Black Letter Law

Question 1

How is an agency generally formed?

Answer 1

Generally, an agency is created when one person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement.

Question 2

In what circumstances is the principal bound to the actions of the agent?

Answer 2

When the agent acted with actual or apparent authority.

Question 3

What is actual authority?

Answer 3

Actual authority is the authority the agent reasonably thinks he possesses based on the principal’s dealings with him.

Question 4

How can actual authority be created?

Answer 4

It can be express (in a written agreement) or implied (based on the actions the principal).

Question 5

When is apparent authority created?

Answer 5

When the principal (i) holds the agent out as acting on the principal’s behalf (ii) causing third parties to reasonably believe that the agent has the authority to act on the principal’s behalf.

Question 6

What must a third party manifest in order for an agent to have apparent authority?

Answer 6

A reasonable belief that the agent was acting with actual authority.

Question 7

When is a principal liable for the contracts of its agents?

Answer 7

When it authorized the contract or later ratified the contract without changing the contracts terms.

Question 8

What is apparent authority?

Answer 8

Apparent authority is authority a third-party reasonably believes an agent has based on the principal’s holding the agent out as having that authority.

Question 9

Can a principal be liable for the actions of its agent under a theory of apparent authority when it did not hold the agent out as having authority?

Answer 9

No. Apparent authority only exists when the principal has taken that step.

Question 10

When is a writing required in order to create an agency?

Answer 10

Generally no writing is required. But, many states require a writing when the contract the agent is to enter into with the third party is within certain provisions of the Statute of Fraud, most notably land contracts.

Question 11

What is the Equal Dignities Rule?

Answer 11

If the contract to be formed by the agent must be in writing under the Statute of Frauds, the agency contract must also be in writing.

Question 12

Is an agent liable for the acts of the sun agent?

Answer 12

Yes, absolutely liable.

Question 13

What duties are owed by the subagent?

Answer 13

The subagent owes the principal the same duties as the agent. But, if the subagent is unauthorized, then he only owes duties to the agent.

Question 14

What duties does the agent owe the principal?

Answer 14

1. Fiduciary duty of loyalty
2. Obedience to lawful instruction
3. Reasonable care under the circumstances

Question 15

What is a non-exclusive contract?

Answer 15

An agent is entitled to compensation upon his production of a willing buyer.

Question 16

Exclusive contract?

Answer 16

The broker gets his commission if anyone produces a willing buyer.

Question 17

When is an agency irrevocable?

Answer 17

An agency is irrevocable if it is coupled with consideration or given as a security to the agent.

Question 18

Lingering apparent authority comes in what types?

Answer 18

1. The agent dealt with parties under the principal’s authority. Until those parties are notified, the agent cans till act with apparent authority towards them.
2. If 3d parties were relying on a writing in determining the agent’s authority, then there is lingering apparent authority.
3. Death or incompetency does not automatically revoke apparent authority.

Question 19

What is inherent authority?

Answer 19

A legally imputed authority designed to protect third parties from not being able to recover even though there was no apparent or actual authority. There are two types: (i) respondeat superior and (ii) conduct similar to the conduct authorized (the agent did something very similar to what they are authorized to do causing harm to the third party).