R7:M1: Agency.

(2.1.3). Termination of Actual Authority Can Occur By:

(1). Act of the parties: agent quits or gets fired. (2). Accomplishment of Objective or Expiration of Stated Period. (3). Termination of Actual Authority.

(1.2.1). Duties of Agent to Principal "fiduciary" "LORA". the agent has whatever duties are expressly stated in his contract. The agent also owes the following four duties:

(1). Duty of Loyalty: No-self-dealing, no competing. (2). Duty of obedience. (3). Duty of Reasonable Care. (4). Duty to Account. (5). Subagent [Assistant].

(2.4.3). Third party's liability : to perform contract duties.

(1). Generally only Principal can hold third party liable. (2). Exceptions:

(3.2). Employer-Employee Relationship. an employer [or master] is liable only for torts of an employee [or servant] and is usually not liable for torts of independent contractors.

(1). Right to control manner of performance is key. (2). Additional Factors.

(3.1). In General: "Respondeat Superior." (2). However, there is an exception for employers. Under the doctrine of respondeat superior, an employer can be liable for an employee's torts committed within the scope of employment.

(1). as a general rule a principal is not liable for the torts committed by his agent--only the agent is liable. (3). This does not relieve the agent of liability. The injured person may sue both the employer under respondeat superior and the agent.

(1.2.3). Duties of Principal to Agent. in addition to any duties expressed in the agency agreement, the principal owes the agent the following duties:

(1). compensation. (2). Reimbursement / indemnification. (3). Remedies of the Agent.

(2.4.2). Agent's liability [to 3rd party for the contract duties].

(1). disclosed principal [agent not liable if authorized]. (2). Partially disclosed and undisclosed principal [agent liable]. existence and ID unknown.

(1.2.2). Principal's Remedies. if an agent breaches the duties she owes to her principal, the principal can recover damages from the agent:

(1). tort damages [negligent, intentional]. (2). Contract damages. (3). Recovery of secret profits [kickback]. (4). withhold compensation.

(1.1.1). Principal with Capacity and Consent. as a general rule, all that is required to create an agency relationship is a principal with contractual capacity [i.e., not a minor and not incompetent] and consent of the parties [i.e., the parties agree to act as principal and agent].

(1). writing. (2). Capacity. (3). Consideration.

(1.1). requisites for creation.

(1.1.1). Principal with Capacity and Consent. (1.1.2). Power of Attorney.

(1.2). Rights and Duties between Principal and Agent. Certain duties are implied in every agency relationship.

(1.2.1). Duties of Agent to Principal "fiduciary" "LORA". (1.2.2). Principal's Remedies. (1.2.3). Duties of Principal to Agent. (1.2.4). Power to Terminate Relationship vs. the "right" to terminate. (1.2.5). Agency Coupled With an Interest: Principal has no power or right to terminate.

(2.3).Ratification [agent had apparent but not actual authority]. ratification allows a principal to choose to become bound by a previously unauthorized act of his agent.

(2.3.1). Requirements [agent must have apparent authority]. (2.3.2). May Ratify Expressly or Impliedly. (2.3.3). What May Be Ratified? (2.3.4). Who May Ratify?

(2.4.).Contractual Liability.

(2.4.1). principal liable if agent had authority or principal ratified. (2.4.2). Agent's liability [to 3rd party for the contract duties]. (2.4.3). Third party's liability : to perform contract duties.

Tort Liability- Wrongful act: unintentional [negligence] / Intentional - fraud.

(3.1). In General: "Respondeat Superior" (3.2). Employer-Employee Relationship. (3.3). Scope of Employment. (3.4). Employer Liability for independent Contractors.

☐ General vs. Special Agent:

A general agent will perform a series of transactions involving a continuity of service. A special agent will perform one or more transactions not involving continuity of service. Therefore, the general agent has broader apparent authority than a special agent.

The examiners often ask what is necessary to create an agency. Generally, all you need is consent and a principal with capacity.

A writing is necessary only if the agent will enter into land sale contracts. Thus, an answer that says a writing is required or the agent's authority must be signed by the principal usually is wrong.

