Law Test 4 CH 32 & 33

Power of Attorney

A written document, which is usually notarized, authorizing another to act as one's agent; can be special (permitting the agent to do specified acts only) or general (permitting the agent to transact all business for the principal).

Indemnification

means to compensate. More than monetary. Going to apply if the agent is sued bc of the principal's breach of contract. They are entitled to be cleared and made whole again after any damages suffered

General Power of Attorney

Expressed agency agreement when you give someone the authority or capacity to carry on all business transactions

1.) Voluntary Consent along with instructions from the principal 2.) Contractual Capacity

What are the 2 most important elements of forming a agent/principal relationship?

1.) Actual (Expressed & Implied) 2.) Apparent

What are the 2 types of ways an agent can have authority?

Agency by Ratification

A person who is in fact not an agent (or who is an agent acting outside the scope of her or his authority) may make a contract on behalf of another (a principal). If the principal approves or affirms that contract by word or by action, an agency relationship is created

Agency by Estoppel

A principal causes a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on that belief. When this occurs, the principal is "estopped to deny" (prevented from denying) the agency relationship. Arises when the principal's actions have created the appearance of an agency that does not in fact exist.

Agency

A relationship between two parties in which one party agrees to represent or act for the other.

Expressed Authority

Authority expressly given by one party to another. In agency law, an agent has the power to act for a principal if both parties agree, orally or in writing, that an agency relationship exists in which the agent had the power to act in the place of, and on behalf of, the principal.

Renunciation

Agent terminates the interest

B.) Franchises

All of the following are examples of agents except for which of the following? A.) salespersons B.) franchises C.) real estate D.) insurance agents E.) All the above are examples of agents

Tort Action Remedies

An action against the principal when they have breached toward the agent. Breaches could be due to slander, libel, defamation, fraud, negligence, strict liability, etc.

Exclusive Agency

An agency in which a principal grants an agent an exclusive territory and does not allow another agent to compete in that territory.

Implied Authority

Authority that is created not by an explicit oral or written agreement but by implication. In agency law, this power of the agent can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority.

No, the agency relationship is unenforceable because selling illegal narcotics is a felony and is contrary to public policy.

Archer (as principal) contracts with Burke (as agent) to sell illegal narcotics. If Burke sells the narcotics and keeps the profits, will Archer be able to sue to enforce the agency agreement?

Incapacity or Death of the individual giving authority

At what point does POA end?

Apparent Authority

Authority that is only apparent, not real. In agency law, a person may be deemed to have had the power to act as an agent for another party if the other party's manifestations to a third party led the third party to believe that an agency existed when, in fact, it did not.

Duty of Confidentiality

Falls under the agent's duty of loyalty. It means that any information or knowledge acquired through the agency relationship is private and can not be shared with any other parties. It is a breach of loyalty to disclose such information either during the agency relationship or after its termination.

Apparent authority

Based on a pattern of conduct The agent has the _______ _______ based on what the principal has done that would cause a third party to reasonably believe that there is an agency relationship

Agency by agreement

Based on an express or implied agreement that the agent will act for the principal and that the principal agrees to have the agent so act. It may be expressed (in writing) or implied (oral)

Specific/Limited Power of attorney

Expressed agency agreeement for a single purpose. The most common types are medical, you give someone the power to make medical decisions like giving sitters power to make medical choices over kids when parents are gone, and in real estate. Sometimes the property is sold but the person is not there so you can let another person sign for you

No & No

Does an agency agreement have to be in writing? Is consideration necessary?

The court held that Hodgins had breached his fiduciary duties. As a real estate agent, Hodgins had a duty to communicate all offers to his principal and not to secretly purchase the property and then resell it to his principal. Hodgins was required to act in Cousins's best interests and could only become the purchaser in this situation with Cousins's knowledge and approval.

Don Cousins contracted with Leo Hodgins, a real estate agent, to negotiate the purchase of an office building. While working for Cousins, Hodgins discovered that the property owner would sell the building only as a package deal with another parcel. Hodgins therefore bought the two properties intending to resell the building to Cousins. When Cousins found out, he sued. Why is this a breach of loyalty?

Safe Working Conditions

Duty imposed on Principal by Common Law. The common law requires the principal to provide safe working premises, equipment, and conditions for all agents and employees. The principal has a duty to inspect working areas and to warn agents and employees about any unsafe situations. *When the agent is an employee, the employer's liability is frequently covered by state workers' compensation insurance.*

Notification

Duty of Agent. An agent is required to inform the principal of all matters that come to her or his attention concerning the subject matter of the agency.

