Agency Flashcards
An agency
is a legal relationship where the principal appoints an agent to act on his or her behalf.
Creation of an Agency
- The principal must have capacity (not a minor).
- Writing Is Not Generally Required—Unless to buy or sell land or agency is to last more than a year.
- Agent (capacity not required)—Minor can be an agent. 4. Consideration not required to form an agency relationship.
Duties of Agent to Principal
- Loyalty—Agent must act solely in the principal’s best interest.
- Obedience—Agent must obey principal’s reasonable instructions.
- Reasonable Care—Agent must not act negligently.
- Duty to Account—For money and property received and paid out.
- If agent breaches the duties he owes the principal, the principal can recover damages from the agent, including tort damages, contract damages (if agent was not gratuitous), and secret profits, and even withhold compensation
Duties of Principal to Agent
1 Compensation—Unless otherwise agreed.
- Reimbursement/indemnification for all expenses in carrying out the agency relationship.
- If the principal breaches her duties to the agent, the agent can bring an action against the principal for damages.
Power to Terminate Relationship
- Both parties generally have the power, but not necessarily the right, to terminate the relationship at will. Can be held liable for damages if termination breaches contract.
- Agency Coupled With an Interest—Principal cannot terminate, only the agent can terminate.
Agent’s Power to Bind the Principal
- Principal is bound by agent’s act if agent acted with authority. There are two kinds of authority, actual and apparent.
- Actual Authority
Actual Authority
a. Express—The principal specifically grants the power.
b. Implied—The agent reasonably believes he has authority based on dealings between the principal and agent, includes authority necessary to run the business or carry out agency agreement.
c. Termination—Actual authority can be terminated by agreement of the parties, accomplishment of objective or expiration of the stated time. Actual authority is also terminated by death of either the principal or the agent, incapacity of the principal, the principal’s discharge in bankruptcy, failure to have a required license, destruction of the subject matter, and subsequent illegality.
Apparent Authority
Power that a third party reasonably believes an agent has, based on principal’s conduct or communications toward the third party. This can arise from:
a. Holding the agent out under a specific title (e.g., an agent held out as a store manager has apparent authority to do whatever store managers in a similar business in the area do).
b. Failure to give notice of agent’s termination.
Ratification of a previously unauthorized act can also bind the principal in contract. Requirements: The agent must have indicated that she was acting on behalf of the principal; all material facts must be disclosed to the principal; and the principal must ratify the entire transaction.
n/a
Disclosed Principal
If the principal’s existence and identity are known to the third party, the agent is not liable to the third party under the contract.
Partially Disclosed or Undisclosed Principal
If a third party does not know the agent is an agent or does not know the principal’s identity, the agent is liable under contract with the third party along with the principal.
Tort Liability
A principal is not liable for torts committed by agent; only the agent is liable.
Tort Liability - Respondeat Superior
An employer can be held liable for an employee’s torts committed within the scope of the employment (while employee is performing services for the employer).
The key difference between an independent contractor and employee is that the employer-principal has the right to control the manner in which employee’s work is performed.
Tort Liability where
An employer is liable for an independent contractor only if the employer authorized the tortious acts or if the work involved an ultra-hazardous activity.
