Agency Flashcards
What three questions should be asked to determine whether an action was “within the scope of employment?”
(1) Was the action of the same general nature as the job?
(2) What was the proximity in time/place of authorized actions? (small detour or major deviation?)
(3) Was the agent motivated to serve the employer w/ his actions? (Purpose of the actions?)
What is “agency?”
Agency refers to the legal relationship whereby an agent is authorized to represent a principal in business dealings with third parties.
What must an agent avoid to comply with the Duty of Loyalty owed to the principal? What is the remedy for breaching this duty?
Must avoid:
(1) secret profits
(2) Other conflicts of interest
Remedy: agent deemed to hold any gains in constructive trust for benefit of principal
What are the three general types of apparent authority?
(1) When agent had no actual authority
(2) When agent exceeds actual authority
(3) Inherent authority
Who are third parties liable to when they enter into a transaction via an agent?
(1) If Principal is disclosed:
- 3rd Party only liable to Principal
(2) If Principal is unidentified and undisclosed:
- either Principal or Agent can enforce contract, but Principal is entitled to benefits
*Of course, Principal can’t enforce contract if there is been fraud about identity or an unforeseen increased burden to 3rd Party now that they know they’ve contracted w/ Principal and not Agent.
What types of actions are included in an agent’s implied actual authority? (8)
(1) Incidental actions
(2) customary actions
(3) actions that principal acquiesced to previously
(4) Emergency measures
(5) delegating ministerial acts that require delegation
(6) Paying for/Accepting goods, where there is express authority to purchase
(7) Accepting payment/delivery/general warranties of fitness/quality of goods, where there is express authority to sell
(8) Managing investments in accordance with the “prudent investor” standard
If an agent appoints someone to perform some of the agent’s tasks, who is this person?
Could be:
(1) subagent: perform functions agent consented to perform
OR
(2) coagent: another agent of the principal, just appointed by the original agent
NOTE: employees of a single organization are presumed to be coagents (ex: manager and store clerk)
If the principal expressly prohibits any detours during the work day, does this protect him from liability under respondeat superior?
Not automatically. Same “within the scope of employment” test applies, although this will be a factor in determining the purpose of the employee’s actions.
Who owes the subagent compensation?
Generally the agent, even if the principal gave agent the authority to appoint subagent.
Do agency relationship contracts need to be in writing?
NO, except:
(1) Equal Dignities Statutes: if the underlying contract must be in writing (SOF) then the agency contract must also be in writing
What are the two different modes of creating an agency relationship?
(1) By act of parties
- agreement
- holding out by principal
- ratification by principal
(2) By operation of law
- estoppel (apparent authority)
- statute appoints agent for limited purpose
What potential theories are there for holding Principal liable for Agent’s torts?
(1) Respondeat Superior
(2) Apparent authority
(3) Actual authority
(4) Principal ratified the tort
Note: Principal may be liable for own tort (negligent hiring, negligent supervision, etc.)
When is a real estate broker entitled to his commission?
(1) Nonexclusive Contract:
Broker entitled upon HIS production of a ready, willing, and able buyer (even if sale doesn’t close)
(2) Exclusive Contract:
Broker entitled upon ANYONE’S production of a ready, willing, and able buyer
What fiduciary duties does the agent owe to the principal?
(1) Loyalty
(2) Obedience to reasonable instructions
(3) Reasonable care and diligence
What is the test for when Principal is liable under the theory of respondeat superior?
Principal liable IF:
Agent’s actions were within the scope of employment.
What is “inherent authority?”
Agent had authority because of:
(1) respondeat superior- torts w/in scope of employment,
OR
(2) his conduct was similar to authorized conduct
What counts as “actual authority?”
When the agent reasonably believes that she possesses authority based on the principal’s dealings with her.
What is “ratification?”
When the agent acts w/o authority, but the principal gives retroactive effect to the transaction by validating the action.
If the principal breaches, what are the agent’s available remedies?
(1) Contract remedies (w/ duty to mitigate)
(2) Right to possessory lien for any money due from the principal