A principal owes her agent the duty of indemnification, which requires the principal to reimburse the agent for costs and liabilities incurred by the agent as a result of authorized acts on behalf of the principal.

Actual authority is the authority that the agent reasonably believes she possesses because of the principal's communications to the agent. The agent has the same actual authority whether the principal is disclosed or undisclosed.

☐ Termination of Apparent Authority: when a principal terminates an agent's actual authority, the agent will continue to have apparent authority until the principal notifies third parties who might have known of the agency.

Actual notice must be given to terminate apparent authority to old customers.

Creation of the Agency Relationship.

Agency is a legal relationship in which one person or entity [the principal] appoints another person or entity [the agent] to act on his behalf. (1.1). requisites for creation. (1.2). Rights and Duties between Principal and Agent.

Apparent Authority of General Vs. Special Agent. Pam hires Alex to manage her pet store. Pam also hires Jordan to distribute advertising brochures at the city park on the day of the annual Art in the Park festival.

Alex is a general agent, and Jordan is a special agent. Alex has broader apparent authority than Jordan.

Liability of Employer for Employee.

Although a bar owner might not authorize a bouncer to beat up boisterous customers, the owner nevertheless can be held liable if this occurs because the conduct is of the same general nature as the bouncer's job.

(2). Duty of obedience.

An agent must obey all reasonable directions of his principal.

Agent's Power to Contractually Bind Principal: To 3rd parties.

An agent's power to bind a principal can arise through: ☐ a grant of actual authority; [power and right] ☐ apparent authority or estoppel; or [power but no right]. ☐ ratification [power but no right].

(1). Right to control manner of performance is key. the most important factor in determining whether a person is an employee or an independent contractor is the right of the principal to control the manner in which the person performs.

An employer has the right to control employees, but has little control over the methods used by independent contractors.

The most important factor in determining whether a person is an independent contractor is the right to control the manner in which work is performed.

An employer has the right to control the manner in which an employee performs his or her work but has little control over the manner in which work is performed by the work of an independent contractor.

☐ Not affected by secret limiting instructions: [no notice to 3rd parties]. a principal who issues secret instructions to the agent will limit the agent's actual authority but not the agent's apparent authority.

Apparent authority is based on the third party's reasonable beliefs, and secret instructions are unknown to the third party.

(1.2.4). Power to Terminate Relationship vs. the "right" to terminate.

Because an agency relationship is consensual, either party generally has the power to terminate the relationship at any time. However, the parties don't necessarily have the right to terminate at any time.

(3). Consideration.

Consideration is not required to form an agency relationship.

(1). disclosed principal [agent not liable if authorized]. if the agent discloses the existence and identity of the principal [a disclosed principal situation], the third party cannot hold an authorized agent liable on the contract.

Every person representing himself as an agent impliedly warrants that he has the authority he purports to have. if , in fact, the agent has no such authority, the third party can hold the agent liable for any damages caused based on breach of this implied warranty.

An employer is liable for his or her own negligent acts. Under the doctrine of respondeat superior, an employer is also liable for the negligence of employees committed within the scope of employment.

Failure to correct a dangerous condition that resulted in injury would be negligence by the employer. Failure of an employee to warn the employer would also be negligence by the employee. This would also subject the employer to liability under the doctrine of respondeat superior.

(2). Additional Factors. ☐ a clear example of an independent contractor is one who has a calling of his own and who uses his own facilities or tools, is hired for a particular job, is paid a given amount for that job, and who follows his own discretion in carrying out the job.

For example, a CPA who performs an audit for a corp. is an independent contractor.

A principal is required to pay its commissioned agent as agreed and thus must maintain sufficient records in order to do so. Therefore, statement I is true. Statement II is also true.

Generally, a principal must indemnify an agent for all expenses the agent reasonably incurs on the principal's behalf unless the parties have agreed otherwise.

(2.3.3). What May Be Ratified?

Generally, any act may be ratified unless performance would be illegal; the third party withdraws prior to ratification; or there has been a material change of circumstance so that it would not be fair to hold the third party liable.

Independent Contractor:

Generally, the principal is not liable for the torts of an independent contractor.

