Agency

Question 1

Elements of an agency relationship

Answer 1

ABC:

• Assent: agent and principal must manifest assent through words or conduct
• Benefit: A agrees to work on behalf of P and for P’s benefit
• Control: A’s actions are subject to P’s control

Question 2

Parties to an agency relationship

Answer 2

• Any individual or legal entity can be either principal or agent
• Principals must have legal capacity; Agents only need minimal capacity

Question 3

Common P-A scenarios

Answer 3

• Employer - Employee
• Corporation - D/O
• Partnership - Partner

Question 4

Termination of an agency relationship

Answer 4

• Generally: either party may unilaterally terminate
• Particular circumstances that also terminate:
  
  • P revokes A’s authority
  • Parties terminate by agreement
  • Changed circumstances
  • Passage of time
  • Breach of fiduciary duty by A
  • Death of A
  • Death or incapacity of P, effective only once A has notice (note: P’s death will not terminate A’s durable POA)

Question 5

Under what circumstances is a principal contractually liable to a third party

Answer 5

• Actual express authority
• Actual implied authority
• Apparent authority
• Ratification
• Estoppel

Question 6

Actual authority

Answer 6

P causes A to reasonably believe that A has authority to act.

• Express: by written or spoken communications from P to A
  
  • A must have a subjective and objectively reasonable belief that P wants A to act
  • P’s actual/subjective intent is irrelevant
• Implied: A may take whatever reasonable steps are necessary to achieve P’s objective, within accepted business practice or custom
  
  • By position—P places A in a position where A has authority to act
  • By acquiescence—P accepts or stays silent re: A’s conduct

Question 7

Apparent authority

Answer 7

P causes a 3P to reasonably believe that A has authority to act.

• Imposter can bind if P was negligent in creating the appearance of authority
• A without authority acting in the ordinary course of business can bind if 3P lacks notice
• A may also have inherent authority from P placing him in a position that usually has that sort of authority (e.g., giving A the title of VP)
• Otherwise, look to communications between P and 3P.

Question 8

Ratification

Answer 8

With knowledge of material facts, P affirms the contract made on P’s behalf.

Question 9

Estoppel

Answer 9

• P may be barred from denying an agency relationship or A’s authority if:
  
  • 3P detrimentally relied on A’s authority AND
  • P’s negligence caused 3P’s belief, or P failed to correct mistake

Question 10

Liability of the agent

Answer 10

Whether A will also be liable to the 3P depends upon P’s status

• Disclosed principal: A is not liable
  
  • 3P had notice and knew the identity of the P
• Partially disclosed principal: A and P are both liable
  
  • 3P had notice that A was acting as the agent of another, but did not know P’s identity
• Undisclosed principal: only A is liable
  
  • 3P did not know of agency relationship at all

Question 11

Tort liability of principals

Answer 11

P may be vicariously liable for tortious acts of his agents committed within the scope and course of his employment.

• Exceptions:
  
  • Frolic (c.f. detour)
  • Intentional torts, unless acting for P’s purpose and closely connected to the assigned task (e.g. a bouncer)
  • Use of physical force, unless necessary to complete assigned task
  • A’s action was not for P’s purpose or benefit (i.e., outside of agency relationship)
• Other situations in which P will be liable:
  
  • A has apparent authority
  • P is directly liable due to authorizing or ratifying A’s conduct, negligent hiring/supervision of A, or delegating a non-delegable duty

Question 12

Employee vs. independent contractor

Answer 12

• Employer - Employee relationship: the employer has the right to control the manner and means of A’s performance
  
  • Provides tools, structures pay, directs the way A must complete tasks
  • Liability: P will be vicariously liable
• Independent contractor: employer does not have the right to control the manner and means of A’s performance
  
  • A provides own tools, sets terms of payment, often has multiple clients/employers
  • Liability: employer cannot A cannot bind P unless the task is inherently dangerous, P was negligent in hiring, or P chooses to retain control over specific task

Question 13

Tort liability of agents

Answer 13

An agent will be responsible to 3P for own torts, but not for P’s torts

Question 14

Duties of the agent

Answer 14

LORcNa

1. Duty of loyalty: work only for P’s benefit, do not compete, usurp P’s business opportunities, or take secret profits
2. Duty of obedience: obey reasonable instructions
3. Duty of reasonable care: perform with reasonable diligence and skill
4. Duty of notification and accounting: must keep P informed of and account for funds

Question 15

Duties of the principal

Answer 15

1. Duty to compensate per agreement
2. Duty to deal fairly and in good faith: includes providing a safe work environment
3. Duty to cooperate
4. Duty to indemnify and reimburse for losses not resulting from A’s wrongful conduct

Question 16

Remedies available to an agent

Answer 16

• Breach of contract
• Action for compensation

Question 17

Remedies available to a principal

Answer 17

• Breach of contract
• Rescission
• Injunctive relief
• Tort damages
• Restitution
• Accounting
• Recovery of secret profits
• Forfeiture of compensation