Agency Flashcards
Agency
Fiduciary relationship that arises when one person (principal) appoints another (agent) to act on their behalf AND the agent consents to the act.
Agent must also be subject to principals control
Consent needed
Both P and A need to consent for the relationship to be formed, can be express or implicit
“On behalf of”
Requirement understood to mean that the A must be acting primarily for the P’s benefit, rather than for A or 3rd P
“Control”
Agent must act subject to P’s control, but the degree exercised need not be significant
P’s Capacity
Must have contractual capacity.
Minors, Incompetent, and Unincorporated orgs cannot be principals
A’s Capacity
No contractual capacity needed, but must have some mental capacity
Formalities
Consent
Writing (sometimes)
No Consideration needed
When is a Writing needed?
If required by statute; OR
When the agent is going to enter into K’s governed by the SOF
Creation Methods
By Act of the Parties; OR
By Operation of Law
Act of the Parties (Formation)
May create by agreement (actual authority)
May be bound by holding out the person as an agent or ratification (Apparent authority)
Operation of Law (Formation)
Estoppel - same as apparent authority, requires third-party reliance on the P’s communication
Statute- Creation usually designed to accomplish a limited purpose
Fiduciary Duties
Duty of Care
Duty of Loyalty
Duty of Obedience
Duty of Care
A owes duty to carry out their agency with reasonable care.
Degree of reasonableness slides depending on the Agent’s special set of skills.
Duty of Loyalty
A owes a duty of UNDIVIDED loyalty to the P, includes:
1. May not use position to profit for themselves
2. Must act solely for the benefit of the P and not for themself or 3rd party
3. Must refrain from dealing w P as an adversary
4. May not compete w P
5. May not use the P’s property for the A’s own purposes or a 3rd party
Duty of Obedience
A must obey all REASONABLE directions of their principal, if the A disobeys a reasonable direction A will be liable for any loss suffered by P
P’s Remedies for A’s Breach
K actions
Tort Actions
Actions for Secret Profits
Equitable Actions
Imposition of a constructive trust
Withholding of Compensation for intentional torts or intentional breaches of duty
Constructive Trusts
Equitable remedy where court transfers property gained by unjust enrichment back to the intended party
Subagent
Person appointed by the agent to perform funtions that the agent has consented to perform on behalf of the principal.
Agent has absolute liability for breaches by a sub-agent
P’s Duties
All imposed by the contract
Reasonable compensation
Reimbursement for expenses
Actual Authority
Authority the AGENT reasonably believes they possess based on their dealings w Principal
“If the P’s words or conduct would lead a reasonable person in the agent’s position to believe that the agent has authority to act on the principal’s behalf, the agent has actual authority to bind the principal.”
May be express or implied
Express Actual Authority
Authority conveyed by the P’s words (oral or written), is effective even if it was granted mistakenly or because or misrepresentation.
Implied Actual Authority
Authority the agent reasonably believes they have as a result of the principals words or actions. Includes authority:
1. Incidental or express
2. Arising out of custom known to A
3. Resulting from prior acquiescence
4. To take emergency measures
5. To delegate authority where circumstances require
Termination of Actual Authority
- Happening of event specified to terminate authority
- Lapse of reasonable time if a time for termination is not specified
- A change in circumstances including destruction of the subject matter of authority, insolvency, or change in the law or business conditions
- Breach of fiduciary duty
- Unilateral termination (by either party)
- Operation of law (death or loss of capacity)
Irrevocable Agencies
When agency is coupled with an interest or power is given as a security