Agency Coupled With Interest. Paul borrows $20,000 from Alex promising to pay Alex within a year and appointing Alex as his agent to sell Blackacre if Paul fails to pay. Alex's agency is coupled with an interest.

However, if Paul hires Alex to sell Blackacre in exchange for a 5 percent commission, Paul has the power to terminate the agency at any time because Alex has no acquired an interest in Blackacre.

Termination of Apparent Authority. Allen has been Patty's office manager for 10 years and has regularly purchased office supplies from Terri. Patty fires Allen, but does not notify Terri.

If Allen purchases more office supplies from Terri purportedly on Patty's behalf, Terri can make Patty pay for the supplies because of Allen's apparent authority.

Duty of Obedience. Paul hires Audrey as his purchasing agent for televisions, but instructs Audrey not to disclose to sellers that she is working for Paul.

If Audrey discloses to a seller that she is working for Paul, she breached her duty of obedience and will be liable to Paul for any damages the disclosure caused.

Third Party's Liability. Ann entered into a contract with Top Corp. to purchase televisions on behalf of Pau. Paul instructed Ann to enter into the contract in her own name without disclosing that she was acting on behalf of Paul.

If Top Corp. repudiates the contract, Paul may hold Top liable even though it did not know it was dealing with Paul.

(2.2.2). Distinguish From Actual Authority. apparent authority is based on the third party's reasonable belief that the agent has the power to bind the principal. actual authority arises from the agent's reasonable belief that he has the power to bind the principal, not the third party's belief.

In either case, the principal is bound. However, if the agent lacked actual authority, the principal can hold the agent liable for acting without authority. ☐ From position: ☐ Not affected by secret limiting instructions: ☐ General vs. Special Agent: ☐ Termination of Apparent Authority:

Liability of Principal for Agent's Torts. Step 1: is the agent an employee or an independent contractor [look chiefly to the extent of the principal's control over the manner and method of the agent's performance]?

Independent Contractor: Employee:

Apparent Authority From Position.

Pam hires Alex to manage her pet store. Alex has the apparent authority to hire and fire employees, make deposits, etc.

Termination at Will.

Porthos hires Athos as his purchasing agent for nine months, at a salary of $2,000 per month. Either party can terminate the agency the next day, but a wrongful termination will be a breach of contract.

The examiners often ask about a principal's liability for its agent's torts.

Remember, if the agent is an employee and committed a tort while trying to serve the principal / employer, the principal/ employer generally will be liable unless the tort was unexpected [e.g., illegal conduct].

Either party has the power (but not necessarily the right) to terminate an agency relationship; the agent's termination is called renunciation.

Renunciation would terminate the agency not by operation of law but by the act of a party.

. An agent owes a duty of loyalty to his principal. This duty includes the duties not to self-deal, usurp opportunities, or have conflicts of interest with the principal.

Roger's purchase through his corporation, Development Co., was self-dealing and usurped an opportunity belonging to his principal.

(3). Termination of Actual Authority. ☐ Subsequent illegality [e.g., Hister, a U.S. corp., hires Alex to sell certain raw materials to a company in Asia.

Subsequently, the Asian company is nationalized by the government where it is located. The government then makes it illegal for the company to purchase materials from companies outside of Asia].

(3.3). Scope of Employment. an employer is not liable to an injured party merely because an employee caused the injury--the injury must also have occurred within the scope of the employment.

That is, the injury must have occurred while the employee was working for the employer within the time and geographic area in which the employee was to work. (1). activities. (2). Time and Geographic Area. (3). Cannot limit liability by agreement with employee.

An agent hired to manage a business does not have the implied authority to sell the principal's business fixtures.

The agent here was hired to manage the principal's retail business, not to dismantle it by selling the business fixtures. Therefore, the act would be considered to be outside the scope of the agency.

(2). Reimbursement / indemnification.

The principal also has an implied duty to reimburse [i.e., indemnify] the agent for all expenses incurred in carrying out the agency.

Here, Sutter had no actual authority because actual authority is that authority which the agent reasonably believes he has, and here North told Sutter that he no longer had authority to make unlimited purchases.

There is no requirement that actual authority granted in writing be rescinded in writing. Nevertheless, North will be bound because Sutter had apparent authority.

