Chapter 28 - Agency Law
Fiduciary relationship
A ___________________________________________ is one of trust: A trustee acts for the benefit of the beneficiary, always putting the interests of the beneficiary before his/her own.
gross ; ordinary
A gratuitous agent is liable if they commit ________________ negligence, but not ______________________ negligence.
1. Damages 2. Profits 3. Recission
A principal has what 3 potential remedies when an agent breaches her duty?
1. The Employer knew or should have known of the Employees propensities; or 2. The Employee was motivated, at least in part, by the desire to serve the Employer, or the conduct was reasonably foreseeable (nature of the work gives rise to hostilities) and the Employer ratified the Employees actions or failed to instruct otherwise.
A principal is NOT liable for the intentional physical torts of an employee unless what 2 things?
Fully
A principal is _________________ disclosed if the third party knows of his existence and identity and an agent is not liable for any contracts
Partially (or Unidentified)
A principal is _________________ disclosed if the third party knows of his existence, but not his identity and the third party can recover from either the agent or the principal.
Undislcosed
A principal is _________________________ if the third party did not know of his existence and the third party can recover from either the agent or the principal.
authority
A principal is bound by the acts of an agent if the agent had ______________________.
1. For any expenses or damages reasonably incurred in carrying out his agency responsibilities 2. For tort claims brought by a third party if the principal authorized the agent's behavior and the agent did not realize he was committing a tort 3. For any liability to third parties that she incurs as a result of entering into a contract on the principal's behalf, including attorney's fees and reasonable settlements.
A principal must indemnify (reimburse) an agent for expenses that fall into what 3 categories?
1. The contract specifically provides that the third party is not bound to anyone other than the agent; or 2. The agent lies about the principal because she knows the third party would refuse to contract with him
A third party is not bound to the contract with an undisclosed principal if what: (2 things)
nonphysical tort
A tort that harms only reputation, feelings, or wallet
Joint and Severally Liable
All members of a group are liable. They can be sued as a group, or any one of them can be sued individually for the full amount owed. But the Plaintiff cannot recover more than the total she is owed.
The principal directs her to behave illegally or unethically
An agent MUST obey her principal's instructions unless what?
Loyally
An agent has a fiduciary duty to act ___________________ for the principal's benefit in all matters connected with the agency relationship (the agent has an obligation to put the principal first, to strive to accomplish the principal's goals)
inapproraite
An agent may not engage in ________________________ behavior that reflects badly on the principal
1. is one that employees are generally responsible for 2. takes place during hours that the employee is generally employed 3. is part of the principal's business 4. is similar to the one the principal authorized 5. is one for which the principal supplied the tools, and 6. is not seriously criminal
An employee is acting within the scope of employment if that act: (6 things)
Respondeat Superior
An employer is liable for a physical tort committed by an employee acting within the scope of employment and a nonphysical tort of an employee acting with authority
partially disclosed principal
An unidentified principal is also sometimes referred to as what?
Objective Manifestation
Any ambiguity about the principal's intent when it comes to authority, the courts look a the principal's _________________________________________ not his subjective intent.
No
Are agents allowed to compete with their principal in any matter within the scope of the agency business?
prevent
Because the principal controls the agent, he should be able to ____________________ misbehavior.
No
Can an agent disclose or use for their own benefit any confidential information that they acquire during their agency?
No
Can an agent receive profits without the principal knowing of it and approving?
Yes
Does an agent have a duty to provide the principal with all (accurate) information in her possession that she has reason to believe the principal wants to know?
Yes
Does confidential information remain confidential even after the termination of the agency?
power ; right
Either party in an agency relationship always has the _______________ to terminate, but not have the _______________.
1. The "agent" indicates to the third party that she is acting for a principal 2. The "principal" knows all the material facts of the transaction 3. The "principal" accepts the benefits of the whole transaction, not just partly. 4. The third party does not withdraw from the contract before ratification
Even if an agent acts without authority, the principal can decide later to be bound by her actions as long as what 4 requirements are met?
A principal may not claim that it was not his agent if he knew that others thought the agent was acting on the principal's behalf but failed to correct their belief
Explain how a principal is bound by the acts of an agent if the principal is estopped from denying that the agent had authority.
1. The agent makes a defamatory statement 2. Agent has express, implied, or apparent authority 3. The third party is harmed by the statement
Explain the 3 elements of a principal being liable for defamation?
1. The agent makes a misrepresentation 2. The agent has express, implied, or apparent authority 3. The third party relies on the misrepresentation 4. The third party suffers harm
Explain the 4 elements of a principal being liable for misrepresentation?
Principal --> Agent --> Third Party
Fill in the arrows: Principal _______ Agent ______ Third Party
Employee ; independent contractor
Generally, an employer (acting as principal) IS liable for the physical torts of an __________________________ caused by negligence that are committed within the scope of their employment, but is NOT liable for the physical torts of an _______________________________, only liable for negligence in hiring or supervising.
if the principal has been negligent in hiring or supervising her.
