Business Law, Chapter 20

Express Authority (Actual Authority)

In express agency, the agent has been given a specific goal by the principal. The agent is then granted the use of other means reasonably necessary, beyond those specified in the agreement, to achieve the desired goal.

Implied Authority

In implied agency, the agent has implied authority which derives from actual authority. For instance, if an agent must make a transaction or agreement with a 3rd party to ensure completion of the goals indicated by the principal, it is implied that they are acting within the scope of their authority.

Avoidance

Allows a principal to nullify any contract the agent negotiated.

Occurrence of a Specific Event

The agency agreement was to perform a certain, singular task. The task has been completed.

Fulfillment of Purpose

The agency agreement's basis was a function or purpose. The agent no longer has the authority to act on behalf of the principal once this is fulfilled.

Renunciation by Agent

The agent quits, and can be liable for breach of contract if there was a specified amount of time in the agreement that was not met. (Termination by acts of parties)

Fiduciary

(An agent) A person in a position of trust & confidence. As such, the agent owes certain duties to the principal.

Agent's Rights & Remedies Against Principal

1. Torts & contract remedies. (Same as standard.) 2. The right to demand accounting when the agent feels they are not being fairly compensated (especially when working on commission). When demanding an accounting, an agent may cease all work while waiting for the principal to supply accounting data. 3. Specific Performance: When a contract exists and a principal fails to perform, an agent may seek court assistance in FORCING the principal to fulfill the contractual duties. Does not apply for non contractual relationships or when contract applies to a personal service.

Undisclosed Principal

3rd party does not know an agent is acting on behalf of a principal.

Partially Disclosed Principal (Unidentified Principal)

3rd party knows an agent is acting on behalf of a principal but do not know the identity of said principal.

Disclosed Principal

3rd party knows an agent is acting on behalf of a principal, & also knows the identity of said principal.

Power of Attorney

A document that gives an agent authority to sign legal documents on behalf of a principal. Often given for business or healthcare purposes, they can be general or specific.

Durable Power of Attorney

A written document, created by the principal, expressing his or her wishes for an agent's authority to be unaffected by the principal's subsequent incapacity. Alternatively, a durable power of attorney may become active only after incapacitation.

Constructive Trust

An equitable trust imposed on a person who wrongfully obtains or holds legal right to property he or she should not possess. When a principal enacts a constructive trust, the court rules that the agent is merely holding the property or goods in trust for the principal, granting the principal legal right or posession.

Agency Coupled With An Interest

Created for the agent's benefit, unlike regular agency agreements. A principal may not terminate this agreement. Rather, the agency relationship is terminated with an event occurs that discharges the principal's obligation.

Tort Liability

Depends on whether the agent was acting within the scope of employment. If an agent makes a SUBSTANTIAL departure from the course of the employee's business, the employer is not liable. If the departure is not substantial, they can be. If an employer knew or should've known of an employee's tendencies towards tortious acts, they're liable.

Misrepresentation Liability

Depends on whether the principal authorized the agent's act. If the principal authorizes an agent to engage in an act and the agent intentionally or unintentionally misrepresents themselves, the principal is liable to the 3rd party who relied on the agent's misrepresentation.

Duty of Loyalty

Duty of agent to be loyal to the best interests of the principal. Suggested by the courts to be the most important duty an agent owes a principal, it is carried out in many ways, including avoiding conflicts of interest and protecting the principal's confidentiality.

Duty of Obedience

Duty of agent to follow lawful instruction & direction of principal.

Duty of Notification

Duty of agent to inform the principal of any relevant information, including all actions taken by the agent on behalf of the principal. (This is critical, because the law generally assumes the principal to be aware of all actions taken by the agent)

Duty of Accounting

Duty of agent to keep an accurate account of all transactions of money and property made on behalf of principal.

Duty of Performance

Duty of agent to principal to perform duties as specified in the agency agreement, & to perform said duties with reasonable skill & care.

Duty of Cooperation

Duty of principal to assist the agent in their duties. Furthermore, the principal can do nothing to interfere with the reasonable conduct of an agent.

Duty to Compensate

Duty of principal to pay the agent.

Duty to Provide Safe Working Conditions

Duty of principal to provide safe working conditions including but not limited to equipment and premises. If the principal is aware of unsafe working conditions, the principal has a duty to warn the agent of potential danger and make the necessary repairs.

Duty of Reimbursement & Indemnification

Duty of principal to repay any authorized expenditures, or losses incurred by agent acting within the scope of authorization on the principal's behalf.

