Agency Law

Duties of Agent to Principal Key Provisions Restatement Second of Agency: 377 379 381-82 385 387-94

Use R2D

Powers of the Agent Ratification Requirements (1) Capacity of P (2) Agent Purport to Act (3) At time of Ratification, Principal has knowlege of all material terms (4) Principal ratifies in enterity (5) If formalities originally required, affirmance the same (6) Necessity

(1) Capacity of P (84): The purported principal must have "capacity" (legally capable of ratifying) at the time of the original situation -84: When Acts Can be Ratified: (1) an act which (that could have been ratified by a principal, or if an act of servitude by an intended principal, can be ratified if: at the time of the affirmative action, he could authorize such action (2) An act which the principal couldn't ratify can't be raitifed, EXCEPT if an act affirmed by a legal representative whose appointment relates back to or before the time of such act (2) Agent Purported To Act (85): Has to be disclosure --> agent must purport to act on behalf of the person who subsequently ratifies (can't be an undisclosed principal) -85: Purporting to Act as Agent as a Requisite for Ratification (1) The agent must purport to be acting on behalf of the principal and disclose this to the 3rd party (2) An act or service not involving a transaction with a 3rd person is subject to ratification, only if the one doing the act intends to purport to perform on the half of another (3) At time of Ratification, Principal has knowlege of all material terms (91): at time or ratification, principal must know of all material fact 91: If at the time of the affirmance, the principal is ignorant of material facts involved in the original transaction, and is unawre of his ignorance, he can void the effect of the ratification afterwards (4) Principal ratifies entirety (96): a contract or other single transaction must be affirmed in its entirety in order to effect its ratification (5) If formalities originally required, affirmance the same (93(2)): 93: where formalities are requisite for the authorization of an act, is affirmance must be by the same formalities in order to constitute a ratification (6) Necessity (22, 47): (22): Husband and Wife as Principal and Agent -Husband and wife can be authorized to act for the other party in martial relations (47) Inference of Authority to Act in an Emergency: -If an unforseen situation arises for which the terms of the authorization make no provision and it is impracticable for the agent to communicate with the principal, he is authorized to do what he reasonably believes to be necessary in order to prevent substnatial loss to the principal with respect to the interests communited to his charge

Norton's Legal Elements of Agency Relationship (1-7) (1) Fiduciary Relation

(1) Fiduciary Relation (R2d 13, 14, 18) -(13) Agent as a Fiduciary: an agent is a fiduciary with respect to matters within the scope of representation -(14) Principal Control: principal has the right to control the conduct of the agent with respect to matter entrusted in him -Principal can control how he acts before and during the time he takes action -Principal right to control extends until termination of the agency relationship -Principal has the power to revoke the agent's authority -Determining how much control the principal has over the agent's actual physical movements is key factor in determining master-servant relationship -(18): Delegation of Powers Held by Agent -Unless otherwise agreed, an agent can not delegate his authority gained from the principal in the use of power held for the benefit of the principal

Norton's Legal Elements of Agency Relationship (2) Manifestation of Consent

(2) Manifestation of Consent (15, 16) -Words, deeds, writings, silence/inaction Can be implied, objective test Depends on fact and circumstances (15): Manifestation of Consent -consent from principal to agent to act -consent from agent to principal to be bound (16) Consideration: -The relation of principal and agent can be created although neither party receives consideration

Norton's legal Elements of Agency Relationship (3) Representative

(3) Representative (438-39/441-49) (438: Duty to Indemnify): A principal is under a duty to indemnify the agent in accordance with the terms of the agreement with him -If the absence of terms in K, the principal must indemnify the agent when: (1) The agent makes a payment for the principal (2) Suffers a loss that the principal should of 439: When Duty to Indemnity Exists When: -authorized payments made by the agent on behalf of principal -Payments upon contracts which the agent is authorized himself to make 441: Duty to Pay Compensation -Unless agreed otherwise, it is inferred that a person promises to pay for services which he requests or permits another to perform for him as his agent

(2) If so, does the agent have the authority to bind the principal to the agreement made by the agent?

