and buys more supplies from Kmart on behalf of Butthead. Does Beavis have actual authority to buy supplies again? Apparent authority?

Actual: NO
Apparent: Yes. KMart saw Beavis buy supplies before and Butthead paid for them. They don’t know any different. Butthead should tell KMart Beavis doesn’t have authority.

*Don’t forget that Butthead has an action against Beavis for the price of the supplies. Beavis acted without actual authority and hurt BH. Duty of obedience breached.

29
Q

What is ratification?

A

Even if the agent had no authoirty at the time of entering into the contract, the principal will still be bound by the agent’s actions if the principal ratifies the contract. Effectively serves as a substitute for before-the-transaction authority.

30
Q

What are the methods of ratification?

A
  1. Express: most common is oral or written confirmation of a contract (e.g. a company resolution).
  2. Implied: when the principal accepts the benefits of the contract.
31
Q

Requirements for ratification:

A
  1. The principal must have knowledge of all material facts regarding the contract;
  2. The principal must accept the entire transaction. Cannot merely ratify a portion;
  3. Ratification cannot be used to alter the rights of intervening parties.
32
Q

Lucy, acting without authority, sells Desi’s car for $6000. Desi later agrees to sell it ot John Wayne Bobbit for $5000. Can Desi ratify Lucy’s earlier sale when he learns about it?

A

NO. He would like to for the extra $1000, but Bobbitt’s intervening rights in the subject matter of the transaction will prevent this.

*Can’t cut off Bobbitt’s rights–haha.

33
Q

The general rule for agency liability in contracts is:

A

If actual authority, apparent authority, or ratification is present, the principal is liable on the contract and the agent is not.

34
Q

Exception to the general agency liability rule:

A

If the principal is undisclosed or partially disclosed, the agent is also liable on the contract. (Along with the principal who is still liable).

Disclosed: at the time of the agent’s transaction, the 3rd party has no notice that the agent is acting for a principal.

Partially Disclosed: at the time of the agent’s transaction, the 3rd party has notice that the agent is acting for a principal, but has no notice of the principal’s identity.

35
Q

The agent (even an unpaid one) is a _______ of the principal and owes corresponding ______ duties to its principal.

A

fiduciary; fiduciary

36
Q

What are the fiduciary duties an agent owes the principal?

A

Duty of care
Duty of loyalty
Duty of obedience

37
Q

What is the duty of care standard that an agent owes the principal?

A

An agent owes a duty to her principal to carry out her agency with reasonable care. (A “sliding scale” depending on any special skills that the agent may have).

Basically a negligence standard.

38
Q

What is the duty of loyalty standard that an agent owes the principal?

A

The agent owes a duty of undivided loyalty to the principal. This includes the following obligations:

  1. an agent must account to the principal for any profits made while carrying out the principal’s instructions
  2. An agent must act solely for the benefit of the principal and not to the beneift of himself or a 3rd party.
  3. an agent must refrain from dealing with his principal as an adverse party or from acting on behalf of an adverse party.
  4. an agent may not compete with his principal concering the subject matter of the agency; and
  5. An agent may not use the principal’s property (including confidential information) for agent’s own purposes or a 3rd party’s purposes.
Profits
Benefit
Adverse Party
Compete
Property

(Please Be A Cool Person)

*Often a number of these will be violated by a single transaction. Go through them all.

39
Q

What are the potential remedies for breach of duty of loyalty?

A

A wide range of equitable remedies are available to a court. In general, a court can do whatever it wasnt to do justice in the situation.

E.g. Can sue for damages and for disgorgement of any profits made by the agent.

40
Q

The duty of obedience requries that:

A

an agent must obey all reasonable directions of his principal. While the principal may well be liable for the agent’s acts in violation of directions (apparent authority), the agent will be liable to the principal for any loss that the principal suffers.

41
Q

What duties does the principal owe to the agent?

A

A principal does not owe fiduciary duties to the agent.

But should indemnify and compensate:

  • If an agent incurs expenses or suffers other losses in carrying out the principal’s instructions, the principal has a duty to indemnify the agent.
  • Most importantly, unless the circumstances indicate otherwise, it will be inferred that the principal agreed to compensate the agent for his services.
42
Q

For purposes of principal liabilitly for torts, what are the definitions of master, servant, and independent contractor?

