Agency and Partnership Flashcards
(51 cards)
Nature of Agency Relationships
An agency relationship (AR) is a VOLUNTARY, FIDUCIARY relationship between two parties: a PRINCIPAL (P) and an AGENT (A).
- –> In an AR, the P has authorized the A to act on the P’s behalf, and the A (acting w/in the scope of authority granted by the P) has the ability to bind the P.
- –> The relationship can be based on a K but does not have to be.
Agency can lead to liability for a P based upon an A’s actions, or a P may be bound by a K made by an A.
Types of Agency Relationships (2 Types)
Gratuitous agencies
—> The P does not compensate the A for the work the A does on the P’s behalf.
Contractual agencies
- –> Employer-employee (aka, master servant)
- –> Employer-independent contractor
“Agency” as an Equitable Doctrine
The related concepts of “AGENCY BY ESTOPPEL” and “APPARENT AUTHORITY” are equitable doctrines invoked to protect a 3rd party from damage or loss.
- –> Parties are treated AS IF an agency had existed and as if an A had acted within the scope of authority granted by a P.
- –> By this fiction, the ostensible A is said to have “apparent authority” and the ostensible P will be deemed to be liable or bound to a 3rd party.
Creation of an Agency Relationship –> Requirements for Creating an Agency Relationship: General Reqs
Generally
To create an agency relationship there must be both MANIFESTATION of the P’s INTENT and of the A’s CONSENT.
—> In other words, there must be mutual assent by both parties—P and A—to the relationship.
Reqs
To create an agency relationship, there must first be a P who manifests an intent to GRANT AUTHORITY to another to act (1) on the P’s BEHALF and (2) subject to the P’s CONTROL.
—-> Additionally, there must be an A who CONSENTS to the P’s grant of authority (that is, to act on the P’s behalf and subject to the P’s control).
—-> The P and A can manifest the requisite intent and consent in several ways: expressly (by means of a writing or spoken words) or impliedly (by conduct).
BC an agency relationship reqs the mutual assent of both the P and the A, each party must have the requisite CAPACITY to offer its assent.
Creation of an Agency Relationship –> Requirements for Creating an Agency Relationship: General Reqs (Capacity)
Requirements
To enter into an agency relationship, the would-be A must have:
(1) (at least) minimum mental capacity.
(2) the contractual capacity to effect transactions.
Minors/Declared Incompetent as As/Ps
While a minor or declared incompetent might have the capacity to be an A, neither a minor nor a declared incompetent will have the capacity to be a P.
—> Exception of minors contracting for necessities.
Creation of an Agency Relationship –> Requirements for Creating an Agency Relationship: Additional Req’ment for Creating Powers of Attorney
CA statute establishes additional re’ments for creating this type of agency relationship, including that there be a signed writing.
—> Note: rarely tested
Creation of an Agency Relationship –> Distinguishing Employees from Independent Contractors
When a P is an employer of the A, the A is either an employee or independent contractor.
- –> Note: rarely tested (in CA)
- –> fact-based inquiry (weigh various factors and facts)
2 Relationships + Reqs
(1) An employer-employee relationship exists where the employer:
- —> controls or has the right to control the A’s performance “not only w/ respect to the results sought to be achieved but also the means and manner in which the results are to be achieved.”
(2) An employer-independent contractor relationship exists where the employer:
- —> determines what services the A is to perform but does not have the right to control HOW the A performs these services on the P’s behalf.
Key
The Degree to which the employer has the right to control the details of the A’s work activity.
—> Factors:
(1) the extent to which the A’s work is typically performed by specialists w/o supervision;
(2) who supplies the A with tools and a place for performing the work;
(3) the length and exclusivity of the employment relationship;
(4) whether the A is paid by the job or at regularly timed intervals; and
(5) whether the A’s work is part of the regular business of the employer.
Creation of an Agency Relationship –> Agency by Ratification: Generally
The concept of “agency by ratification” refers to the post- hoc creation of an agency relationship.
- –> Only transactions entered into on behalf of another, or purportedly entered into on behalf by another, can be ratified.
- –> When a party, w/o authority, enters into a K on behalf of another, and this other party thereafter affirms or ratifies this transaction on its behalf, an actual P-A relationship is retroactively created.
Retroactive Ratification
To grant authority retroactively to a purported A who had entered into a K on its behalf, the would-be P must: have knowledge, at the time of ratification, of all material facts concerning the transaction entered into on its behalf.
—> To ratify the actions of an A or purported A, the P must manifest assent, by word or conduct, that: the purported A’s earlier unauthorized transaction entered, into on would-be P’s behalf, is now binding on the P so as to impact the P’s legal relationships.
—> Ratification reqs that a party have the requisite capacity to authorize the actions at the time they were performed.
*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Commonly Tested
Commonly tested
- -> duties of A to their Ps tend to be more freq’ly tested than the duties of Ps to their As.
- -> Moreover, among the various duties owed by As to Ps, the duties of care and loyalty are the most important on the exam.
*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Duty of Care
As owe their Ps a duty of care.
- –> Pursuant to this duty of care, an A must:
(1) follow the P’s instructions;
(2) perform any service/task w/in the scope of the agency w/ reasonable care; and
(3) indemnify the P against loss caused by the A’s failure to act w/ reasonable care (when that failure occurs w/in the scope of the agency).
*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Duty of Loyalty
As owe their Ps a duty of loyalty.
- –> Pursuant to this duty of loyalty, an A acting on the P’s behalf must:
(1) prefer the interests of the P over those of the A or others;
(2) avoid self-dealing; and
(3) neither compete with the P nor usurp business opportunities belonging to the P.