Actual Authority --> can bind -Expressed -Implied -Incidental Apparent Authority --> can bind (even it exceeds actual authority expressed by principal) Inherent Authority, Estoppel, and Ratification --> can bind

Powers of the Agent Actual Authority (Express/Implied) [35, 7(c)] -Incidental Authority -Actual Implied Authority -Power of Attorney -Durable Power of Attorney

Actual Authority: The power granted by the principal in express (or implied/incidental) writing (or orally) about the scope of his representation on a specific matter -R3D: "an agent acts with the actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal's manifestation to the agent, that the agent has the power to do so -(7) Authority: authority is the power of the agent to affect the legal relations of the principal by acts of done in accordance with the principal's manifestation of consent to him -(35): Incidental Authority: authority to conduct a transaction includes authority to do acts which are incidental to it (acts that are required to do the goal that the principal gave him in the first place) -Actual Express Authority: examines the principal's explicit instructions to agent delineating the agent's authroity (what the principal told the agent he could do) -Power of Attorney: a written document where the principal appoints an agent (his lawyer) and confers upon him the authority to make legal decisions on his behalf -Durable Power of Attorney: bypasses the common law rule that POA is terminated upon the incapacity of the principal; the agent (lawyer) can cover medical/financial issues even if the principal is incapacitated or dead -Actual Implied Authority (7): Examining the principal's explicit instructions and deducing from the objective given to the agent what other powers may be reasonable inferred from the instructions -(this includes actions required to achieve the original goal set out by the principal) -(7): Most authority is created by implication

Partnership: Agents Not Agents Why/When Important

Agents: -partners, employees When? -(RUPA 301):

Powers of the Agent Apparent Authority Case Smith v. Hansen

An Agent's Apparent Authority Smith v. Hansen, Hansen & Johnson, Inc (1991) Case: Deals with how courts construe if there is apparent authority in a relationship Rule: (1) employee of supply company did not have actual or apparent authority to enter into contract for sale of glass for construction of glass wall, and (2) contract was not ratified by the supply company. Facts: Owner hired Hansen and Hansen to build their building but after a year the wall they put in began to leak so they sued them for damages H and H sued Fentron (the one in charge of putting in the glass wall) Fentron had employed Foster as manager of manufacturing services (agent) Foster was in charge of manufacturing items but not selling them Foster told H and H about the salvage glass available to complete their job acting as an agent for the company Foster told H and H that the glass was rejected because of the color but it was really because it was defective H and H accepted because it thought it was dealing with Fentron and not Foster individually Issue: did Foster have the apparent authority to act on Fentron's behalf? Holding: Will only support apparent authority if the apparent authority has two effects: (1) they must cause the one claiming apparent authority to actually subjectively believe that the agent has authority to act for the principal (2) they must be such that the claimant's actual, subjective belief is objectively reasonable The evidence is insufficient to show that Foster had the apparent authority to sell products on Fentron's behalf By granting the authority as a manufacturing manager, Fentron did not convey the authority to Foster to sell products on its behalf There is no circumstances surrounding the contract to show that the title of manager of manufacturing would convey the power to be salesperson on the principal's behalf The facts show that Foster was an employee for Fentron's whose authority was not apparent H and H knew that the check requested by Foster was made out to him personally and this should of shown he was not acting on behalf of someone else Smith v. Hansen, Hansen & Johnson Inc. (Wash. Ct. App. 1991) · Facts: HH&J was sued by the owner of a building for faulty construction of a glass wall. HH&J then sued Fentron for reimbursement plus other damaged. Fentron employed a man named Foster as "manager of manufacturing services" to solicit sales for Fentron products and services in the construction of a hotel. Foster told HH&J that Fentron had glass available for them and led H to believe that he had the authority to sell materials on behalf of Fentron but Foster's efforts were unknown to Fentron. Foster orally offered to H the faulty ARCO glass on behalf of Fentron. HHJ wrote checks out to Foster. Hansen accepted the glass from Foster thinking it was dealing with Fentron. · PH: o Trial court ruled in favor of HH&J and against Fentron (that Foster did have apparent authority) · Issue: According to the evidence, Did Foster have apparent authority to bind Fentron to a contract for the sale of merchantable glass? · Holding: No, there is insufficient evidence to support a reasonable inference that Foster had apparent authority. · Reasoning: o Actual and apparent manifestations depend upon objective manifestations that must be of the principal to the agent (with actual) or third party (with apparent). o Manifestations will only support the finding of apparent authority if § They cause the one claiming apparent authority to actually, subjectively, believe that the agent has the authority to act for the principal § The claimant's actual subjective belief is objectively reasonable · Foster's position as manager of manufacturing services does not manifest that Foster has the authority to sell materials and designs on Fentron's behalf (he was not a general manager) · HH&J payed Foster personally and the glass was in his control

