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Flashcards in Agency Deck (28)
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Who can be a principal

Any one or enttity with legal capacity


o Corporation; LLC
o Partnership; LLP

Unincorporated associations CANNOT


Employers as principals

Employers typically exert a great amount of control over employees. This includes a significant amount of control over the DAY TO DAY activities of the employees

--pay employees
-direct how employees finish/perform tasks ,


Who can be an agent

Any person or entity with minimal capacity

e.g. a minor


Principal’s Contractual Liability:

Express Actual Authority

Actual authority may be express or implied.

Principal directly tells the agent (orally or in writing) that he has the authority to take certain actions


Principal’s Contractual Liability:

Implied Actual Authority

Actual authority may be express or implied.

authority which agent reasonably believes principal
has given b/c of necessity in order to accomplish assigned task; custom; or prior dealings (absent contrary instructions)

e.g. You tell your roommate, who happens to be a talent agent, to get you a role in the new Aquaman film. In an attempt to do this, your roommate takes the producer of the film out to dinner and tells the waiter to send the bill to you. Are you bound by the bill?

Yes The agent had actual implied authority to do whatever was necessary, under accepted business custom or trade usage, to secure the role for the principal.


Principal’s Contractual Liability:

Apparent Authority

Apparent authority exists when:

(1) the principal holds the agent out as having authority to AND

(2) 3rd party reasonably believes the agent has authority to act (based on the principal’s

the agent will have the power to bind the principal.


Principal’s Contractual Liability:


Principal is prevented from denying liability if he failed to take reasonable steps and use ordinary care to inform a third party of the lack of authority

e.g. has two co-agents, A and B. P learns that B, acting without actual or apparent authority, is informing P’s neighbors that A has the authority
to sell P’s ring, which P has specifically forbidden A from doing. P’s next-door
neighbor purchases P’s ring from A, in justifiable reliance on B’s representation
as to A’s authority. P, in her suit to rescind the sale, may be estopped
(prevented) from denying B’s authority to make the representation as to A’s


Termination of Authority

Termination of an agency relationship is unilateral; either party may assert the right to terminate the agreement.
Principal has the power to terminate the agency relationship at any time

An agency relationship terminates and the agent no longer has authority to act if:

 Actual authority—simply tell the agent that authority is revoked

 Apparent authority—must tell the third party that authority is revoked

Upon the death of the principal, actual express authority terminates when the agent has knowledge of the principal’s death



principal can ratify (affirm) an act performed by an agent, even if the agent did not have authority to act

Ratification requires that:
a. The principal ratify the entire contract;

b. The principal and third party have legal capacity to contract;

c. The ratification occurs before the third party withdraws from the contract; and

d. The principal know the material facts of the transaction.

e.g. I have said nothing to my butler about wine, and I have said nothing to the store. I just hired the butler yesterday. The butler, to cheer me up, goes down to the store on the very first day of employment and orders me a huge crate of wine; I have not authorized him and I have not said anything to the store. He brings the crate of wine back and gently drops it at my feet.

If I reject the wine, am I bound to pay? No

If I accept the win, I am bound to pay


General Rule regarding liability in torts and k



Employee vs. Independent Contractor

-Test:Whether the principal had the right to control the manner and method in which the job is performed.

Employee: If principal has substantial control in dictating the manner and method in which the job is performed,
then the person is deemed to be an employee of the principal.

Independent Contractor: Worker is subject to less control


Characteristics of Independent Contractor

- maintain high level of independence
-free to work for other ppl
-paid a fixed raid
-owns his own tools


Termination of agency relationship

Either party can terminate (unilateral termination ok)


Creation of Agency Relationship

1. Assent both parties manifest assent to work w/ one anther

2. Benefit: Agent agrees to work for principal's benefit

3. Control: agent agrees to work subject to principal's control

NO consideration requirement



undisclosed. The third party knows neither agent’s status as an agent nor the principal’s identity.

Parties to k are: 3rd party and the agent

Whether an undisclosed principal is also party to the contract depends on whether the agent had the authority to bind the principal to the contract.


liability Torts

Vicarious liability, or respondeat superior: A principal may be liable for the tortious acts of his agent.


Requirements for respondeat superior to apply:

2 elements

1. Principal had sufficient control over agent's conduct (such that employer-employee developed)

2. tort committed by agent was committed when agent was acting in scope of his employment

Scope of employment:

- was agent's conduct of the kind he was hired to perform
-did the tort occur on the job
- did the agent intend to benefit principal


Independent Contractor:

Torts liability

Generally principal does NOT have vicarious liability for torts committed by an independent contractor unless:

1. task inherently dangerous

2. principal was negligent in hiring the I. contractor

3. principal retains control over certain tasks and the tort occurs w/in those tasks


Intentional Torts Liability

Generally outside scope of employment----> no liability for principal


Frolic vs Detour

Frolic- action was outside scope of employment

Detour: action w/in scope of employment


Fiduciary duties of Agent to Principals

-duty of care (exercise reasonable care)

-duty of loyalty

-duty to obey reasonable directions

principal may recover losses and profits from breaching agent


Can there be apparent authority if principal is undisclosed



Actual Express Authority:
Death of a principal

The death of a principal does not terminate an agent’s express authority until the agent is aware of the principal’s death.


As long as the agent had the proper authority to bind the principal to a contract, which liability of the parties applies when there is full disclosure of a principal’s existence and identity by the agent to a third party

principal and 3rd party



Even though a person has not authorized another to act as his agent, he may be estopped from denying the existence of an agency relationship when a 3rd 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:

a. carelessly or intentionally caused the belief or

b. failed to take reasonable steps to to notify 3rd party


How long does apparent authority last?`

Apparent authority continues until the principal communicates the termination to third parties (even if the agency relationship was actually terminated).


Reasons why agent's authority might end

death, change in circumstances, reasonable amount of time, incapacity of principal



A principal may recover from an agent for indemnification