Agency

Question 1

What capacity does a principal need?

Answer 1

To become a principal and be bound by an agent’s actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal.

Question 2

What consideration is required to form an agency relationship?

Answer 2

None- an agent need not receive consideration (a gratuitous agent)

Question 3

What are common crimes that a principal could be vicariously liable for?

Answer 3

Negligence, misrepresentation, false imprisonment, battery

Question 4

What is the term for what happens when a principal affirms a prior act that was done or purported to be done on the principal’s behalf?

Answer 4

Ratification

Question 5

What are the four elements required for creating an agency relationship?

Answer 5

1. A principal manifests assent to an agent.
2. The agent acts on the principal’s behalf.
3. The agent’s actions are subject to the principal’s control.
4. The agent manifests assent or otherwise consents.

Question 6

What makes a principal partially disclosed?

Answer 6

A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity.

Question 7

Does an agent have a right to be compensated if not expressly written in a contract, and if so, how much?

Answer 7

Yes, an agent has a right to receive compensation if the principal impliedly promises such. When no amount has been specified, an agent has the right to be compensated in the customary manner of the business trade.

Question 8

What three things must an agent have or do to create an agency relationship?

Answer 8

1. Have minimal capacity
2. Manifest assent and consent to act on the principal’s behalf
3. Manifest assent to be subject to the principal’s control

Answer 9

An agent does not have to verbally consent, but may manifest assent by performing acts on behalf of the principal.

Question 10

Under what negligence theory can a principal be liable to a third party?

Answer 10

A principal who is negligent in selecting, supervising, or otherwise controlling an agent runs the risk of liability attaching to that negligence.

Question 11

What are the subjective and objective standards of intent for actual authority?

Answer 11

Subjective standard: the agent must believe that he/she is doing what the principal wants

Objective standard: the agent’s belief must be reasonable

Question 12

What is the capacity required to serve as an agent?

Answer 12

Generally, anyone with minimal capacity can serve as agent, including minors, incompetents, and entities.

Question 13

In a partnership, who is the principal and who is the agent?

Answer 13

The partnership can be considered the principal, while partners, employees, and others, such as attorneys, can serve as agents of the partnership.

Question 14

What is the most common method of creating an agency relationship?

Answer 14

By appointment (either oral or written)

Question 15

When is a duty non-delegable?

Answer 15

Generally, a duty is non-delegable when the responsibility is so important to the community that a person should not be permitted to transfer it to another person.

Question 16

When does fraudulent concealment apply?

Answer 16

For fraudulent concealment to apply, either the principal or the agent must have notice that the third party would not have dealt with the principal. Mere suspicions or doubts are not enough to give notice.

Question 17

Besides contract and tort law, when else should one be on the lookout for agency issues on the exam?

Answer 17

Partnership and corporations questions. Be prepared to

1. Identify the existence of agency relationships
2. Discuss whether the principal is subject to liability for the agent’s actions
3. Articulate an agent’s fiduciary duty to the principal and if there’s a breach
4. Determine if or when an agency relationship has terminated

Question 18

When does fraudulent concealment apply?

Answer 18

For fraudulent concealment to apply, either the principal or the agent must have notice that the third party would not have dealt with the principal. Mere suspicions or doubts are not enough to give notice.

Question 19

Besides contract and tort law, when else should one be on the lookout for agency issues on the exam?

Answer 19

Partnership and corporations questions. Be prepared to

1. Identify the existence of agency relationships
2. Discuss whether the principal is subject to liability for the agent’s actions
3. Articulate an agent’s fiduciary duty to the principal and if there’s a breach
4. Determine if or when an agency relationship has terminated

Question 20

What makes a principal partially disclosed?

Answer 20

A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity.

Question 21

When an agent is contracting on behalf of a disclosed principal, what three steps must the agent take to avoid becoming a party to the contract?

Answer 21

The agent must:

1. Enter into the contract on behalf of the disclosed principal
2. Affirmatively disclose to the third party both the existence and identity of the principal, and
3. Not agree to become a party to the contract

Question 22

What three things must an agent have or do to create an agency relationship?

Answer 22

1. Have minimal capacity
2. Manifest assent and consent to act on the principal’s behalf
3. Manifest assent to be subject to the principal’s control

Question 23

What is the most common method of creating an agency relationship?

Answer 23

By appointment (either oral or written)

Question 24

What three situations provide the agent with power to bind the principal to a contract?

Answer 24

1. The agent has actual authority (express or implied)
2. The agent has apparent authority, or
3. The principal is estopped from denying the agent’s authority

Question 25

What consideration is required to form an agency relationship?

