Agency Basics

Question 1

What constitutes an agency relationship?

Answer 1

Mutual assent between principal and agent that the agent will act on behalf of and subject to the principal’s control

Question 2

What is agency?

Answer 2

A fiduciary relationship that arises when:
* One person manifests assent
* to another person
* that the agent shall act on the principal’s behalf and subject to the principal’s control

Question 3

What obligations do principals have to agents?

Answer 3

• duty to act** in accordance with contract**
• duty to indemnify an agent for injury or loss incurred during agent action
• duty to deal fairly and in good faith

Question 4

What fiduciary duties do agents owe to the principal?

Answer 4

• duty of loyalty and care
• duty of obedience
• duty to provide information
• duty of confidentiality

Question 5

What does the agent’s duty of loyalty and care require of the agent?

Answer 5

• must act to the principal’s benefit
• no self-dealing or personal enrichment
• may not represent an adverse party
• may not compete with the principal
• must safeguard property and confidential information
• must act with reasonable care, skill, and diligence

Question 6

When does an agent have actual authority?

Answer 6

Exists to the extent the principal expressly or impliedly authorizes the agent to take action on behalf of the principal

Question 7

When does an agent have apparent authority?

Answer 7

When a third party reasonably believes that the agent has actual authority based on the principal’s conduct and manifestations

Question 8

Is a contract required for an agency relationship?

Gay Jenson Farms v. Cargill, Inc. (Minn. 1981)

Answer 8

No, but an agreement of some kind is required.

Question 9

True or false: Existence of agency may be proven by circumstantial evidence which shows a course of dealing between the parties.

Answer 9

True, but if circumstantial evidence proves the existence, then the principal must be shown to have consented.

Question 10

Can an agent compete with the principal’s business?

Answer 10

No, this is a violation of the duty of good faith and fair dealing.

Question 11

What are the 5 ways that a principal can incur contract liability?

Answer 11

• Actual authority
• apparent authority
• undisclosed principal liability
• ratification
• estoppel

Question 12

Elements of actual authority under Rest. 3d Agency §2.01?

Answer 12

Authority that:
* agent reasonably believes they have
* based on principal’s manifestations
* expressed through words or other conduct

Question 13

What is implied authority?

Mill St. Church of Christ v. Hogan (1990)

Answer 13

Implied authority is actual authority, circumstantially proven, which the principlan actually intended the agent to possess
*includes powers as are practically necessary to carry out the duties actually delegated

Question 14

What’s the definition of apparent authority in Rest. 3d Agency §2.03?

Answer 14

Occurs when a 3rd party reasonably believes that the agent has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations

Question 15

When does an agent have apparent authority?

Answer 15

When the principal places the agent in a position where it appears that the agent has certain powers that they may or may not possess

Question 16

True or false: Inaction or omission on the part of the principal is sufficient to create apparent authority in an agent.

Answer 16

True!

Question 17

What is an undisclosed principal?

Answer 17

When a 3rd party doesn’t have notice that the person they are dealing with is an agent acting on behalf of someone else.

Question 18

When can an undisclosed principal be held liable on the basis of actual authority?

Answer 18

If the agent acting within the scope of authority when dealing with a third party

Question 19

What are the two ways under Rest. 3d Agency §2.06 that an undisclosed principal can be subject to liability?

Answer 19

• A third party who is justifiably induced to make a detrimental change in position by the conduct of an agent acting without actual authority when the principal has notice of the agent’s conduct and its likely impact on third parties and fails to take reasonable steps to inform them of the facts

Question 20

Rest. 3d Agency §4.01-4.07. Ratification

Answer 20

affirmance of a prior act done by another, whereby the act is given effect as if done by an agent acting wiht actual authority

Question 21

When can a principal be held liable in tort?

Rest. 3d Agency §7.07
Rest. 3d Agency §7.08

Answer 21

Through vicarious liability, either:
* respondeat superior (scope of employment)
* agent commits tort when acting with apparent authroity when dealing with a third party on behalf of the principal

Question 22

When does an employee act within the scope of employment?

Answer 22

The agent is performing work assigned by the employer or engaging in a course of conduct subject to the lawyer’s control.

Question 23

When is an agent not working within the scope of employment?

Answer 23

When the employee’s act occurs within an independent course of conduct not intended by the employee to serve any purpose of the employer

Question 24

What is a frolic?

Answer 24

When an employee substantially deviates from or abandons the scope of employment

Question 25

What is a detour?

Answer 25

An employee is still engaged in the scope of employment but strays slightly from the assignment

Question 26

What are three factors that determine whether an employee's tort is within the scope of employment?

Answer 26

1. An employee's conduct must be of the general kind the employee is employed to perform; 2. Employee's conduct must occur substantially within the hours and ordinary spatial boundaries of the employment; 3. Employee's conduct must be motivated at least in part by the purpose of serving the employer's interests