Agencies Flashcards
(14 cards)
Describe an agent’s power in relation to a principal.
An agent has the power to bind the principal to a contract when the agent acts with actual or apparent authority.
Describe actual authority.
Actual authority exists when the principal makes a manifestation that causes the agent to reasonably believe that the agent is authorized to act on the principal’s behalf.
Describe apparent authority
Apparent authority exists when a third party reasonably relies on manifestations by the principal concerning the agent’s authority to act on the principal’s behalf.
Describe the undisclosed principal doctrine.
A principal is an undisclosed principal if the third party has no notice of the principal’s existence. An agent who enters into a contract on behalf of an undisclosed principal becomes a party to the contract. Thus, when the agent does not inform a third party of the identity or the existence of the principal, the agent becomes liable to the third party on the contract.
Describe ratification
A principal can ratify an act that was done on the principal’s behalf. There are four requirements for ratification:
(i) the principal must ratify the entire contract;
(ii) the principal and the third party must have legal capacity to enter into the contract;
(iii) the ratification must occur before the third party withdraws from the contract; and
(iv) the principal must know the material facts of the transaction.
Creation of an agency relationship
created when one (principal) manifests intent that another (agent) act on his behalf and be subject to his control.
Three Components: (ABC)
Assent
Benefit
Control
Express Authority
Through written or spoken words, Agent must reasonably believe that he is doing what the principal wants him to do.
Implied Authority
Allows agent to take whatever reasonable steps are necessary to achieve principal’s objective, within the accepted business practice or custom.
Estoppel
Principal may be barred from denying an agency relationship or agent’s authority if third party detrimentally relied and principal’s negligence caused the belief or principal failed to correct the mistake.
Describe the agents liability in the following circumstances:
Disclosed Principal
Partially Disclosed Principal
Undisclosed principal
Warranty of Authority
- Disclosed Principal: If third party had notice and knew the identity of the principal, agent is NOT liable.
- Partially Disclosed: If third party had notice but did not know principal’s identity, agent IS liable.
- Undisclosed principal: If third party did not know of agency relationship at all, agent IS liable.
- Warranty of Authority: breached is agent lacks power to bind principal. Agent IS liable.
Principals can be liable for independent contractor torts in the following four circumstances
- Principal retains control over the item/task
- Principal hires independent contractor to perform nondelegable tasks
- Independent contractor has apparent authority.
- Principal is negligent in selecting, training, or supervising independent contractor.
Principal can be directly liable to a third party for the following three circumstances:
- Authorizing or ratifying tortious conduct of agent.
- Negligently selecting, training, or supervising agent.
- Delegating a non-delegable duty (legal responsibility remains with P)
Duties of the agent
- Duty of loyalty to work only for principal’s benefit and to not compete, usurp principal’s business opportunity, not take secret profits.
- Duty of reasonable care.
- Duty of obedience
- Duty of notification and accounting
Duties of the principal
- Duty to compensate
- Duty to deal fairly and in good faith
- Duty to cooperate and not interfere with agent’s work.
- Duty to indemnify and reimburse for losses if not resulting from A’s wrongful conduct.
