Agency

Question 1

What is agency?

Answer 1

A relationship where the agent represents and acts on behalf of the principal, having the power to bind the principal to contracts

Question 2

What kind of relationship is agency?

Answer 2

Fiduciary relationship – involves trust, confidence, and dependence

Question 3

Can corporations and partnerships appoint agents?

Answer 3

Yes – corporations cannot act but through agents, and partnerships can either appoint agents or act through partners

Unincorporated businesses cannot appoint agents

Question 4

Can infants/minors appoint agents?

Answer 4

Yes, and such appointments are voidable, unless the agents acts to provide necessities

Question 5

Can insane people appoint agents?

Answer 5

If an insane person appoints an agent before being judicially declared insane, it is voidable; if after, it is void

Question 6

Can married couples enter into an agency relationship?

Answer 6

Yes

Question 7

Does an agent need to have the legal capacity to enter into contracts?

Answer 7

No, since he is only entering into contracts on behalf of the principal – anyone who can follow orders can be an agent

Question 8

What are the principal’s duties towards his agent?

Answer 8

• paying for services
• reimbursing expenses
• indemnification for actions performed at the principal’s orders
• compensating for injury

Question 9

What are the agent’s duties towards his principal?

Answer 9

• being loyal (not acting against his interests)
• following instructions
• communicating material facts
• keeping track of property

Question 10

Can an agent act for two principals at once?

Answer 10

Yes, so long as it does not constitute a conflict of interest – but even that is permitted if the principals consent

Question 11

What is an agent’s “actual” authority?

Answer 11

The authority delegated to the agent, contractually, by the principal

Can be express or implied

Question 12

How can an agent’s authority be implied?

Answer 12

If it is customary, or if it is reasonably needed to perform what the agent is authorized to do

Question 13

What happens if an agent acts with apparent/ostensible authority?

Answer 13

If the principal acts in such a way that an agent appears to have more authority than he does, then a third party can rely on this, but the principal can hold the agent responsible for any losses he incurs from it

Question 14

What is the difference between a general agent and a special agent?

Answer 14

General = has wide authority to act in different circumstances and transactions

Special = has authority limited to a certain specific transaction(s)

Question 15

What is a sub-agent, a co-agent, and an agent’s agent?

Answer 15

sub-agent = an agent appointed by another agent, with the authority from the principal to appoint other agents; responsible to both principal and agent

co-agent = an agent hired (but not appointed) by another agent to act alongside him; responsible only to principal

agent’s agent = an agent appointed by another agent, WITHOUT authority from the principal to appoint other agents; responsible only to the agent

Question 16

What is a gratuitous agent?

Answer 16

An agent who acts for free

Not legally bound to perform, but cannot act negligently if he does perform

Question 17

When is an agency irrevocable?

Answer 17

If the principal gives the agent a property interest (or security interest) in whatever he gives the agent power over

This is NOT the same as agreeing to pay the agent a commission on a sale

Question 18

What is a del credere agent?

Answer 18

An agent who also acts as a surety in case the principal’s customers do not pay, usually to get a higher commission

This is an example of a surety with a primary promise (rather than collateral) – acting for his own benefit – and thus does not fall within the Statute of Frauds

Question 19

What is an exclusive agent?

Answer 19

The only agent a principal will interact with for a particular purpose

E.g. after hiring a real estate agent, a principal may be forbidden to take a buyer gotten from a different agent

Question 20

What is a factor?

Answer 20

An agent who has possession of the principal’s property in the aims of selling it for a commission (or factorage)

The title remains with the principal, but a factor can sell in his own name, and he can transfer title to a good-faith buyer even if such a sale is beyond the factor’s authority

Question 21

How are an express agency and implied agency formed?

Answer 21

Express = by written or oral contract

Implied = by behavior

Question 22

What is not needed to form an agency relationship?

Answer 22

Consideration

Question 23

What is a written instrument by which a principal can appoint an agent?

Answer 23

Power of attorney

Question 24

When do agency relationships need to be in writing?

Answer 24

Generally, when the agent has the power to write contracts that must themselves be in writing (i.e. governed by the Statute of Frauds)

Question 25

For what purposes can an agent NOT be appointed?

