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Flashcards in Agency Deck (24):

What are the types of agency authority?

- express authority
- implied authority
- apparent authority
- estoppel authority
- ratification
- necessity


What is express authority?

authority conferred by an actual affirmative appointment by the principal


What is implied authority?

when the act was "necessary or usual" in carrying out functions which were expressly authorized by the principal

*There is no implied authority without express authority.


What is apparent authority?

when the principal has cloaked a person with the appearance of authority by outward manifestations

*agent must lack express authority for apparent authority to apply


What is estoppel authority?

when a principal causes or fails to correct a false belief in a third party that the agent has authority to act for the principal and the third party reasonably relies on that belief to his detriment

*typically occurs when an express authority has terminated and the principal has failed to inform a third party


What is required for agency liability by ratification?

(1) agent represented to the third party that she was acting for the principal
(2) principal later expressly adopts the contract OR accepts the benefits
(3) principal knows all the material facts concerning the contract and ratifies the entire contract

* when an agent lacked express, implied, or apparent authority


When is agency created by necessity?

When there is an emergency, such as a family member contracting for medical assistance or other necessities.


A principal is liable to third parties on contracts entered by the agent when:

the agent had express, implied, or apparent authority, or if the principal subsequently ratified the contract.


A principal is liable to third parties for torts of the agent when:

the tortious act or omission occurred in the scope of the agency


An agent is personally liable for contracts entered into on behalf of the principal when:

the principal was:
- undisclosed
- unidentified
- or lacked capacity

*Rule statement: When an agent fully discloses that she is acting for a principal and identifies the principal, then the agent is not personally liable on the contract.


An agent is personally liable for torts committed in the course of the agency when:

Agents are ALWAYS liable for their own torts.


A promoter of an unformed business may avoid liability on contracts for the entity when:

if the third party agrees to look to the future entity; the promoter must demonstrate there was intent to effectuate a novation upon formation


What are the exceptions to the rule that businesses are not liable for torts committed by independent contractors?

(1) if the independent contract is used to avoid liability from an unreasonable risk of harm to the public
(2) negligent supervision/hiring

*look for abnormally dangerous activities


What are the fiduciary duties of an agent to the principal?

- duty of honest dealing, obedience, and loyalty
- duty to make full disclosure
- duty to avoid conflicts of interest
- powers are non-delegable unless with permission


What is the gratuitous agent rule?

A gratuitous agent is an unpaid agent. She is not obliged to perform, but if she begins, she may not be negligent.


If an agent exceeds the scope of express authority in dealings with third parties, what claim can the third party bring?

breach of warranty of authority


What is the shop rights doctrine?

Both agent and principal have a nonexclusive right to use an invention or improvement created in the employer's workplace.

*does not apply if the agent was hired as an inventor, in which case the principal has the exclusive right to the invention


What are the principal's duties to the agent?

- reimburse expenses
- indemnify for liability flowing from duties performed under the principal's direction
- make the work place safe
- pay reasonable compensation, unless otherwise agreed


When is an employer liable to an employee for injuries in the workplace?

- for "work-related injuries"
- including injuries caused by other employees authorized by management to act


What are the types of voluntary termination of an agency relationship?

- agreement
- completion of the job
- time period expires
- breach of contract (potentially)
- revocation of authority
- renunciation by the agent

*revocation and renunciation require reasonable notice to the other party


What happens if a principal dies or is incapacitated?

The agency terminates and the estate will not be bound for future liabilities except as to third parties relying on the agency without notice of the death/incapacity.


What is agency coupled with an interest?

When an agent has an interest in the property that is the subject of the agency, there is an "agency coupled with an interest." In this situation, the principal cannot revoke the agency.


After termination of an agency relationship, what must the principle do to avoid liability?

The principal must give notice to creditors and customers that the agent no longer has authority in future dealings.


What are the two ways that third parties are notified that an agency relationship is terminated?

actual notice, and constructive notice by publication in a local newspaper or trade journal