Performance

Duty of Agent. An implied condition in every agency contract is the agent's agreement to use reasonable diligence and skill to carry-out the work

Accounting

Duty of Agent. Unless the agent and principal agree otherwise, the agent must keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf. The agent also has a duty to maintain a separate account for the principal's funds and must not intermingle these funds with the agent's personal funds.

Cooperation

Duty of Principal. A principal has a duty to work and facilitate the process with the agent and to assist the agent in performing his or her duties. The principal must do nothing to prevent that performance.

Obedience

Duty of an agent. When acting on behalf of the principal, an agent has a duty to follow all lawful and clearly stated instructions of the principal. Any deviation from such instructions is a violation of this duty.

Compensation

Duty of the Principal. When a principal requests certain services from an agent, the agent reasonably expects payment. The principal therefore has a duty to pay the agent for services rendered *IN A TIMELY MANNER*. If no amount has been expressly agreed on, then the principal owes the agent the customary compensation for such services.

Yes it has. The court ruled that the son was an apparent agent of his parents' gas station because the credit application had caused the creditor to reasonably believe that the son was acting as the gas station's agent in ordering merchandise. If his mother had not signed the credit application, then the creditor would not have had a reason to believe the son.

Has agency by estoppel occurred in the following scenario? A boy works for his parent's gas station, but has no ownership interest in the gas station and decides that he wants to open his own company. To obtain credit he uses his mother to sign the credit application with her gas station and she signs it as secretary-owner and the son adds his name to the list underneath the "Owners" section. Later, when the son is unable to make payments the credit company seeks out his parents gas station. Is this a realistic scenario?

In this situation, the principal is obligated to compensate the agent for any costs incurred by the agent as a result of the principal's failure to perform the contract.

If the agent, on the principal's behalf, forms a contract with a third party, and the principal fails to perform the contract, the third party may sue the agent for damages. Who is responsible for the payment of the damages?

Principal

In an agency, the party that agrees to be represented by another (agent). This party has the power and rights.

Agent

In an agency, the party that agrees to represent or act for another.

Equal Dignity Rule

In most states, a rule stating that express authority given to an agent must be in writing if the contract to be made on behalf of the principal is required to be in writing.

The hotel's conduct displays a willingness to have Renke park its customers' cars, and Renke can infer from the hotel's conduct that he has authority to act as a parking valet. Thus, there is an implied agreement that Renke is an agent of the hotel and provides valet parking services for hotel guests. It is an implied agency agreement

In the following scenario is Renke acting as an agent for the hotel? Why or why not? If this is an agreement, what type of agency agreement is it? A hotel expressly allows only Boris Renke to park cars, but Renke has no employment contract there. The hotel's manager tells Renke when to work, as well as where and how to park the cars.

True; By using agents, a principal can conduct multiple business operations simultaneously in various locations.

T/F: Contracts that bind the principal can be made at different places with different persons acting as agents at the same time.

Fasle; these statutes only apply when the agent is also an employee under employment law. *Independent contractors acting as agents do not fall into the category of employees so they do not recieve the same protection or benefits*

T/F: Discriminatory, worker's compensation laws, and federal and state witholdings (all examples of *social security*) apply to employment law and agency law.

Fiduciary

Noun: A person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking. Adjective: A relationship founded on trust and confidence.

Loyalty

One of the most fundamental duties of an agent in a fiduciary relationship. The agent has the duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party. For instance, an agent cannot represent two principals in the same transaction unless both know of the dual capacity and consent to it.

Independent Contractor

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An ________ ______ is not an employee but may be an agent.

Duty of Notification

Perez, an artist, is about to negotiate a contract to sell a series of paintings to Barber's Art Gallery for $25,000. Perez's agent learns that Barber is insolvent and will be unable to pay for the paintings. Under which of the 5 duties does Perez's agent have to inform him?

Revocation

Principal terminates the interest

Tort and contract law

Remedies of the agent for breach of duty by the principal follow what principles?

Cooperation under exclusive territory Emir can sue for lost profits.