Powers of the Agent Apparent Authority (8) (1) (2) (3)

Apparent Authority: arises from the objective manifestation by the principal to the 3rd party that another person is authorized to act as an agent for the principal. The principal can be bound by the agent's act here even if the act was not authorized by actual authority Elements: (1) Objective manifestation of principal to 3rd party that an agent has authority to bind the principal (2) detrimental reliance by the 3rd party Involves: (1) A reasonable belief by the 3rd party that the alleged agent is an agent of the principal -Duty to Inspect: if 3rd party knows or has reason to know that the agent authority is set forth in a written instrument, he must inspect it -Duty to Inquire: Courts sometimes cite a duty to inquire into an agent's apparent authority (if you only have their business card/email address and never met face to face) (2) Some action or inaction (manifestation/representation) by the principal to create (or fail to dispel) the reasonable belief on the part of 3rd party -Mere relationship: between agent and principal is sufficent to constitute representation of some authority "powers of postion" (applies to general manager, presdient, partner, attorney-client) -DOES NOT Apply to -Absent Notice to 3rd party: people in positions of power (CEO) usually have the authority to do certain things, an absent a notice to a 3rd party that they are not allowed to, the principal can be bound to the actions of the agent on their behalf (3) Showing that 3rd party injury arose out of that 3rd party's reasonable belief that agency relationship existed -created when a principal does something or creates a reasonable impression that another person has the authority to act on behalf of the principal -Termination: an agent whose agency has been terminated has no power to bind the principal (except for POA)

Types of Principals -Disclosed (R2D 4(1)) -Partially Disclosed (R2D 4(2)) -Undisclosed (R2D 4(3))6

Disclosed: if at the time of the transaction conducted by the agent, the other party has notice that the agent is acting for a principal and of the principal's identity -Principal doesn't have to directly relay this info; may be inferred from circumstances -If disclosed, agent will generally not incur liability Partially Disclosed: if the other party has notice that the agent is acting for a principal but has no notice of the principal's identify -Court may permit both agent and principal to be held liable Undisclosed: if the other party has no notice that the agent is acting for the principal -High risk of agent liability (R2D 144: General Rule for Principal Liablity to Third Parties) -a disclosed or partially disclosed principal is subject to liability upon contracts made by an agent acting within his authority

Powers of the Agent Estoppel (8B) (a) cause (b) fail to take steps

Estoppel: estopped to deny the existence of an agency relationship between the principal and agent -8B: Estoppel; Change of Position (1) a principal will be liable to 3rd parties for the transaction taken on by the agent, if the 3rd party was entered transaction because of their belief that the transaction was entered into by or for them if: -(a) he intentionally or careless caused such a belief or -(b) knowing of such belief and that others might change their positons because of it, he did not take reasonble steps to notify them of the facts

Types of Agents: General Special Master-Servant Independent Contracter

General 3(1): -generally assuming a series of ongoing transactions (continuity of service) -Not as concerned with the breadth of agent's powers; more concerned with continuity of relationship Special 3(2): -For a specific purpose where the agent is authorized to conduct a single transaction for the principal -(JV, General Partnership, for a specific purpose) Master-Servant(R2d Torts 82) -Employee/Employer -Respondent Superior Independent Contractor (14N)(220) -(14N): one who contracts to act on behalf of another and subject to the other's control, except with respect to his physical conduct is an agent and also an independent contractor -In most cases, IC will not be an agent -(220): a servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct of the performance of the service, the principal has complete control over

(1) Is there an agency relationship?

Is one person acting on behalf of another? -(1) is there manifestation of consent by the principal that the agent act on the principal's behalf? -(2) Is the agent subject to the principal's control? -(3) Did the agent manifest consnet?

Powers of the Agent: -Position of Power (R3d 1.08) -Agent Misrepresents -Ostensible Authority (R3d 2.05)

Position of Power (1.08) : an agent is sometimes place in a postiion in an industry which holders of the position normally have authority of a specific scope (CEO's rights) -Absent a notification to the 3rd party that the agent does NOT have that authrotiy, the principal is manifesting that the agent has the authority in that scope to act on his behalf Agent Misrepresents: when an agent misrepresents their authority and the 3rd party is uable to prevail on the issue of apparent authority to bind the principal, the agent will be liable to the 3rd party for damages caused by their reliance on the agent's purported authority Ostensible Authority (2.05): hold a principal accountable for an appearnce of authority arising soley from the principal's failure to use ordinary care