Answer 25

to perform something... - only the principal can do - prohibited by statute - which the principal cannot do

Question 26

What is ratification?

Answer 26

Approval by a principal of an action done by a non-agent (or of an unauthorized action done by an agent) Can be express or implied

Question 27

Can transactions be ratified only in part?

Answer 27

No, individual transactions must be ratified as a whole or not at all

Question 28

Can crimes be ratified?

Answer 28

No, but torts can

Question 29

Can a person (e.g. a corporation) ratify actions done before it came into existence?

Answer 29

No, the person must exist at the time of the actions in order to ratify them

Question 30

If a potential agent contracts with a third party, is that party at liberty to revoke its agreement prior to ratification?

Answer 30

Yes, it can withdraw before there is ratification Further, the principal can lose power to ratify if he waits too long (and thus hurts the third party)

Question 31

What effectively occurs once ratification has been done?

Answer 31

It is exactly as if the principal had first performed the action himself Thus the principal and the third party cannot hold the agent liable for anything (e.g. breach of authority), and the principal cannot withdraw his ratification

Question 32

What is respondeat superior?

Answer 32

Doctrine that the principal can be liable for the torts (not crimes) of his agent performed in the scope of his employment, even if the principal did nothing wrong

Question 33

How does a principal-agent relation differ from a master-servant relation?

Answer 33

A servant's conduct is controlled by a master (which is the same as an agent and principal), but the servant lacks any authority to bind his master legally as a representative Respondeat superior applies to both relations

Question 34

How does an agent differ from an independent contractor?

Answer 34

An independent contractor is not controlled by his employer except regarding his results, and thus respondeat superior does not apply to such a relationship

Question 35

Does respondeat superior apply if the agent, in committing a tort, disregards his principal's instructions?

Answer 35

Yes, it still applies, unless the agent entirely departs from performing his own duties to act independently E.g. an intentional tort is usually outside the scope of employment, because for the agent's benefit

Question 36

If an agent commits a tort within the scope of his employment, can the injured party collect from the agent?

Answer 36

Yes, respondeat superior enables the injured party to choose to collect from either principal or agent (but not both)

Question 37

Under what circumstances would a contract between an agent and a third party bind only the principal?

Answer 37

If the third party knows of the agency relationship and the identity of the principal

Question 38

Under what circumstances would a contract between an agent and a third party bind both principal and agent?

Answer 38

If the third party knows of the agency relationship but not the principal's identity

Question 39

Under what circumstances would a contract between an agent and a third party bind only the agent?

Answer 39

If the third party is unaware of the agency relationship The principal can still enforce the contract against the third party, however

Question 40

What can a third party do if he discovers a principal's identity after having contracted with his agent?

Answer 40

He can hold him liable unless - the contract is a negotiable or sealed instrument - the agent already performed - the contract forbids it

Question 41

What is the difference between crimes and torts?

Answer 41

Crimes are offenses against society that punish, imprison, or fine criminals for the sake of retribution or rehabilitation; these cases are initiated by the state Torts are offenses against individuals that seek damages for the sake of restitution; these cases are initiated by private individuals

Question 42

If the third party knows the principal, when is the agent personally liable?

Answer 42

If the agent signs the contract with his own name, guarantees performance, or otherwise includes himself as a party

Question 43

If the third party knows of the agency relationship but not the principal's identity, when is the agent personally liable?

Answer 43

Always, unless the agent and third party agree not to bind the agent

Question 44

For what is an agent liable if he acts beyond his authority in such a way that the principal is not bound?

Answer 44

Can be liable to the third party for breaching an implied warranty of authority -- the party could get damages for what he would have gotten if the principal were actually bound Can be liable in tort for fraud

Question 45

Can an agent simply renounce his agency?

Answer 45

Yes, unless he was given consideration to be an agent (i.e. as a contract)

Question 46

When can a principal not revoke agency?

Answer 46

If it is an agency coupled with a property/security interest (which is irrevocable), or if he contracted to the relationship Principals (and agents) can still revoke/renounce the relationship if the other party breaches

Question 47

If an agency relationship ends, does notice have to be given?

Answer 47

If it not ended by operation of law (e.g. the principal goes bankrupt or dies), then yes Otherwise actions of the agent can still bind the principal