(2.1.2). Implied Actual Authority. authority that the agent could reasonably believe is implied along with the express grant is called implied actual authority.

This includes the authority to do things reasonably necessary to carry out the agency [e.g., a person hired to manage a business will usually have authority to hire employees, buy merchandises,etc.]

Once an undisclosed principal becomes known to the third party, the third party can elect to hold either the agent or the principal liable for breach of contract.

Thus, both Part and Young can be held liable.

(4). Duty to Account.

Unless otherwise agreed, the agent has a duty to account to the principal for all property and money received and paid out when acting on behalf of the principal. The agent cannot commingle the principal's property with the agent's property.

(1). compensation.

Unless the agent has agreed to act gratuitously, the principal has an implied duty to give the agent reasonable compensation.

Duty of Loyalty. Petshop hired Andy as its store manager and gave Andy authority to purchase pets for the store. Andy occasionally purchased dogs from Tremendous Dogs.

When Andy bought dogs from Tremendous, it paid Andy 5 percent of the purchase price as incentive to do more business. Petshop was unaware of the payments, which Andy kept. Andy has breached his duty of loyalty and can be forced to turn over his profit to Petshop.

Was there apparent authority [authority the third party reasonably believes the agent has based on the third party's dealings with the principal]?

Yes the principal will be bound.

was there express or implied actual authority [authority the agent reasonably believes he possesses based on his dealings with the principal]?

Yes: The Principal will be bound.

Employee: was the act within the scope of employment [i.e., was the employee where she was supposed to be, doing what she was supposed to be doing, with the purposes of the employer in mind]?

Yes: The principal is liable No: The principal is not liable.

Did the principal ratify the contract after the agent entered into it on the principal's behalf and before the third party withdrew?

Yes: The principal will be bound.

(2). Time and Geographic Area. it is not enough simply that the conduct that caused the injury was of the same general type the employee was hired to perform. The conduct must also have occurred within usual employment time and space limits.Small detours from an employer's directions

[e.g., driving a few blocks out of the way, stopping for lunch, etc.] fall within the scope of the employment. Major deviations [frolic] from an employer's directions [e.g., driving 15 miles out of the way to attend a party] fall outside the scope of employment.

☐ Form position:

a principal who holds another out as his agent vests the agent with the power to enter into all transactions that a reasonable third party would believe a person in the agent's position would have.

(2.1.1). express actual authority [oral/ written instructions].

actual authority includes all powers that the principal expressly grants within the "four corners" of the agency agreement.

(3.4). Employer Liability for independent Contractors.

although the general rule is that an employer is not liable for torts committed by independent contractors, an employer can be liable for the torts of an independent contractor if the employer authorized the tortious act or if the work involved an ultra-hazardous activity.

(1). Duty of Loyalty: No-self-dealing, no competing.

an agent owes her principal a duty of loyalty; the agent must act solely in the principal's interest in connection with the agency. An agent breaches this duty when she has interests adverse to the principal [e.g., the agent obtains kickbacks from a third party].

(3). Duty of Reasonable Care.

an agent owes her principal a duty to carry out the agency with reasonable care [i.e., the duty not be negligent].

(2.1.). Actual Authority. Actual authority [sometimes called "real authority" or simply "authority"] is the authority the agent reasonably believes he possesses because of the principal's communications to the agent.

an agent with actual authority has the power and the right to bind his principal to contracts with third parties. actual authority can be either express or implied. (2.1.1). express actual authority [oral/ written instructions]. (2.1.2). Implied Actual Authority. (2.1.3). Termination of Actual Authority Can Occur By:

(3). Cannot limit liability by agreement with employee.

an agreement between the employer and employee that the employer will not be liable for employee torts does not prevent a third party from holding the employer liable. The employer can seek reimbursement from the employee.

♦ Crimes.

an employer generally is not liable in tort for an employee's conduct that constitutes a serious crime [e.g., carrying an illegal weapon].