River City Times Company (the principal) grants Emir (the agent) the right to sell its newspapers at a busy downtown intersection to the exclusion of all other vendors. This creates an exclusive territory within which only Emir has the right to sell those newspapers. If River City Times allows another vendor to sell its papers in that area, what duty have they breached and what actions can Emir take?

True

T/F: *distinguishing between agents and independent contractors* An insurance agent is both an independent contractor and an agent of the insurance company for which he sells policies. An insurance broker, in contrast, normally is an agent of the person obtaining insurance and not of the insurance company.

True

T/F: A minor may act as an agent.

True

T/F: Accounting may also include gifts, bonuses, and commissions, things given by the third party to the agent. the agent can't benefit from the relationship other than the stuff provided by the principal

True

T/F: Actual authority (express or implied) arises from what the principal makes clear to the agent. Apparent authority, in contrast, arises from what the principal causes a third party to believe.

FALSE; Because employees who deal with third parties generally are deemed to be agents of their employers, agency law and employment law overlap considerably.

T/F: Agency and Employment law are two seperate and distinguishable categories of law, and the two have very little overlap.

*FALSE*; oral agreements are also enforceable

T/F: Agency by agreement may only be expressed through writing.

True

T/F: Agents cannot recover for expenses incurred as a result of their own misconduct or negligence

*FALSE*; Accounting duty includes accounting for gifts from third parties in connection with the agency. For instance, a gift from a customer to a salesperson for prompt deliveries made by the salesperson's firm, in the absence of a company policy to the contrary, belongs to the firm.

T/F: Agents do not have to account for gifts from third parties in connection with the agency. For instance, a gift from a customer to a salesperson for prompt deliveries made by the salesperson's firm, in the absence of a company policy to the contrary, belongs to the agent.

True

T/F: An agency agreement may be implied through conduct.

True

T/F: An agency relationship can be created for any legal purpose. An agency relationship created for a purpose that is illegal or contrary to public policy is unenforceable.

*FALSE*; An agent's implied authority cannot contradict his or her express authority. Thus, if a principal has limited an agent's express authority, then the fact that the agent customarily would have such authority is irrelevant.

T/F: An agent's expressed authority cannot contradict his or her implied authority. Thus, if a principal has limited an agent's implied authority, then the fact that the agent customarily would have such authority is irrelevant.

FALSE; A salesperson in a department store, for instance, is an agent of the store's owner (the principal) and acts on the owner's behalf. (meaning any sale made by the salesperson is binding to the principal.)

T/F: An employee/employer relationship does not fall into the category of agency.

True

T/F: During emergency situations, when the principal cannot be consulted, the agent may deviate from the instructions without violating his or her duty, and when directions are not clearly stated, the agent can fulfill the duty of obedience by acting in good faith and in a manner reasonable under the circumstances.

True

T/F: If an agent has represented herself or himself as possessing special skills the agent is expected to exercise the degree of skill claimed. Failure to do so constitutes a breach of the agent's duty.

True

T/F: In a principal-agent relationship, the parties have agreed that the agent will act on behalf instead of the principal in negotiating and transacting business with third parties

FALSE

T/F: POA does not have to be in writing.

True

T/F: Ratification involves a question of intent, and intent can be expressed by either words or conduct.

True

T/F: The agent's loyalty must be undivided. The agent's actions must be strictly for the benefit of the principal and must not result in any secret profit for the agent

True

T/F: The amount of indemnification usually is specified in the agency contract. If it is not, the courts will look to the nature of the business and the type of loss to determine the amount.

True

T/F: Truck drivers who own their vehicles and hire out on a per-job basis are independent contractors, but truck drivers who drive company trucks on a regular basis usually are employees

Agency by Operation of Law

The agency relationship is based on a social or legal duty (such as the need to support family members) or formed in emergency situations when the agent is unable to contact the principal and failure to act outside the scope of the agent's authority would cause the principal substantial loss

on whether the agent had the authority to enter into legally binding contracts on the principal's behalf

The liability of a principal to third parties with whom an agent contracts depends....

