Agency Flashcards
(20 cards)
What is an agency relationship?
An agency relationship is a fiduciary relationship where one party (the agent) is authorized to act on behalf of another party (the principal).
This relationship can be established through an express agreement, implied agreement, or estoppel.
How can an agency relationship be established?
An agency relationship can be established in several ways:
* Express Agreement
* Implied Agreement
* Estoppel
An express agreement is when the principal explicitly agrees to an agency relationship, while an implied agreement arises from the conduct of the parties.
What is Express Agreement in the context of agency formation?
Express Agreement is when the principal explicitly agrees to an agency relationship, usually through a written or verbal contract.
For example, when a company hires a sales agent with a formal contract.
What is Implied Agreement in agency relationships?
Implied Agreement arises from the actions of the parties involved, suggesting an agency relationship even without a formal agreement.
If a principal acts in a way that suggests someone is their agent, an agency relationship may be implied.
What is Estoppel in agency relationships?
Estoppel prevents the principal from denying the agency relationship if they allow someone to act as their agent and a third party reasonably believes the agent has authority.
This is to prevent unfairness to the third party.
What are the types of authority an agent can have?
Agents can have different types of authority:
* Actual Authority
* Apparent Authority
Actual Authority is further divided into Express Authority and Implied Authority.
What is Actual Authority?
Actual Authority is the authority that the agent actually possesses, which can be either express or implied.
Express Authority is clearly stated in the agreement, while Implied Authority is necessary to perform the duties.
What is Apparent Authority?
Apparent Authority exists when the principal’s conduct leads a third party to believe that the agent has authority, even if the agent does not have actual authority.
For example, if a business owner allows an employee to negotiate contracts publicly.
What is the Duty of Loyalty?
The Duty of Loyalty requires the agent to act solely for the benefit of the principal and avoid conflicts of interest.
An agent should not engage in activities that compete with the principal’s business.
What is the Duty of Care?
The Duty of Care mandates that the agent performs their responsibilities with the level of skill that a reasonable agent would exercise under similar circumstances.
For instance, a real estate agent must be knowledgeable about the market.
What is the Duty of Disclosure?
The Duty of Disclosure requires the agent to inform the principal of all relevant information pertaining to the agency.
This duty ensures that the principal is fully informed to make decisions.
What is the principal’s Duty to Compensate?
The principal must pay the agent for their services as per the agreement.
This duty ensures that the agent is compensated for their work.
What is the Duty to Indemnify?
The Duty to Indemnify requires the principal to cover the costs incurred by the agent while acting within the scope of their authority.
This includes legal fees from lawsuits arising from the agent’s actions.
What is the Duty to Provide Safe Working Conditions?
The principal must ensure that the working environment is safe for the agent if they are working in a physical setting.
This duty protects the agent’s well-being.
How can an agency be terminated?
An agency can be terminated by:
* Act of Parties
* Expiration
* Fulfillment of Purpose
* Revocation of Authority
* Operation of Law
Each of these methods outlines a different way the agency relationship can end.
What does ‘By Act of Parties’ mean in agency termination?
By Act of Parties means that either the principal or agent may terminate the relationship by mutual agreement.
This is a voluntary termination of the agency.
What does ‘By Expiration’ refer to in agency termination?
By Expiration refers to the automatic termination of the agency relationship when the specific duration for which it was established ends.
This applies to time-bound agency agreements.
What does ‘By Fulfillment of Purpose’ imply?
By Fulfillment of Purpose means that the agency relationship ends once the task for which the agency was created is accomplished.
This is often seen in project-based agency agreements.
What is meant by ‘By Revocation of Authority’?
By Revocation of Authority means that the principal can revoke the agent’s authority at any time, provided it is not in breach of contract.
This gives the principal control over the agency relationship.
What does ‘By Operation of Law’ indicate?
By Operation of Law indicates that certain events, like the death or incapacitation of either the principal or agent, can terminate the agency.
This is an involuntary termination based on legal principles.