*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Other Duties
(1) As have a duty to account for money or property received on behalf of a P;
(2) As have a duty to keep separate the P’s assets from their own assets; and
(3) As have a duty of candor, which reqs them to fully disclose to a P any facts relevant to a transaction that the P might reasonably want to know.
*Principals (Ps) and Agents (As) –> Duties Owed by Ps to As: Duty of Compensation
Even if the agency agreement does not specifically provide for compensation for the A, the P has a quasi-K duty to pay the A the reasonable value of the services rendered, unless the parties have agreed otherwise.
—> A P’s failure to meet this obligation allows the A to seek restitutionary damages.
*Principals (Ps) and Agents (As) –> Duties Owed by Ps to As: Duty of Reimbursement
The P is obligated to reimburse the A for all reasonable expenses incurred in the scope of the agency.
*Principals (Ps) and Agents (As) –> *The Power and Authority of Agents: The Power to Bind
When an A acts w/i the scope of his authorized powers, he has the power to bind the P to Ks he enters into on the P’s behalf.
*Principals (Ps) and Agents (As) –> *The Power and Authority of Agents: An Agent’s Actual Authority: Express or Implied
An A’s actual authority can be express or implied.
—> An A has no power to bind the P beyond the actual authority—express and implied—granted the A by the agency relationship.
Actual express authority is the authority of the A to:
—> do those things that the P has—in an express oral or written communication—directly authorized the A to do.
Actual implied authority includes the authority of the agent to:
—> conduct transactions that are reasonably nec to fulfilling the broader responsibilities given him by the P; including things incidental to the main business at hand.
*Principals (Ps) and Agents (As) –> *A Principal’s Power to Ratify Unauthorized Acts of an Agent
By ratifying a transaction entered into on its behalf, a P retroactively grants the A the authority to act on the P’s behalf and effectively agrees to be bound to the K.
Provided that the P has knowledge of all material facts, a P ratifies the otherwise unauthorized transaction entered into by its agent by either:
(1) manifesting assent that the transaction shall affect the P’s legal relations; or
(2) performing some conduct that is justifiable only on the assumption that the P consents to be bound.
*Principals (Ps) and Agents (As) –> *Employer-Employee Relationships and the “Scope of Employment”
Generally
–> Fact based inquiry
An employee acts w/i the scope of employment when: performing tasks assigned by the employer or engaging in a course of conduct subject to the employer’s control.
An employee’s act is not w/in the scope of employment when: it occurs w/in an independent course of conduct not intended by the employee to serve any purpose of the employer − if it is done for the employee’s purposes only.
Factors
(1) the extent to which the conduct is the kind of work the employee was hired to perform;
(2) the extent to which the conduct occurred substantially within the time and space authorized by the employer; and
(3) the extent to which the conduct was intended to serve the interests of the employer.
***The Agency Relationship and Third Parties –> Agent’s Tort Liability to Third Parties
Agents will be liable to 3rd parties for harm caused by their neg or by their intentionally tortious conduct whether or not they are acting w/in the scope of the agency.
***The Agency Relationship and Third Parties –> Agent’s Contractual Liability to Third Parties
Fully Disclosed P
- –> A fully disclosed P is a P whose existence and identity are known to the third party.
- –> In general, if an agent enters into a K on behalf of a P that is fully disclosed: the A will not be personally liable on the K.
Undisclosed/Partially Disclosed P
—> In general, if an A enters into a K on behalf of a P that is not fully disclosed, either partially disclosed (existence but not identity) or undisclosed the A will be personally liable on the K (along with the P).
***The Agency Relationship and Third Parties –> *Third Parties and a Principal’s Tort Liability: Liability for the P’s Own Negligence
A P is liable to a 3rd party for harm caused by the P’s own neg in selecting, training, retaining, supervising, or otherwise controlling the A.
***The Agency Relationship and Third Parties –> *Third Parties and a Principal’s Tort Liability: *Vicarious Liability for A’s Conduct - The General Rule
Under the doctrine of respondeat superior, vicarious liability generally attaches where the P has a right to control the A and the A’s actions are w/in the scope of the agency.
—> Respondeat superior is a SL doctrine; the P’s due diligence is no defense.
***The Agency Relationship and Third Parties –> *Third Parties and a Principal’s Tort Liability: *Vicarious Liability for A’s Conduct - Employer-Employee Relationship Context
Employee’s negligence
—> The liability of an employer for its employee’s neg is limited to actions that occur w/in the employee’s scope of employment.
Employee’s intentional tort
In general, employers will not be held liable for the ITs of an employee.
—> Exception: Employers will be held liable for the IT of an employee if the employee’s IT is accomplished:
(1) in the course of doing the employer’s work; and
(2) for the purpose of accomplishing such work.
(3) It is generally no defense to the employer that it had previously instructed the employee not to use force in the performance of his duties.
***The Agency Relationship and Third Parties –> Third Parties and a Principal’s Liability on a Contract: Contractual Liability from Agent’s Actual Authority
Ps will be liable on Ks with 3rd parties when their As, acting with actual authority (express or implied), enter into those Ks on their behalf.
Ps will also be liable on Ks entered into on their behalf even when the A’s authority to do so was only retroactively granted, that is, even when the agency is created by ratification.
Ps will also be liable on a K when an authorized A enters into a K on the P’s behalf w/o disclosing the P.
—> In this circumstance, the P’s liability comes into play if, subsequent to the transaction, the 3rd party discovers the identity of the undisclosed P.