Powers of the Agent Ratification (82, 100A)

Ratification: this is where the principal affirms a prior act done by the agent on account of the principal previously (when the agent didn't yet have the authority to act on behalf of the principal) -Once the principal ratifies it, it is as if the agent had authority to do so since the day he took the action -82: Ratification is the affirmance by a person of a prior ct which did not bind him but which was done or professedly done on his behalf, whereby the act, as to some or all persons, is given effect as if originally authorized by him -100A: Relation Back in Time and Place The liabilities of the parties of a ratified act are determined in accordance with the law governing the at or contract at the time and place the act was done -Determining if the principal affirmed the actions is a question of the law at the time and the place when and where the principal consents or acts

Duties of Agent to Principal Duty of Care Case Carrier v. McLLarky

Rule: Under ordinary circumstances , the promise to act as an agent is interpreted as being a promise to only make reasonable efforts to accomplish the directed result (R2D 377) Facts: -D replaced the water heater in the P house -D said he would try to get warranty for the heater to get a price reduction for the P -D never got the warranty because it wasn't under warranty, but he did do what was necessary to check Holding: The D was not liable to the P as a fiduciary or as his agent because he used reasoanable efforts and satisfied the duty of care standard Provisons: R2D 376 The duties of an agent toward his principal are always to be determined by the scope of authority conferred R2D 379: the degree of skill required is the amount normally used by other agents in the industry R2D 215: an agent cannot be held liable to the principal simply "because failed to procure for him something that he is not entilted to

Duties of Agent to the Principal Dual Agency Rule

Rule: an agent cannot act on behalf of the adverse party to a transaction connected with the agency without the permission of the principal -if the 2 principals are unaware of the double employment: contract is voidable -if one principal secretly employs the agent to act on its account knowing the other principal is unaware of the double employment: defrauded principal can either void or affirm the transaction and recover damages from the other principal or agent -Limitation to the rule: agent can deal with the other party "if such dealing is not inconsistent with his duties to his principal"

Principal §1(2)

The person the agent acts for

Agent §1(3)

The person who acts on behalf of the principal and is bound by a fiduciary duty to the principal

Power of the Principal Right to Control -Principal control of agent -Principal control of Master/Servant -Principal control of Independent contractors

agent: principal has control over the objectives of the enterprise and the conduct of the agent in regards to matters adressed to him Master/Servant: master controls or has the right to control the physical conduct of the agent in the performance of the service (controls physical) Independent Contract: person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control the physical conduct he takes to do it (doesn't control physical) Classification matters for liability: Master = liable for torts committed by servant within scope of his employment Principal = not liable for torts committed by an independet contractor in connection with his work

Agency §(1)(1)

the fiduciary relationship that imposes special responsibilites and duties that arise when one person (the principal) manifests assent to another person ("an agent") that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent to otherwise consents to act

Duties of Agent to Principal Basic Duties (1) Care (2) Loyalty (3) Disclosure

(1) Care: R3d 8.08: sets forth standard of care that an agent must act with care, competence, and diligence normally exercised by agents in similar circumstances -A principal may recover for any damages caused by the agent's negligence of a lower level employee. but principal wouldnt sue lower level employee it would be insured (2) Loyalty (R2D 387): unless otherwise agreed, an agent is subject to a duty to his principal to act soley for the benefit of the principal in all matters connected with his agency -Economic Loss Rule: a party suffering only economic harm from the breach of a contractual duty may assert a tort claim for such a breach of duty only if tort law provides an independent duty of care -Post Termination Compeition: can an agent, after learning a particular skill, leave the company and go start a competiting business doing the same thing? -Common law will not stand in the way of competition -Important factor to asses--> the terms they left the company on ("cannot feather own nest somewhere else while still on payroll from the original employer" -Contractual Modification of Fiduciary Duties: (R3D 8.06): conduct by an agent that would be a breach, can be saved if the principal consents in the conduct, provided that: (a) in obtaining the p's consent, the agent: (i)acts in good faith (i) discloses all material facts (3) Disclose (R3D 8.11): an agent has a duty to make a reasonable effort to disclose to the principal facts that the agent knows, has reason to know, or should know when: (1) subject to any manifestation by the principal, the agent knows that the principal would want to make his decision (2) the facts can be provided without breaching a superior duty owed by the agent to another person

