Unit 7: Agency

Question 1

An agreement where the agent acts on behalf of the principal in dealings with third parties

Answer 1

agency relationship

Question 2

A person with a legal duty to act in the best interest of another

Answer 2

fiduciary

Question 3

deal with third parties on behalf of the employer

Answer 3

agents

Question 4

What are the 4 ways an agency relationship can be created?

Answer 4

Agreement, Ratification, Estoppel, Operation of Law

Question 5

Formed by express or implied consent (oral, written, or conduct)

Answer 5

agency by agreement

Question 6

When the principal approves a contract made by someone acting without authority

Answer 6

agency by ratification

Question 7

When a principal causes a third party to reasonably believe an agency exists

Answer 7

agency by estoppel

Question 8

An agency created by necessity (e.g., emergencies or family relationships)

Answer 8

agency by operation of law

Question 9

What are the 3 types of authority an agent can have?

Answer 9

• Actual (express & implied)
• apparent
• emergency authority

Question 10

Direct, clearly stated authority (oral or written)

Answer 10

express authority

Question 11

Authority inferred from position, custom, or necessary to carry out express authority

Answer 11

implied authority

Question 12

When a third party reasonably believes the agent has authority due to the principal’s actions

Answer 12

apparent authority

Question 13

If the contract must be in writing, the agent’s authority must also be in writing

Answer 13

Equal Dignity Rule

Question 14

A written, usually notarized document granting express authority to an agent

Answer 14

Power of Attorney

Question 15

Who is liable when an agent acts within their authority?

Answer 15

principal

Question 16

Who is liable if an agent acts outside their authority and the principal doesn’t ratify?

Answer 16

agent

Question 17

Who is liable with a disclosed principal?

Answer 17

principal

Question 18

Who is liable with a partially disclosed or undisclosed principal?

Answer 18

agent

Question 19

The principal is liable for an agent’s negligent acts done within the scope of employment

Answer 19

respondeat superior

Question 20

minor deviation, principal still liable

Answer 20

Detour

Question 21

major deviation, principal not liable

Answer 21

Frolic

Question 22

a principal accepts an agent’s unauthorized act

Answer 22

ratification

Question 23

principal must know all material facts and affirm the whole transaction

Answer 23

a requirement for ratification

Question 24

What are the five duties of an agent?

Answer 24

• Performance
• Notification
• Loyalty
• Obedience
• Accounting

Question 25

Agent must act only for the principal’s benefit and keep information confidential

Answer 25

duty of loyalty

Question 26

Ending the agency in violation of the contract, possibly leading to a lawsuit

Answer 26

wrongful termination

Question 27

What events cause automatic termination by operation of law?

Answer 27

* Death * insanity * impossibility * bankruptcy * war * changed circumstances

Question 28

Compensation, Reimbursement & Indemnification, Cooperation, Safe Working Conditions

Answer 28

principal’s duties

Question 29

Reimbursing the agent for liabilities from the principal’s failure to fulfill duties

Answer 29

indemnification

Question 30

Normal contract/tort remedies, accounting, and withholding performance

Answer 30

remedies for an agent if the principal breaches

Question 31

Contract and tort remedies, including termination and claims for fiduciary breach

Answer 31

remedies for a principal if the agent breaches