Generally, principals are not liable for the physical torts of an independent contractor, except when?
Agent agrees to perform a task under the control of the principal
How do you create an agency relationship?
The principal can recover from the agent any damages the breach has caused
How much damages can a hurt principal recover?
No
If a principal hires an agent to arrange a transaction, may the agent become a party to the transaction without the principals permission?
The agent must turn over to the principal any profits he has earned as A RESULT OF HIS WRONGDOING.
If an agent breaches the duty of loyalty, how much can the hurt principal receive in profits?
Equal dignities rule
If an agent is empowered to enter into a contract that must be in writing, then the appointment of the agent must also be written
Principal
If principals direct their agents to commit an act, it seems fair to hold the ___________________ liable when that act causes harm.
Yes (rescission remedy)
If the agent has violated her duty of loyalty, does the principal have the right to rescind the transaction?
gratuitous
If the agent is a ______________________ agent, he has both the power and right to quit at any time he wants, regardless of the agency agreement.
Term agreement
If the principal and agent agree in advance how long their relationship will last, they have a what?
Principal
In an agency relationship, the person for whom an agency is acting
Agent
In an agency relationship, the person who is acting on behalf of a principal
Disclosed
In the case of a _____________________ principal, only the principal may enforce a contract against a third party.
Partially or Undisclosed
In the case of a _______________________ or _______________________ principal, a principal or agent may enforce a contract against a third party, but the principal receives all of the rights and benefits thereunder.
The agent is; NOT the principal
In the case of an unauthorized agent (the agent has no express/implied/apparent authority), then who is liable to the third party?
Agency relationship
In this relationship, someone (the agent) agrees to perform a task for, and under the control of, someone else (the principal).
Unidentified and Undisclosed
In which two principal scenarios are both the principal and the agent are joint and severally liable.
Yes
Is a principal bound by the acts of sub-agents (those hired by his agent)?
Yes
Is an act within the scope of employment, even if expressly forbidden, if it is of the same general natural as that authorized or if it is incident to the conduct authorized?
Yes
Is an agency relationship a personal relationship?
NO
Is an agent allowed to use confidential information after the relationship has ended?
No, but they can recover partially from both parties
May an injured party recover twice from the intentional tort of an agent and a principal?
Yes
Must a principal pay an agent for their work after they have completed their work, even if the principal decides they no longer want it?
contract claim
Nonphysical torts (intentional or unintentional) are treated like a _______________________________: the principal is liable only if the employee acted with express, implied, or apparent authority
Yes
Once an agency relationship ends and the agent no longer as authority to act for the principal, is the agent liable to the principal for any damages incurred if s/he continues to act?
Control
Principals are liable for an agent's acts because they exercise ________________ over that person
Apparent
Remember that the issue in ____________________ authority is always what the principal has done to make the third party believe that the agent has authority (No one may claim that a person was not his agent, if he knew that others thought the person was acting on hidus behalf, and he failed to correct their belief)
Vicarious Liability
Respondeat Superior is also called what?
1. authorization 2. abandonments
Scope of employment can raise what two major issues?
Sub-agents
Someone appointed by an agent to perform the agent's duties
Gratuitous Agent
Someone not paid for performing duties
Intermediary agent
Someone who hires sub-agents for the principal
False; they are ALWAYS liable for there own torts
T/F: Agents are not always liable for their own torts
True
T/F: An agent has a duty to act with reasonable care (act as a reasonable person would)
False; he may still be liable (ex. a company could be liable for the damage on on-duty worker causes if speeding while driving, even if she is violating company policy at this time)
T/F: An employer is not liable if he forbade or tried to prevent the employee from misbehaving
True
T/F: Principals have substantial liability for the actions of their agents
True
T/F: So long as the parties are acting like an agent and a principal, the law will treat them as such.
False; it DOES apply to off-duty conduct
T/F: The appropriate behavior duty of an agent does not apply when the agent is off-duty
False ; they do not have to formally agree. In fact, they do not even have to say the word "agent".
T/F: The principal and agent have to agree formally that they have an agency relationship
True
T/F: The principal can sue the agent if the injured third party recovers from the principal (torts)
True
T/F: The principal is always liable, but the agent is not unless the principal's identity is a mystery.
Employee
The Employer has the right to control the conduct of the agent
aware
The Foreign Corrupt Practices Act (FCPA) states that US firms are liable for bribes made by foreign agents if they were ________________ of the illicit payments or the high profitability that such payments were being made.
Disclosure
The agent's liability on a contract depends upon how much the third party knows about the principal, and so _____________________ is the agent's best protection against liability.
detour ; frolic of his own
The employer is liable if the employee is simply on a __________________ from company business, but the employer is not liable if the employee is off on a ________________________.