A

Master: (employer): is a principal who employs an agent to perform service in hisi affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.

Servant: (employee): an agent so employed by a master.

Independent Contractor: person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respoect to his physical conduct in the performance of the undertaking.

43
Q

A master is liable for the torts committed by the _______ within the ___________. The ______ and _________ are both jointly and severally liable.

A

servant; scope of servant’s employment; master; servant

44
Q

A principal is generally not liable for torts committed by __________.

A

an independent contractor in connection with his work.

45
Q

In general, if a person is subject to the control of another as to the _______ used to achieve a particular result, he is a servant. By contrast, if a person is subject to the control of another as to his _____ only, he is an independent contractor.

A

Means; results

46
Q

The single overriding factor to determine whether someone is a servant or independent contractor is whether the principal has the:

A

right to control the manner and methods used to perform his tasks.

47
Q

Factors to consider in determining whether the principal has the right to control the manner and means of performance are:

A
  1. Skill required–where great skill is required, more likely to be an IC
  2. Tools and facilities–if the principal supplies the tools and facilities used to perform the job, morely likely to be an EE
  3. Period of employment–if the period is indefinite and/or long, more likely to be an EE.
  4. Basis of compensation–if compensation is on the basis of time, more likely to be an EE; If based on the job, more likely to be an IC.
  5. Business purpose– if the person was hired to perform an act in furtherance of the principal’s business, more likely to be an EE; and
  6. Distinct Business– a person who has her own business or occupation is more likely to be an IC.
Skill
Tools
Period
Compensation
Business Purpose
Distinct Business

Servants, TP; Contractors BiDet

48
Q

A master is not automatically liable for a servant’s torts. A master is only liable if the servant was acting within the ___________. What are the 3 factors that help make this assessment?

A

scope of employment

3 factors:

  1. Was the conduct of the kind the agent was hired to perform?
  2. Did the tort occur onthe job (within the time and space limits of the employment?)
    • A minor deviation, detour, is usually within the
    scope
    • A substantial deviation, frolic is usually
    outside the scope
  3. Was the conduct actuated at least in part to benefit the principal?
49
Q

ER instructs EE to drive across town to deliver files to a branch office. On the way back to HQ, EE stops to pick up his shirts at the dry cleaner for work the next day. In the parking lot of the dry cleaner, EE hits a pedestrian. Is ER liable?

A

Yes. EE is a servant. Likely to be viewed as a minor deviation, or detour.

50
Q

What is the general rule for ER liability for intentional torts?

Exceptions?

A

Generally, the ER is not liable for the intentional torts of an EE. Intentional torts are generally viewed as outside the scope of EM.

Exception: Intentional torts will be viewed as within the scope of EM if the conduct is

  1. Natural from the nature of the job;
  2. Motivated to serve the ER
  3. Specifically authorized or ratified by ER.

*Usually a bouncer or security officer type situation.

51
Q

If an ER lends the services of an EE to another, and the EE commits a tort while in loaned role, who is liable?

A

Key issue is who has the primary right of control over the EE.

In most situations, the loaning principal retains control.

52
Q

Domino’s hired Dennis the Menace without checking his driving record. He had 2 DWIs. While on a frolic, Dennis negligently injures Mr. Wilson. Is Domino’s liable?

A

Domino’s is not vicariously liable for Dennis’ negligence because he was on a frolic.

But, Domino’s is likely directly liable for its own negligence in failing to check the driving record of its delivery persons.

**Don’t forget about direct liability.

53
Q

For a vicarious liability contracts question, ask:

A
  1. Did agent have actual/ apparent authority at the time of contract, or did principal ratify the contract later?
  2. If so, principal is liable. (Usually agent is not–disclosure exception).
54
Q

For a vicarious liability torts question, ask:

A
  1. Was the tort committed by a servant in the scope of his employment?
  2. If so the master and servant are jointly and severally liable to the 3rd party.

CMONEY STUDIES FOR THE BAR (17 decks)

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