Reimbursement and Indemnification

The principal has a duty to pay the agent for any funds disbursed at the principal's request. The principal must also pay the agent for any necessary expenses incurred in the course of the reasonable performance of her or his agency duties. The princiapl also has a duty to pay an agent for liabilities incurred because of authorized and lawful acts and transactions.

fiduciary; fiduciary

The principal-agent relationship is _______ based on trust. In a _______ relationship, each party owes the other the *duty to act with the utmost good faith.*

MOLT P 1.) Lapse of time or reasonable time-the agency will expire due to the terms of agreement or after a reasonable time if no stated time 2.) Purpose is accomplished 3.) Occurrence of a special event -"you are my agent as long as I'm out of town" 4.) Mutual agreement 5.) Termination by either party-the agent can walk away and the principal can fire the agent unless this is an agency coupled with an interest. Where the principal has given the agent an interest in the subject matter

What are the 5 ways that an agency agreement can be terminated by action of parties?

1.) Operation of Law 2.) Action of Parties

What are the two primary ways that an agency relationship can be terminated?

Breach of Contract

What happens if a Principal neglects his duty to perform?

If a licensed professional (such as an attorney) violates this duty, he or she may be subject to disciplinary proceedings carried out by the appropriate regulatory institution (such as the state bar association). Of course, the professional will also be liable to the principal (the professional's client) for failure to account.

What happens if an agent breaches the accounting duty?

Failure to comply with the equal dignity rule can make a contract voidable at the option of the principal. The law regards the contract at that point as a mere offer. If the principal decides to accept the offer, the acceptance must be ratified, or affirmed, in writing (or in an electronic record).

What happens if the Equal dignity rule applies to a contract in writing when the agent and the principal have not created an express authority contract in writing for the agent?

the principal owes the agent the customary compensation for his/her services

What happens if there is no agreed upon amount between the principal and the agent?

Agency relationships can exist outside an employer-employee relationship, and thus agency law has a broader reach than employment law does. *Employment laws (state and federal) apply only to the employer-employee relationship.*

What is the main difference between agency and employment law?

LOAN P -Acronym 1.) performance 2.) notification 3.) loyalty 4.) obedience 5.) accounting

What're the 5 duties that the Agent owes to the Principal?

WIC(ID) B (DI)IBCW 1.) Death or incapacity of either party 2.) Impossibility - Death or destruction of the subject matter. 3.) Bankruptcy of either party 4.) Changed circumstances- involve some kind of extreme circumstances. Very large. So large that the agent should know the relationship is terminated. Ex. selling house for 40,000$ but then you find oil and its worth 400000$ so agent relationship terminated bc you aren't selling it for 40000$ 5.) War- you and agent's nationalities go to war with each other.

What're the 5 ways that an agency agreement can terminate by operation of law?

C(RI)CS- Acronymn 1.) Compensation 2.) Reimbursement and indemnification 3.) Cooperation 4.) Safe working conditions

What're the four duties of the principal to the agent?

AERO 1.) Agreement of the parties 2.) Ratification 3.) Estoppel 4.) Operation of law

What're the four ways an agency agreement can arise?

1.) Compensatory damages- pay your actual bills if you got physically hurt or something, pay your lost wages, your pain and suffering 2.) Contract damages- if principal breaches contract- they can pay you what you were supposed to be paid 3.) Accounting Remedies-involves commisions. Making sure the agent gets paid.

What're the three types of rights and remedies that an agent can seek out under tort law?

1.) Limited Power of Attorney 2.) General Power of Attorney *both must be in writing and notarized*

What're the two powers of attorney and how must they be expressed?

CACTI 1.) Contract remedies- when agent breaks fiduciary rules 2.) Tort damages- same thing as in agent tort but vice versa 3.) Constructive trust- this kind of trust exists when the principal has a beneficial interest in property received by the agent 4.) Avoidance- if an agent acts outside is scope of authority in entering a contract, those duties are avoidable by the principal. Duties the principal may avoid. In other words, a voidable agreement is created when agent acts outside scope of authority 5.) Indemnification- occurs when principal is sued for the agent's negligent conduct. Like if agent causes a drinking and driving accident in the car you gave them, you can be compensated for that

What're the types of remedies and rights that the principal can seek out against the agent?

they both have to be notarized they both terminate on death or disability

What're two common features between General Power of Attorney and Specific/limited Power of Attorney?

1.) The Third Party's Reliance Must Be Reasonable (third party must prove that it reasonably believed that an agency relationship existed) 2.) Created by the Principal's Conduct (it is the deeds or statements of the principal that create an agency by estoppel)

What're two ways to determine whether or not Agency by Estoppel has occurrred?

Durable POA

general PoA that is notarized, but it survives disability

indemnify

to compensate; can be more than just money