Apparent authority arises from a third party's reasonable beliefs based on the principal's communications directed toward the third party. Here, North had given Sutter written authorization to make purchases for North without limitation,

and Orr had been shown the written authorization. North's secret limitation on Sutter's authority has no effect on Sutter's apparent authority. Thus, North is liable to Orr for the purchase of all 500 recorders because Sutter had apparent authority.

(1). Generally only Principal can hold third party liable.

as a general rule, only the principal [not the agent] can hold the third party liable on a contract the agent entered into on the principal's behalf, even if the principal's existence or identity were not disclosed.

(2). Additional Factors. where right to control is not clear, the courts look to other factors, such as whether the worker has a business of his own, provides his own tools and facilities, length of the employment [short or definite vs. long or indefinite],

basis of compensation, and the degree of supervision. ☐ a clear example of an employee is one who works full time for the employer, uses the employer's facilities or tools, is compensated on a time basis, and is subject to the supervision of the principal.

Once disclosed, an undisclosed principal can be held liable on a contract made on the principal's behalf by an agent if the agent had authority. There is no need to ratify. In fact, an undisclosed principal can never ratify

because a principal can ratify only when a person represents that the person is an agent acting with authority on the principal's behalf when, in fact, the person lacks authority. When a principal is undisclosed, there is no representation of agency, and so, a prerequisite for ratification is missing

A tortfeasor is liable for the damages caused by his negligence. Thus, Neal is liable. Additionally, if the tortfeasor is an employee operating within the scope of his employment,

his employer also is liable under the doctrine of repondeat superior. Thus, since Neal was Jordan's employee and was delivering Jordan's merchandise at the time of the accident, Jordan is also liable for the accident.

(5). Subagent [Assistant].

if an agent is authorized to hire a subagent, the subagent owes a duty of care to both the agent and the principal.

☐ Termination of Apparent Authority: Constructive notice [e.g., an ad in a newspaper] must be given to terminate apparent authority as to potential customers who may have known of the agency but who had not done business with the agent.

if an agent's authority is terminated by operation of law, apparent authority also is terminated by operation of law and no notice is needed.

(4). withhold compensation.

if the agent committed an intentional tort or intentionally breached her duty to her principal, the principal may refuses to pay the agent.

The examiners often ask about undisclosed principal situations. There are a few key points to remember. ☐ the principal is bound if the agent had authority. it is irrelevant whether the principal was disclosed, partially disclosed, or undisclosed.

if the agent did not have authority , the principal is bound only if he ratifies. ☐ the agent can be held personally liable if the principal is partially disclosed [identity is not disclosed] or undisclosed [neither identity nor existence are disclosed].

(3). Recovery of secret profits [kickback].

if the agent obtained a secret profit, the principal can recover the secret profit, usually by imposing a constructive trust on the profit.

(2). Contract damages.

if the agent was compensated, the principal can collect contract damages. if the agent did not receive consideration, a contract was not formed and so contract damages are not available.

☐ No apparent authority with an undisclosed principal:

if the principal is undisclosed, there can be no apparent authority because there is no holding out of the agent by the principal.

(3). Remedies of the Agent. if the principal breaches her duties to agent, the agent can bring an action against the principal for any damages caused.

if the relationship is not contractual, however, the agent may not seek the contract remedy of specific performance. The agent has a duty to mitigate damages [e.g., a wrongfully fired agent must seek comparable work to replace lost income].

(1). Act of the parties: agent quits or gets fired. termination of an agency can occur through the acts of either the principal [a revocation] or the agent [a renunciation].

if the termination violates the parties' contracts, damages could be available. If the agency is coupled with an interest, only the agent has the power to terminate the agency relationship.

Termination of agency by operation of law

is a heavily tested issue. be sure to memorize the above list.

Where an agent enters into a contract on behalf of a principal and discloses the existence and identity of the principal and acts with authority, the principal is liable and the agent is not liable. Here, Jones signed the contract with an indication that he was signing for the corporation. The president of a corporation

is an agent of the corporation and has apparent authority to enter contracts that appear to be within the ordinary scope of the corporation's business. The restaurant repairs here appear to be with the scope of Food Corp.'s business. Therefore, Food Corp. will be bound because Jones had at least apparent authority.