Independent Contractor
The employer leaves the details (method and manner in which the agent performs the job)
control
The more ____________________ the principal has over an agent, the more likely that the agent will be considered an employee.
No
The principal IS liable for the actions of an employee that occur while the employee is at work, but is the principal liable for the actions that occur after the employee has abandoned the principal's business?
express
The principal grants __________________ authority by words or conduct that, reasonably interpreted, cause the agent to believe the principal grants permission for him to act(The principal asks the agent to do something and she does it)
1. The agent had authority; or 2. The principal, for reasons of fairness, is estopped from denying that the agent had authority 2. The principal ratified the acts of the agent (almost as if the principal performed the acts himself)
The principal is bound by the acts of an agent if: (3 things)
1. employee 2. independent contractor
There are two kinds of agents in the workplace:
Express and Implied
These types of authority are categories of actual authority because the agent is truly authorized to act for the principal
Foreign Corrupt Practices Act (FCPA)
This act states that is it unlawful to bribe foreign officials for the purpose of obtaining business
Apparent
This type of authority states that a principal can be liable for the acts of an agent who is not, in fact, acting with authority if the principal's conduct causes a third party reasonably to believe that the agent is authorized. (Principal has not given authority, but the third party thinks they have)
Apparent
This type of authority states that the principal is liable for the agent's actions even though the agent was NOT authorized
implied
This type of authority states that unless otherwise agreed, the authority to conduct a transaction includes the authority to do acts that are reasonably necessary to accomplish it. (principal does not have to micromanage the agent)
1. A principal 2. An agent 3. who mutually consent that the agent will act on behalf of the principal and 4. be subject to the principal's control 5. thereby creating a fiduciary relationship
To create an agency relationship, there must be what 5 things present?
Consent
To establish _______________________, the principal must ask the agent to do something, and the agent must agree.
No
Unless otherwise agreed, can an agent act for two principals whose conflicts conflict?
1. Principal's duty to indemnify agent 2. Confidential Information
What 2 duties still remain even after the agency relationship has ended?
1. Duty to compensate as provided by the agreement 2. Duty to reimburse reasonable expenses (indemnify) 3. Duty to cooperate with the agent (cannot interfere with the agent's ability to accomplish his or her task)
What are a principal's 3 duties?
1. The principal must furnish the agent with the opportunity to work 2. The principal cannot unreasonably interfere with the agent's ability to accomplish his task 3. The principal must perform her part of the contract
What are the 3 aspects of a principal's duty to cooperate with their agent?
1. Express 2. Implied 3. Apparent
What are the 3 types of authority?
1. employee 2. scope of employment 3. nonphysical tort 4. acting with authority
What are the 4 elements of respondeat superior?
1. Duty of Loyalty a. Outside Benefits b. Confidential Information c. Conflict of Interest between two principals 2. Duty to Obey Instructions 3. Duty of Performance 4. Duty of Notification 5. Duty of Accounting
What are the 5 duties of agents to principals?
1. By completion of the agreed upon terms (time) 2. By completion of the agreed upon purpose 3. Mutual agreement: no matter what the original agreement was 4. In an agency-at-will, either party may terminate at either time 5. Wrongful termination 6. Operation of Law
What are the 6ways in which an agency relationship can be terminated?
Compensation/Consideration: The relationship is valid even if the agent is not paid.
What aspect of contract law does NOT need to be present in an agency relationship?
1. Written Agreement 2. Formal Agreement/Consent 3. Compensation
What following 3 elements are not required for an agency relationship?
The equal dignities rule
What is the one exception to the "written agreement" rule that states that an agency agreement does not have to be in writing?
Only after the relationship ends
When can an agent compete with a principal?
1. The principal supervises details of the work 2. The principal supplies the tools and place of work 3. The agents work full time for the principal 4. The agents receive a salary/hourly wages, not fixed price for a job 5. The work is part of the regular business of the principal 6. The principal and agents believe that they have an employee-employer relationship 7. The principal is in business
When determining if agents are employees or independent contractors, courts should consider what 7 things?
When an agent has special skills
When is an agent held to a higher standard of duty of care?
If they are acting as a gratuitous agent
When is an agent held to a lower standard of duty of care?
principal
Which party is more likely to be affected by bankruptcy: agent or principal?
Agent
Who has stricter rules in their duties: the agent or the principal?
Pay damages
Wrongful termination states that either party may terminate the agency relationship, but the wrongful party may have to do what?
Agents
______________________ have a fiduciary duty to their principals
Ratification
____________________________ of an act states that if a person accepts the benefits of an unauthorized transaction or fails to repudiate it, then he is as bound by the act as if he had originally authorized it.