Principal-Agent Relationship

Employer hires employee to enter into contracts on behalf of the employer.

Employer-Employee

Employer hires employee to perform physical service, in which the employer exerts control over the conduct of the employee.

Employer-Independent Contractor

Employer hires persons who are not employees, but hired to conduct certain tasks, in which the employer does not have control over the conduct of the independent contractor(s).

Agency By Ratification

Exists when an individual misrepresents himself or herself as an agent for another party & the principal accepts or ratifies this unauthorized act. There are 2 requirements: 1. An individual must misrepresent himself or herself as an agent for another party. 2. The principal accepts or ratifies the unauthorized act. For ratification to be effective, 2 additional requirements must be met: 2a. The principal must have complete knowledge of all material facts regarding the contract. 2b. The principal must ratify the entirety of the agent's act. (The principal cannot accept certain parts & reject other parts of an agent's acts.)

Implied Agency

Formed by implications through the conduct of the parties.

Expressed Agency (Agency By Agreement)

Formed by making a written or oral agreement. The most common type of agency. As specified in the agreement, the agent as the authority to contract on behalf of the principal.

Agency By Estoppel (Apparent Agency)

Formed when a principal leads a 3rd party to believe that another individual serves as his or her agent but the principal had made no agreements with the so-called agent. By the principal's conduct, he or she has created an apparent agency. The agent has apparent authority to act, thus the principal is estopped, or prevented, from denying the individual is an agent. (Created by operation of law.)

Termination by Change in Law

If a new law renders a previously agreed upon agency illegal, it terminates. (Operation of Law)

Termination by War

If a principal in the US has an agent in another country, and the two countries go to war, the agency is terminated because there's no way to enforce the rights of either party. (Operation of Law)

Lapse of Time

If an agency agreement specifies that an agency relationship will last a certain amount of time, the agency agreement ends when the amount of time expires.

Termination by Changed Circumstances

If an unusual change in circumstance leads the agent to believe the principal's instructions do not apply, the relationship ceases to exist. (Operation of Law)

Termination by Insanity

If either the principal or agent becomes insane, the relationship is finished. In sone states, they must be adjudicated insane. In others, this is not necessary. (Operation of Law)

Termination by Death

If either the principal or the agent dies, the agency agreement terminates immediately, regardless of whether or not the other party has knowledge of the death. If the principal dies, the agent's transactions are not binding on the principal's estate. (Operation of Law)

Termination by Impossibility

If the agreement is no longer possible to fulfill, it is terminated. (Operation of Law)

Termination by Disloyalty of Agent

If the duty of loyalty is breached, or the agent acquires an interest against the principal's interest, the agency is terminated. (Operation of Law)

Termination by Bankruptcy

If the principal or agent files a bankruptcy petition, the agreement is generally terminated. However, if the agent files for bankruptcy and their personal financial history is not relevant to the agency, it may continue. (Operation of Law)

Respondeat Superior

Latin for "Let the superior speak"; the principle by which liability for harm caused by an agent/employee is half by the principal/employer.

Vicarious Liability

Liability assigned without fault, where one is held responsible for damages caused by another.

Constructive Notice

Notice of agency termination that is generally given via publication in a newspaper for the area where the agency agreement existed.

Gratuitous Agent

One who acts without consideration; that is, the agent is not paid for his or her services. Gratuitous agents function much like regular agents with a few specific exceptions.

Revocation of Authority

Principal terminates agreement. Could constitute a breach of contract, in which case the principal would be liable for damages to the agent, UNLESS the agent has breached her fiduciary duties, in which case, the principal is not liable. (Termination by acts of parties)

Mutual Agreement by Parties

Since an agency agreement is mutual, a termination of one can be as well. (Termination by acts of parties)

Actual notice

When a 3rd party is given direct notice, orally or in writing, of an agency termination. Must be given to 3rd parties who have had business interactions with this agent. Also, when the agent's authority was granted in writing, the actual notice must be in writing as well.

Equal Dignity Rule

When express authority it granted for an agent to enter into a contract legally required to be in writing, the grant of authority must also be in writing in most states. This rule is based on the statute of frauds.

Indemnification

When sued by a 3rd party, a principal may sue his agent to recover the amount assessed to the 3rd party if the breach of contract is due to the negligence of the agent. A principal can also recover if the agent fails to follow limiting instructions given by the principal (excluding advice- only SPECIFIC instructions).