A clear example of an employee is one who works full time for the employer, uses the employer's tools, is compensated on a time basis, and is subject to supervision of the employer in the details of the work. A clear example of an independent contractor

is one who has a calling of his own, who uses his own tools, is hired for a particular job, is paid a given amount for the job, and follows his own discretion. Thus, payment on a weekly basis is an indication that a person is an employee rather than an independent contractor

An agent generally is not liable on contracts that the agent makes on the principal's behalf if the principal is disclosed, but the agent

is personally liable on contracts the agent makes on behalf of the principal when the principal is undisclosed.

Apparent Authority Not Affected by Secret Limiting Instructions. Pam hires Alex to manage her pet store. It is customary in the area for pet store managers to have actual authority to purchase inventory [pets]. Pam tells Alex that he may purchase pets for the store, but may not purchase a pet for

more than $200. Tom, a dog breeder, offers to sell Pomeranian puppies to the pet store for $250 each, and Alex accepts. Alex has apparent authority to purchase the puppies, but not actual authority. Thus, Pam will have to pay Tom for the puppies, but can hold Alex liable for any loss that results.

(2.2.1). Principal's Conduct.

note that apparent authority requires a holding out by the principal or negligent inaction by the principal. The purported agent's mere representation that he is an agent is not sufficient to establish apparent authority.

Apparent authority is based on the reasonable beliefs of the third party with whom the agent deals. Since third parties have no way of knowing whether the principal and agent have terminated their relationship,

notice is required to terminate agency power after the principal and agent agree to terminate the relationship.

(2). Capacity.

only the principal must be competent. The agent need not have capacity. Thus, a minor or mentally incompetent person can be appointed as an agent.

(2.3.4). Who May Ratify?

only the purported principal may ratify. the agent cannot take over the contract for himself. only a disclosed principal may ratify. an undisclosed principal cannot ratify.

(2). Partially disclosed and undisclosed principal [agent liable]. existence and ID unknown. if the principal's identity is not disclosed to the third party [a partially disclosed principal situation],

or neither the existence nor the identity of the principal is disclosed to the third party [an undisclosed principal situation], the agent is liable on the contract with the third party.

(2.3.1). Requirements [agent must have apparent authority]. (1). the agent must have indicated that he or she was acting on behalf of the principal [if the third party did not believe that the agent was acting for a principal, there can be no ratification]. (2). All material facts must be disclosed to the

principal. (3). The principal must ratify the entire transaction--there can be no partial ratification. (4). Ratification does not require consideration, and the principal need not notify the third party of the ratification [because the third party already thinks he has a contract with the principal].

(1). activities. the conduct causing the injury need not actually have been authorized by the employer;

rather the conduct need only be (i). of the same general type the employee was hired to perform; and (ii). actuated, at least in part, by a desire to serve the employer. ♦ intentional torts. ♦ Crimes.

The examiners have tested on the implied authority of a business manager a number of times. The key is to remember that the manager is there to run the business, not destroy it. thus, she has authority to hire and fire employees, purchase inventory, and pay business debts.

she has no implied authority to sell or mortgage business fixtures or other property of the principal [other than inventory]. also remember that generally an agent does not have implied authority to borrow money on the principal's behalf-such authority must be expressed.

♦ intentional torts. the employer usually is liable only for an employee's negligence and is not liable for intentional torts,

since intentional torts are seldom within the scope of employment. However, where the tort is authorized or where use of force is authorized [as with a bouncer], the employer can be liable.

(1.2.5). Agency Coupled With an Interest: Principal has no power or right to terminate. only the agent [not the principal] can terminate an agency coupled with an interest. This arises where the agent has an interest in the subject matter of the agency,

such as where the agency power is given as security. In effect, the agent has paid for the right to be appointed ad the agent, usually by giving credit. Death, incapacity, or bankruptcy of the principal will not end an agency coupled with an interest.

☐ No effect on actual authority:

the fact that the principal is undisclosed has no effect on the agent's actual authority since actual authority arises from the communications between the principal and the agent.

(1). tort damages [negligent, intentional].

the principal can recover tort damages from the agent if the agent negligently or intentionally breached a duty owed to the principal.

