Agency (DONE)

Question 1

What is agency liability in contract?

Answer 1

Principal (P) becomes liable to third party (T) through the actions of his agent (A) if A and P both consent and A is subject to P’s control.

Question 2

What is required for a contract between P, T, and A?

Answer 2

1) Capacity
2) Writing (maybe, under SoF)
3) Consideration (not required)

Question 3

What is the contractual capacity requirement between a principal, agent, and third party?

Answer 3

P must have contractual capacity (because the contract is between P and T), but A does not, because A just an intermediary.

Question 4

What is the writing requirement for agency?

Answer 4

Agency law requires no writing, but the SoF may,

If the contract involves a conveyance of land, or performance for more than one year, then a writing is required.

Question 5

Is consideration required for agency contract?

Answer 5

No.

Question 6

How is actual authority of an agent created?

Answer 6

1) Express: P expressly tells A to act on P’s behalf.

2) Implied: P’s conduct leads A to believe that A has authority.

Question 7

How is actual authority terminated?

Answer 7

1) After a specified time/event or a reasonable time
2) By change of circumstances (e.g., subject matter destroyed)
3) If agent acquired adverse interest (e.g., joins a competitor)
4) When agent says so (because agency in consensual)
5) When principal says so, unless it’s “coupled with an interest” (which makes power of agency irrevocable)
6) By death/incapacity/bankruptcy, unless coupled by an interest.

Question 8

Can an agent delegate his authority to another?

Answer 8

This is ok if the P consents (may be express of implied)

Question 9

What are substitutes to actual authority?

Answer 9

1) Apparent authority
2) Ratification
3) Intervening rights

Question 10

What is apparent authority?

Answer 10

P leads T to mistakenly believe A has authority.

There must be a reasonable belief created by P, not by A alone. Otherwise, it wouldn’t be fair to P.

Apparent authority can linger after actual authority ends.

Question 11

What is the policy behind apparent authority?

Answer 11

Protects an innocent T who relies on P’s holding out A as an agent.

Question 12

What is ratification?

Answer 12

Even if A had no authority, P can ratify by expressly affirming the contract, accepting the benefit of it, or suing T on it.

Question 13

What is required for ratification to be effective?

Answer 13

1) Knowledge: P must have knowledge of all material facts
2) All of nothing: P must accept the ENTIRE transaction.
3) Capacity: P must have capacity at the time of ratification, AND at the time of original contract, because ratification is retroactive.

Question 14

What are intervening rights?

Answer 14

Since ratification is retroactive, we must protect the intervening rights of a bona fide purchaser.

Question 15

What is adoption?

Answer 15

e.g., A promoter that enters into a lease on behalf of a corporation that has not yet formed (as its agent), the corporation (P) can adopt the lease as its own.

Question 16

What’s the difference between ratification and adoption?

Answer 16

Adoption is not retroactive. There is only liability on the contract from the moment of adoption forward.

Ratification created liability from the outset.

Question 17

What is the relationship between a principal and agent?

Answer 17

1) Agent is a FIDUCIARY, and owes duties of loyalty, case, and obedience to the principal.
2) Principal must pay, reimburse, and indemnify A.

Remedies: Wide range, including constructive trust if A breaches the duty of loyalty.

Question 18

What is the relationship between a principal and third party?

Answer 18

Assuming actual authority or a substitute:

1) Principle is ALWAYS liable to a third party.
2) Third party is liable to principal, UNLESS A has special skills AND T does not know P exists. (“undisclosed P”)

Question 19

What liability is owed to the third party agent?

Answer 19

Generally no liability, since A is just a go-between.

Question 20

What is the test for tort liability in agency law?

Answer 20

Was a tort committed by a servant acting within the scope of employment? If so, the master and servant are jointly and severally liable.

Question 21

What is the test for tort liability against a servant or independent contractor?

Answer 21

Did the employer have the right to control how the employee did the job (even if never exercised?)

If an independent contractor, then the employer will probably not be vicariously liable for the IC’s tort.

Question 22

What is the analysis to determine whether a person is liable as a servant or not liable as an independent contractor?

Answer 22

1) Who supplied the tools/workplace?
2) Was the job part of the employer’s regular business?
3) Was it long-term?
4) How much skill was required?
5) Was payment made in regular intervals (salary), or by the job?

Question 23

What is the analysis for the scope of employment of an agent?

Answer 23

A master is not automatically liable for a servant’s torts. M is liable only if S was acting within the scope of their employment.

1) USUAL TASK: If S was doing a usual task, the tort was within the scope.
2) DEVIATION: How substantial was the deviation?

Question 24

What types of deviation still result in liability of an employer?

Answer 24

1) Detour: A minor deviation that is still within the scope of employment
2) Frolic: A substantial deviation that is outside the scope

Question 25

What is the employer’s liability for an employee’s intentional torts?

Answer 25

Employee’s intentional torts are OUTSIDE the scope unless

1) Force is used to further Employer’s business,
2) Employer ratifiers use of force, or
3) Employer authorized Employee to commit the tort

Question 26

What is the liability of M and S if there is vicarious liability?

Answer 26

M and S are JOINTLY and SEVERALLY liable.

e.g., T can sue S alone or M alone or join them as defendants, but is entitled to only one satisfaction.

Question 27

When is there direct liability to employer for the intentional tort of an employee?

Answer 27

Employer is liable for its own negligence if it fails to properly train or supervise employees or check an employee’s criminal record or job history.