Business Law (15)

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