R7 Agency

Question 1

What are the requirements to create an agency?

Answer 1

• Consent of both parties
• Capacity of principal (not agent minors can serve as agents)

Note: consideration is NOT required and a writing is necessary only if the agent is to purchase land on behalf of the principal or the agency cannot be performed within one year

Question 2

What are the duties of the agent to the principal?

Answer 2

• Loyalty
• Obedience
• Reasonable care
• Duty to account

Question 3

What are the duties of principal to the agent?

Answer 3

• Compensation

* Reimbursement

Question 4

What types of agency relations cannot be unilaterally terminated by the principal?

Answer 4

A principal may not unilaterally terminate an agency coupled with an interest

Question 5

Define actual (real) authority

Answer 5

Actual authority is that which an agent reasonably things he possesses base on communications from the principal

Question 6

What are 2 types of actual authority?

Answer 6

The two types of actual authority are:

1. Implied authority- from position, past acts and circumstance
2. Express authority - specifically granted by the principal

Question 7

Define apparent authority

Answer 7

Apparent authority is that which a third party believes an agent possesses as a result of the principal’s communications with the third party

Question 8

If a principal tells a purchasing agent not to spend more than $500 on each purchase, but tells the agent not to disclose this ceiling amount to third parties, has the principal effectively limited the agents apparent authority?

Answer 8

NO, secret limiting instructions are insufficient to limit actual authority, but do not limit apparent authority because apparent authority is based on the third party’s reasonable belief in the agent’s authority.

An instruction of which the third party is unaware can have no effect on the third party’s beliefs.

Question 9

Would the manager of a retail business generally have implied authority to:

• Hire employees?
• Purchase merchandise?
• Sell the store’s trade fixtures?

Answer 9

• A manager generally has implied authority to hire and fire employees
• Whether the manager would have implied authority to buy merchandise depends on the nature of the business and the customs of the industry
• A manager generally has NO implied authority to sell his store’s trade fixtures because the manager’s apparent authority is limited to running the business not dissolving the business

Question 10

What is the difference between a general agent and a special agent?

Answer 10

General agent - is one who is authorized to engage in a series of transactions involving continuity of service

Special agent - is one who is authorized only to engage in a single transaction or a single type of transaction

Question 11

Under what conditions may a principal ratify an unauthorized transaction?

Answer 11

The agent must have indicated that he was action on behalf of the principal, and the principal must:

• Know all the material facts surrounding the transaction
• Accept the entire transaction

In addition the third party must not have already revoked in order for the principal to be able to ratify

Question 12

Describe the differences between a disclose, partially disclosed and undisclosed principal

Answer 12

Disclosed principal - is one whose existence and identity are disclosed to the third party with whom an agent deals

Partially disclosed principal - is one whose existence is disclosed but who identity is not disclosed

Undisclosed Principal - is one whose existence and identity are not disclosed to the third party with whom the agent deals

Question 13

Who is liable to third parties in the case of an undisclosed or partially disclosed principal?

Answer 13

Both the agent and the principal are liable if partially disclosed.

Only the principal is liable if the principal is fully disclosed

Question 14

What elements are necessary to establish a principal’s liability under respondeat superior?

Answer 14

An employer-employee relationship

Act committed within the scope of employment

Question 15

What is an employer’s liability for independent contractors?

Answer 15

The general rule is that an employer has no liable for tors committed by independent contractors, but there are certain situations in which the employer can be held liable for torts of independent contractors:

• Ultra-hazardous activities
• Authorized misrepresentation