What is agency law concerned with?
Your responsibility for the actions of the others
What do principals have substantial liability for?
The actions of their agents
Who agrees to to perform a task for someone else?
The agent agrees to perform a task for the principal
What must there be to create an agency relationship?
A principal and an agent who mutually consent that the agent will act on behalf of the principal and be subject to the principal's control thereby creating a fiduciary relationship
What must the principal do in order to establish consent with the agent?
The principal must ask the agent to do something, and the agent must agree
Why are principals liable for the acts of their agents?
Principals exercise control over the agents
What is a fiduciary relationship?
A special relationship with high standards. The beneficiary places special confidence in the fiduciary who, in turn, is obligated to act in good faith and candor, putting his own needs second
What is the purpose of a fiduciary relationship?
For one person to benefit another
Who has a fiduciary duty to who?
Agents have a fiduciary duty to principals
What 3 elements are necessary to create an agency relationship?
Consent, control, and a fiduciary duty
What 3 elements are not required for an agency relationship?
1. A written agreement
2. A formal agreement
3. Consideration
When is an oral understanding not valid?
Under the equal dignities rule
Equal dignities rule
An agent is empowered to enter into a contract that must be in writing, then the appointment of the agent must also be written
Even if there is no formal agreement, when will the law treat an agency and principal as such?
As long as they act like an agent and principal
What does an agency relationship not need to meet?
All the standards of contract law
Is an agency agreement still valid even if it's not paid?
Yes
What is the agent's fiduciary duty in a fiduciary relationship?
To act loyal for the principal's benefit in all matter connected with the agency relationship
When may an agent receive profits?
When the principal knows and approves
What is the rule on disclosing confidential information?
Agents can neither disclose nor use for their own benefit any confidential information they acquire during their agency
When does nondisclosure of confidential information end?
Never. This duty continues even after the agency relationship ends
What is the rule in agency competition?
Agents are not allowed to compete with their principal in any matter within the cope of the agency business
Conflict of Interest between Two Principals
Unless otherwise agreed, an agent may not act for 2 principals whose interests conflict
When can an agent represent two clients whose interests conflict?
Unless they both know about the conflict and agree to ignore it
Secretly Dealing with the Principal
If a principal hires an agent to arrange a transaction, the agent may not become a party to the transaction without the principal's permission
Appropriate behavior
An agent may not engage in inappropriate behavior that reflects badly on the principal
When even must an agent not engage in inappropriate behavior?
Applied in off-duty conduct
Duty to Obey Instructions
An agent must obey instructions unless the principal directs her to behave illegally or unethically
Duty of Care
An agent has a duty to act with reasonable care
How must an agent act under the duty of care?
An agent must act as a reasonable person would under the circumstances
What is an agent held to under the duty of care?
A higher or lower standard than usual
When is an agent held to a higher standard? Why?
When he has special skills because she is expected to use those skills
Gratuitous agent
Not being paid
What standard is a gratuitous agent held to? Why?
A lower standard because he is doing his principal a favor
When are gratuitous agents liable? When are they not liable?
If they commit gross negligence
Not liable for ordinary negligence
Duty to Provide Information
An agent has a duty to provide the principal with all the information in her possession that she has reason to believe the principal wants to know. She also has the duty to provide accurate information
What can a principal do when an agent breaches her duty?
Recover damages the breach has caused
What can a principal do when the agent breaches her duty of loyalty?
The principal may rescind the transaction
What must an agent do when he breaches the duty of loyalty?
He must turn over to the principal any profits he has earned as a result of his wrongdoing
What are the primary responsibilities of a principal?
- Duty to reimburse
- Duty to cooperate
What must a principal indemnify an agent for under the duty to reimburse?
- Any expenses or damages reasonable incurred in carrying out his agency responsibilities
- Tort claims brought by a 3rd party if the principal authorized the agent's behavior and the agent did not realize he was committing a tort
- Any liability the agen
Under the duty to cooperate, what must the principal do?
- Furnish the agent with the opportunity to work
- Not interfere with the agent's ability to accomplish his task
- Perform her part of the contract (pay the agent)
When can the agent or principal terminate the agency relationship?
At any time
When does an agency relationship terminate automatically?
When the principal or agent can no longer perform their required duties or a change in circumstances renders the agency relationship pointless
What are the 5 choices principals and agents have in terminating their relationship?
1. Term agreement
2. Achieving a purpose
3. Mutual agreement
4. Agency at will
5. Wrongful termination
Term agreement
An advanced agreement in how long the relationship will last
Achieving a Purpose
Agree that the agency relationship will terminate when the principal's goals have been achieved
Mutual Agreement
No matter what the principal and agent agree at the start, they can always change their minds later on, as long as the change is mutual
Agency at Will
No agreement in advance and either principal or agent can terminate at any time
Wrongful Termination
If an agency relationship is not working out, the courts will not force the agent and principal to stay together
What does each party always have the power to do?
Walk out.
What does a gratuitous agent have the right to do under termination?
Has both the power and the right to quit any time, regardless of the agency agreement
Under what circumstances can a principal or agent no longer perform?