(2.3.2). May Ratify Expressly or Impliedly.

the principal may ratify expressly, or may ratify impliedly by accepting the benefits of the contract when there is an opportunity to reject them.

(2.4.1). principal liable if agent had authority or principal ratified.

the principal will be bound by the agent's acts if the agent acted with actual authority or apparent authority, or if the principal ratified the transaction. The principal's liability does not depend on whether the principal's existence or identity was disclosed.

☐ Third party's election:

the third party can hold either the principal or the agent [but not both] liable if the principal was undisclosed or partially disclosed. The third party must elect whom to hold liable.

. An unauthorized transaction or agreement by an agent is voidable by the third party if the third party cancels the tranaction or agreement prior to the principal's ratifying

the transaction or agreement. Because the principal may ratify (before the third party cancels) the transaction or agreement, the transaction or agreement is not void.

If an agent breaches her fiduciary duty, the principal can terminate the agency and receive the remedy of a constructive trust

to ensure that the principal can recover secret profits obtained by the agent because of the wrongful conduct.

Apparent Authority. Even though an agent might not have actual authority, there are situations in which the agent will nevertheless have the power [but not the right] to bind the principal, either because the principal's conduct has caused third parties

to reasonably believe that the agent had authority or because the principal was negligent and so will be estopped from denying that the agent had authority. This power to bind the principal is known as apparent authority. (2.2.1). Principal's Conduct. (2.2.2). Distinguish From Actual Authority.

Corporation by estoppel prevents (stops) a party to a lawsuit from successfully arguing that an entity is not a corporation on account of the failure of the entity to comply fully and timely with all the provisions of state law

with respect to the formation and operation of a corporation. The party is so prevented ("estopped") on account of that party's previously treating the entity as if the entity had been a properly formed and properly operated corporation.

(1). writing. ☐ Note that a contract to find a buyer or seller [normal real estate broker's agreement] and a contract to build a house are contracts for services. An oral agency involving such transactions is valid.

☐ Agency agreements that cannot be performed in one year must be evidenced by a writing.

(2). Partially disclosed and undisclosed principal [agent liable]. existence and ID unknown.

☐ Third party's election: ☐ No apparent authority with an undisclosed principal: ☐ No effect on actual authority:

(1.1.2). Power of Attorney. ☐ Generally only the principal is required to sign the power of attorney. There is no requirement that the agent sign the instrument. ☐ the agent's authority is normally limited to specific transactions. "special agents."

☐ a power of attorney is a written authorization of agency. ☐ the agent under a power of attorney is referred to as an "attorney in fact." but the agent need not be a lawyer. It just means that the agent has the power to act on behalf of the principal.

(3). Termination of Actual Authority. Actual authority is terminated automatically, by operations of law upon any of the following events: ☐ death of either the principal or the agent: ☐ incapacity of the principal:

☐ discharge in bankruptcy of the principal. ☐ failure to acquire a necessary license; ☐ destruction of the subject matter of the agency [e.g., Paula hires Alex to purchase an antique car, which is destroyed before it can be purchased]; or

(1). writing. ☐ a writing generally is not required to create an agency relationship, even if the contract that the agent is to enter on the principal's behalf must be evidenced by a writing under the Statute of Frauds.

☐ however many states require a written agency agreement if the agent is to buy or sell an interest in land for the principal.

(2). Accomplishment of Objective or Expiration of Stated Period. ☐ if the agency is for a limited purpose [e.g., Phil appoints Andrea to purchase Blackacre for him], actual authority is terminated when the objective is accomplished [i.e., Andrea purchases Blackacre].

☐ if the agency is for a stated period [e.g., six months], actual authority is terminated upon expiration of the period. If no time is stated, the actual authority terminates after a reasonable time.

(2). Exceptions: The principal cannot hold the third party liable where: ☐ the principal's identity was fraudulently concealed [e.g., if the third party indicates that he will not do business with the principal, the principal cannot get around this by dealing through an agent]; or

☐ the performance to the principal would increase the burden on the third party [e.g., Big Rubber Company cannot employ Small Rubber Company as an agent to enter into a rubber requirements contract without disclosing that the contract is for Big Rubber Company].