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Flashcards in Agency Law Deck (18):

What is required for Agency to exist?

Both parties must consent to the relationship and intend for an Agency relationship to exist (a meeting of the minds)

Note: Consideration is NOT needed for an agency to exist

Agent owes Principal fiduciary duty

Principal doesn’t owe Agent fiduciary duty

A contract is NOT required and an Agency agreement is not based on Contract Law;

Exception – If duties cannot be performed within a year; a signed writing is required


What is Agency Law?

Agency Law deals with someone’s ability to bind you to a contract with a third party


What is Actual Authority in an agency?

Actual Authority is what is expressly granted or is implied by the duties you expect the Agent to perform and is necessary to carry them out


What is Apparent (Ostensible) Authority in an agency?

Apparent Authority is based on the third party’s perspective – they believe that the Agent has the
authority to enter into a contract based on:

*Prior dealings with agent

*Agent's title leads the third party to believe they can enter into a contract

*The Principal hires the Agent to carry out duties that normally carry with them the rights to enter into contracts


How is an Agency terminated?

*Both Agent and Principal agree to terminate

*Principal fires Agent

*Agent fires Principal

*Agent breaches their contract by doing something like violating their obligation to act as a fiduciary to Principal

*Termination by law

a. Death or insanity of either party

b. Bankruptcy of Principal
Note: Bankruptcy of Agent does NOT end agency

c. Loss or destruction of an essential subject to the agency

d. Failure to have or loss of a required license


How do you terminate Apparent Authority?

*Let the public know

*Let the people or entities that the Agent previously interacted with know

*In cases of death; or Principal is otherwise not competent to contract; ALL authority is revoked


What is an Agency Coupled with an Interest?

Agent acquires an ownership interest in the Agency

Can only be terminated early (before the interest expiration date) by the Agent

Unless the Agency has a specific time limit spelled out in a contract; the Agent’s authority is irrevocable
by the Principal

Note: Death or insanity DOES NOT end this agency


What is Implied Authority in an agency?

When authority is expressly granted; it is implied that the agent has the authority to carry out the duties

Does not include authority to sell or alter a business


When is an employee an Agent; and when does this make the employer liable?

Employees are agents while acting within the scope of their duties.

For employees who injure third parties while acting within the scope of their duties; both Employee and Employer are liable


When are Agents liable for torts (civil wrongs) they commit?

Agents are liable for torts (civil wrongs) committed whether they had authority or not


What is an Agent's liability when acting for an undisclosed principle?

*Agent liable to third party even if acting within authority

*Third party can sue both Principal and Agent if Principal becomes disclosed

*Agent can then sue Principal


What are the requirements for a Power of Attorney (POA)?

Must be in writing

Must be signed by person granting the POA - only needs to be signed by the principal, NOT the agent

Ends upon death of Principal

General POA - Agent authorized to handle all affairs

Special POA - Agent authorized to handle only specific affairs

Note: Agent does NOT have to be an attorney at law


Are Agents who act outside of their authority liable?

Agents who act outside of their authority will be liable for the act

Exception – Principal ratifies the contract which relieves Agent of liability

In order to ratify; Principal must know all of the facts and must ratify before third party cancels agreement

If Principal keeps the benefits of the contract; ratification is implied

Contract must be 100% ratified or there is no contract


Which kind of principals can normally ratify an unauthorized contract made by an agent?

Fully disclosed and Partially disclosed principal can ratify an unauthorized contract made by an agent


What is required in order for a Principal to ratify a contract made by an Agent?

Generally, Principal is not liable for unauthorized contracts unless they ratify:

1. Principal must know all material facts to ratify

2. If Principal accepts the benefits of the deal = automatic ratification

3. Once Principal ratifies, 3rd parties are stuck with the deal

4. For Principal to ratify, Agent must have indicated that they was making the contract on behalf of the Principal


What is an Undisclosed principal and who is liable for contracts under this situation?

An undisclosed principal is when an Agent makes a contract in their own name while really acting for a secret principal

1. Agent has the same actual authority as an agent for disclosed principal

2. Agent CANNOT have apparent authority

3. If there is a breach, BOTH principal and agent are liable

4. 3rd party can't get out of deal because of undisclosed Principal


What duties does a Principal owe to an Agent?

Principal owes the following duties to an Agent:

1. Duty to Indemnify Agent for losses incurred while acting for Principal

2. Duty to Compensate Agent - must keep records

3. Duty to reimburse Agent for Expenses


What duties does an Agent owe to a Principal?

Agent owes the following duties to a Principal:

1. Duty of Due Care

2. Duty of Inform Principal of all relevant facts

3. Duty to Account for money received or spent - must keep records

4. Fiduciary duty of Loyalty - must act solely in Principal's best interest

5. Duty of Obedience - must follow Principal's reasonable instructions