Answer 25

None- an agent need not receive consideration (a gratuitous agent)

Question 26

Who may be a principal?

Answer 26

Any individual or entity that has the legal capacity to possess rights and incur obligations can be a principal.

Question 27

Label the parties involved: Seller lists a property with a broker and a Realtor shows the property to prospective buyers.

Answer 27

Seller: Principal Broker: Agent Realtor: Subagent

Question 28

What are the five types of principals?

Answer 28

1. Individual 2. Master / Employer 3. Entrepreneur 4. Corporation 5. Partnership

Question 29

Does an agent have a right to be compensated if not expressly written in a contract, and if so, how much?

Answer 29

Yes, an agent has a right to receive compensation if the principal impliedly promises such. When no amount has been specified, an agent has the right to be compensated in the customary manner of the business trade.

Question 30

Which type of authority results when the principal causes a third party to reasonably believe the agent has authority to act?

Answer 30

Apparent authority (also known as the doctrine of "ostensible agency")

Question 31

Must an agent consent to the agency relationship verbally, in writing, with actions, or by a combination thereof?

Answer 31

An agent does not have to verbally consent, but may manifest assent by performing acts on behalf of the principal.

Question 32

What are the four elements required for creating an agency relationship?

Answer 32

1. A principal manifests assent to an agent. 2. The agent acts on the principal's behalf. 3. The agent's actions are subject to the principal's control. 4. The agent manifests assent or otherwise consents.

Question 33

What is the capacity required to serve as an agent?

Answer 33

Generally, anyone with minimal capacity can serve as agent, including minors, incompetents, and entities.

Question 34

What is a subagent?

Answer 34

A person appointed by an agent to perform functions that the agent has agreed to perform on behalf of a principal. The agent is liable to the principal for the conduct of the subagent.

Question 35

Under what negligence theory can a principal be liable to a third party?

Answer 35

A principal who is negligent in selecting, supervising, or otherwise controlling an agent runs the risk of liability attaching to that negligence.

Question 36

What capacity does a principal need?

Answer 36

To become a principal and be bound by an agent's actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal.

Question 37

As between a principal and agent, who owes whom the duty of loyalty?

Answer 37

The agent owes the principal the duty of loyalty, the principal does not owe the agent the duty of loyalty. However, a principal does have a duty to refrain from conduct likely to injure an agent's business reputation or reasonable self-respect.

Question 38

Under what two areas (or subjects) of law may an agent file a claim against a principal?

Answer 38

An agent might have a claim against the principal founded in contract or tort law.

Question 39

What five circumstances would each count as a change in circumstance, ending the agency relationship?

Answer 39

1. A change in a statute relating to the subject matter 2. Insolvency of either party 3. A dramatic change in business conditions 4. The destruction of the subject matter of the agency relationship 5. A disaster (natural or unnatural)

Question 40

Who may terminate the agency relationship?

Answer 40

The termination may be unilateral- the principal or agent may terminate without the other's consent.

Question 41

What is the difference in standard of care a compensated agent owes a principal compared with the standard of care an uncompensated agent owes?

Answer 41

Both owe the same standard of care: reasonable care

Question 42

When may a person who has not represented that an individual is authorized to act as an agent be estopped from denying the existence of the agency relationship?

Answer 42

Estoppel applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for the principal, and either the principal intentionally or recklessly caused the belief, or failed to take reasonable steps to correct such belief.

Question 43

When should one apply tort law to an agency scenario?

Answer 43

Tort law applies when vicarious liability attaches to a principal for torts or crimes committed by an agent.

Question 44

What are the seven elements that identify someone as an independent contractor rather than an employee?

Answer 44

An independent contractor is one who: 1. Bears the risk and benefits from good management 2. Maintains a high level of independence 3. Is free to work for others 4. Agrees to be paid a fixed fee 5. Receives payment based on results 6. Is liable for work performed, and 7. Accepts responsibility to remedy defects at her own expense

Question 45

What is the two-factor rule for when a principal is vicariously liable to a third party harmed by the agent's conduct?

Answer 45

A principal is vicariously liable when: 1. There is an employer-employee relationship and 2. The agent commits a tort while acting within the scope of employment.

Question 46

What are the five "must have" duties an agent owes a principal?

Answer 46

1. Duty of care 2. Duty to provide information 3. Duty of loyalty 4. Duty of obedience 5. Duties not to usurp a business opportunity, not to take financial gain, provide an accounting, and no commingle

Question 47

Must an agent consent to the agency relationship verbally, in writing, with actions, or by a combination thereof?