Norton's Legal Elements of Agency Relationship (4) Control

(4) Control (14, 118, 335) -(14) Principal Control: principal has the right to control the conduct of the agent with respect to matter entrusted in him -Principal can control how he acts before and during the time he takes action -Principal right to control extends until termination of the agency relationship -Principal has the power to revoke the agent's authority -Determining how much control the principal has over the agent's actual physical movements is key factor in determining master-servant relationship -(18): Delegation of Powers Held by Agent -Unless otherwise agreed, an agent can not delegate his authority gained from the principal in the use of power held for the benefit of the principal -(335): Agent Surety for Principal -in an action brought against an agent upon a contract to which the agent is a party but under which the primary duty of performance rests upon the principal, the agent has the defense of a surety

Norton Legal Elements of Agency Relationship (5) Capacity

(5) Capacity (20,21) -(20):Capacity of Principal -Principal has the right to let the agent act on his behalf as if he was acting himself -(21): Capacity of Agent -(1) any person has capacity to hold a power to act on behalf of another -(2) The extent of their power is a fiduciary and is subject to duties and liabilites to the principal

Powers of the Agent Inherent Power (8A and 161) -Unauthorized Acts of General Manager (Can bind principal)

-8A: Inherent Agency Power: inherent agency power is a term used to show the power of an agent which is derived solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent -(Doesn't come from authority, apparent authority, or estoppel) -161 Unauthorized Acts of General Manager A general agent can make a principal liable for actions done on his account which usually accompany (are incidental) to transactions which the agent is authorized to conduct, even if forbidden by the principal, if the other party reasonably believes that the agent is authorized to do so and has no notice that he doesn't have the authority

Powers of the Agent (1-5) Ways that an Agency Relationship can be Triggered

-Actual did the principal give express authority to agent (express or implied)? -Apparent Did the principal make some manifestation to the 3rd party creating apparent authority + detrimental reliance? -Estoppel Has the 3rd party been mislead to he point that they will be harmed? -Ratification: did the principal ratify the contract and take over the actions of the agent before he had the power to act for him -Incidental/Inherent?: Incidental: simply authority to do incidental acts that relate to an authorized transaction (A purhcase on P's credit when not given explicit funds Inherent: arises from the agency position itself, rises from the authority actually or apparently granted

Powers of the Agent Actual Authority (POA) King v. Bankerd Case

An Agent's Express Authority King v. Bankerd (1985) Case: deals with how far an agent's express authority in a contract actually goes and how it is interpreted by courts Rule: an agent holding a broad power of attorney lacks the power to make a gift of the principal's property, unless the power (1) is expressly conferred, (2) arises as a necessary implication from the conferred powers, or (3) is clearly intended by the parties, as evidenced by the surrounding circumstances and facts Facts: Bankred owned a lot with his wife but got divorced and left the property Before going he assigned power of attorney to his lawyer to "convey, grant, bargain, and or sell" the property as he saw fit The lawyer couldn't get ahold of the Bankred for a long time and finally signed over the property to the wife that was still living there and she sold it for $60K Trial court found for Bankred claiming that King's power as an agent didn't extend that far Issue: whether a power of attorney authorizing the agent to "convey, grant, bargain and/or sell" the principal's property authorizes the grant to make a gratutious transfer of that property? Holding: Affirmed for Bankred, that King's power was not that broad because even though he has the power to convey the land, it is implied that if he does so it should be for the principal's benefit Well settled rule that powers of attorney should be "strictly construed as a general rule and are held to grant only those powers which are clearly delineated" Another rule of construction is to discount or disregard as meaningless verbiage, all embracing expressions found in power of attorney Ambiguities in express authorization of power are construed against the party who made them Main duty of an agent is loyalty to the interest of the principal It would be unusual for a principal property owner to give an agent the power to give his land away for free

Duties of Principal to Agent (144, 292) Basic Duties Limitations Rule 144, 292

Basic Duties: (1) Compensate (2) Comply in good faith and fair dealing with any agreements between parties (3) Indemnify the agent for expenses, costs, and or damages incurred while acting for the principal Limitation: -Does not cover agent's own negligence, illegal acts, or wrongful conduct -Right to indemndify depends on reasonable inferences drawn from circumstance Rule: principal bears the burden to the extent that courts believe to be just, considering the customs of the business and circumstances 144: Principal is bound by agent authority as if it was him 292: 3rd party is bound to obligations to the principal in the contract settled on by the agent -owes the same stuff he owes the agent to the principal