- If either the agent or the principal fails to obtain a license necessary to perform duties under the agency agreement
- Bankruptcy of the agent or the principal
- The death or incapacity of either the principal or the agent
- If the agent violates her d
What 2 changes in circumstances affect the an agency agreement?
- Change of law
- Loss or destruction of subject matter
After an agency relationship ends, what does the agent no longer have the right to do?
Act for the principal
What is the agent responsible for if she continues to act after the relationship ends?
The damages she incurs as a result
What duties of both the principal and the agent continue after the relationship ends?
- Confidential information
- Principal's duty to indemnify agent (reimburse for expenses agency incurred before the relationship ended)
When is a principal bound by the acts of an agent?
1) The agent had authority
2) The principal is estopped for denying that the agent had authority
3) The principal ratifies the acts of the agent
When is a principal bound by the acts of an agent?
If the agent has authority
What are the 3 types of authority?
Express, implied, and apparent
What are express and implied authority categorized under? Why?
Actual authority because the agent is true authorized to act for the principal
Who is liable in apparent authority?
The principal is liable for the agent's actions even though the agent was not authorized
How does a principal grant express authority?
By words or conduct that cause the agent to believe the principal desires her to act on the principal's account
What does implied authority allow the agency to do?
Conduct a transaction and to do acts that are reasonable necessary to accomplish it
What does that law assume under implied authority?
That the agent has authority to do anything that is reasonable necessary to accomplish a task
What is different under apparent authority compared to express and implied authority?
The principal has not authorized the agent, but has done something to make an innocent third party believe the agent is authorized
What is the issue under apparent authority?
What the principal has done to make the third party believe that the agent has authority
Ratification
If a person accepts the benefit of an unauthorized transaction or fails to repudiate it, then he is as bound by the act as if he had originally authorized it. He has ratified the act
What can the principal decide later even if an agent acts without authority?
To be bound by their actions
Intermediary agents
Someone who hires subagents for the principal
Subagents
Agents who work for the principal but whom the principal has never met
When does an agent have the authority to delegate tasks to subagents?
When the principal authorizes her to
Is the principal liable for the acts of the subagents?
Yes
What is the agent's best protection against liability?
Disclosure
Under what principal is an agent not liable for any contract she makes?
Fully disclosed principal
Fully disclosed principal
When the seller knows of the buyers existence and identity
Why is the agent not liable under a fully disclosed principal?
The seller knew who the principal was and could have investigated him
What must an agent be sure to state to avoid liability?
That she is an agent and must also identify the principal
Who can a third party recover from in the case of an unidentified principal?
Either the agent or the principal
Unidentified principal
Unidentified if the party knew of his existence but not his identity
Why can a third party recover from either the agent or the principal?
The buyer only knows the principal exists but does not know who he is so she can not investigate his creditworthiness
Who can a third party recover from in the case of an undisclosed principal?
Either the agent or the principal
Undisclosed principal
The third party did not know of his existence
Who is always liable in each principal?
The principal
When is the agent liable?
When the principal's identity is a mystery
What is a contract with an undisclosed principal?
Binding
When would a third party not be bound to the contract with an undisclosed principal?
1) The contract specifically provides that the third party is not bound to anyone other than the agent
2) The agent lies about the principal because she knows the third party would refuse otherwise
Who is liable if the agent has no authority?
The agent is liable to the third party
Principal's liability for torts
An employer is liable for a tort committed by its employee acting within the scope of employment or acting with apparent authority
respondeat superor
let the master answer
Who is liable for the misbehavior of the employee where or not the employer was at fault?
The employer, even if he forbade or tried to prevent the employee from misbehaving
What is the logic behind the principal's liability for torts?
Because the principal controls the agent, he should be able to prevent misbehavior. If he cannot prevent it, at least he can insure against the risks
- The principal generally has greater funds and can afford the cost of the agents misbehavior
What are the two kinds of agents?
- Employees
- Independent contractors
When is a principal not liable for a tort?
If it is an independent contractor and not an employee
How can the courts determine the difference between an employee and an independent contractor?
The more control the principal has over an agent, the more like that the agent will be considered an employee
When can the principal be liable for the torts of an independent contractor?
If the principal has been negligent in hiring or supervising her
When are principals only liable for torts that an employee commits?
When they take place within the scope of employment
What 2 major issues arise from scope of employment cases?
Authorization and abandonment
What occurs in authorization cases?
The agent is clearly working for the principal but has committed an act that the principal has not authorized
What are the terms of liability under abandonment?
The principal is liable for the actions of the employee that occur while the employee is at work, but not for the actions that occur after the employee has abandoned the principal's business
In what case is the employee liable and not liable (use fast food and movies example)?
The employer is liable if the employee is simply on a detour from company business (getting food in a drive through), but the employer is not liable if the employee is off on a frolic of his own (went to see a movie)
In terms of negligent and intentional torts, when is the principal liable?
If the employee commits a negligent tort that causes physical harm to a person or property, the principal is liable.
In terms of negligent and intentional torts, when is the principal not liable?
For the intentional torts of the employee unless the employee intended to serve some purpose of the employer
What are agents always liable for?
Their own torts
What are the principal and agent if the agent and principal are both liable?
Jointly and severally liable and can be individually or jointly sued by the injured third party