Answer 47

An agent does not have to verbally consent, but may manifest assent by performing acts on behalf of the principal.

Question 48

What are three situations that would result in a principal being directly liable to a third party harmed by an agent's conduct?

Answer 48

1. The principal authorizes or ratifies the agent's conduct 2. The principal is negligent in selecting, supervising, or otherwise controlling the agent, or 3. The principal delegates to an agent performance of a non-delegable duty to use care to protect other persons or their property, and the agent breaches the duty Note: Because it is the agent’s conduct that triggers a principal’s liability for violation of a non-delegable duty, some jurisdictions treat the principal’s liability as vicarious rather than direct.

Question 49

Can a minor serve as a principal or agent?

Answer 49

A minor may serve as an agent, but lacks the capacity to serve as principal. This is because to become a principal and be bound by an agent's actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal.

Question 50

What may an agent with implied actual authority do?

Answer 50

Implied actual authority allows an agent to take whatever actions are properly necessary to achieve the principal's objectives, based on the agent's reasonable understanding of the manifestations and objectives of the principal.

Question 51

What is a special agent?

Answer 51

Special agents generally have limited authority regarding a specific transaction or a string of repetitive acts. Examples: real-estate agents, subagents, insurance agents, commission merchants, bailees

Question 52

When is a principal not required to indemnify an agent's losses?

Answer 52

A principal is not obligated to indemnify losses that result from an agent's own negligence, illegal acts, or other wrongful conduct.

Question 53

What doctrine places liability on an innocent principal for acts of an agent?

Answer 53

Vicarious liability asserts that a principal is liable for acts of an agent, even though the principal is innocent of fault and not directly guilty of any tort or crime.

Question 54

When does the election of remedies doctrine come into play?

Answer 54

When a principal is first undisclosed and the agent binds the principal to a contract with a third party, and then the third party learns of the principal's existence, this doctrine comes into play and requires the third party to choose to hold either the agent or the principal liable and obtain a judgment against only one.

Question 55

When is a duty non-delegable?

Answer 55

Generally, a duty is non-delegable when the responsibility is so important to the community that a person should not be permitted to transfer it to another person.

Question 56

What role, if any, may an incompetent play in the agency relationship?

Answer 56

A person who has a factual incapacity, such as incompetence, does not have the legal capacity to be a principal, but may be an agent.

Question 57

What are the seven types of agents?

Answer 57

1. Individual 2. Employee 3. Independent contractor 4. Gratuitous agent 5. General and special agents 6. Trustee 7. Subagent

Question 58

Which type of authority results when the principal's words or actions cause an agent to reasonably believe in the agent's authority to act?

Answer 58

Implied authority

Question 59

What results when a principal's manifestation intended for one agent is actually given to another agent in error?

Answer 59

This situation creates express authority to the agent who received the manifestation by mistake. Note: The same result occurs when a principal's manifestation concerning the subject matter is incorrect.

Question 60

What are common crimes that a principal could be vicariously liable for?

Answer 60

Negligence, misrepresentation, false imprisonment, battery

Question 61

What are an agent's five general rights?

Answer 61

1. To be compensated (if so promised) 2. Allowed to work without interference 3. Reimbursed for losses 4. Provided a safe work environment 5. Indemnified for working on behalf of a principal

Question 62

What is the term for what happens when a principal affirms a prior act that was done or purported to be done on the principal's behalf?

Answer 62

Ratification

Question 63

What doctrine places liability on a principal for a tort committed by an agent acting within the scope of employment?

Answer 63

Respondeat superior, also known as derivative liability

Question 64

What are the eight ways in which an agent's actual authority may be terminated?

Answer 64

1. Principal's revocation 2. Principal's agreement with the agent 3. Change of circumstances 4. Passage of time 5. Principal's death or suspension of powers 6. Agent's death or suspension of powers 7. Principal's loss of capacity 8. A statutorily mandated termination

Question 65

In a partnership, who is the principal and who is the agent?

Answer 65

The partnership can be considered the principal, while partners, employees, and others, such as attorneys, can serve as agents of the partnership.

Question 66

What are the subjective and objective standards of intent for actual authority?

Answer 66

Subjective standard: the agent must believe that he/she is doing what the principal wants Objective standard: the agent's belief must be reasonable

Question 67

What is it called when an employee's personal errand involves a significant deviation from the path that otherwise would be taken for the purposes of performing work?

Answer 67

A frolic