Exam 4 (Chapters 25,26,27,28)

Employer-Employee relationship

Any work done by the employee to the customer is binding to the principal. Most representations of fact made by the agent with respect to the goods sold are binding to the principal -Agency law and employment law overlap considerably

Constructive trust

Anything that an agent obtains by virtue of the employment or agency relationship belongs to the principal. An agent commits a breach of fiduciary duty if he or she secretly retains benefits or profits that, by right, belong to the principal.

Apparent Authority -Pattern of conduct

Apparent authority usually comes into existence through a principal's pattern of conduct over time.

Employment laws (federal and state)

Apply only to the employer-employee relationship. Thus, statutes that govern social security, withholding taxes, workers' compensation, unemployment compensation, and workplace safety apply only when an employer-employee relationship exists.

Criteria to be considered an employee under the IRS

The Internal Revenue Service (IRS) has established its own criteria for determining whether a worker is an independent contractor or an employee. The most important factor is the degree of control the business exercises over the worker

Exception to the employee copyrighted work

An exception is made if the parties agree in writing that the work is a "work for hire" and the work falls into one of nine specific categories.

Performance duty that is owed to the Principal from the agent

An implied condition in every agency contract is the agent's agreement to use reasonable diligence and skill in performing the work. When an agent fails to perform his or her duties, liability for breach of contract may result.

Compensation in a timely manner and exception

-Includes paying them in a timely manner!! Unless the agency relationship is gratuitous and the agent does not act in exchange for payment, the principal must pay the agreed-on value for the agent's services. If no amount has been expressly agreed on, then the principal owes the agent the customary compensation for such services.

The Undisclosed Principal can require the third party to fulfill the contract, UNLESS ONE of the following is true:

1, The undisclosed principal was expressly excluded as a party in the written contract 2. The contract is a negotiable instrument signed by the agent with no indication of signing in a representative capacity 3. The performance of the agent is personal to the contract, thus allowing the third party to refuse the principal's performance

What four ways can an agency relationship arise?

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

3 Exceptions to the Equal Dignity Rule:

1. An executive officer of a corporation normally can conduct ordinary business transactions without obtaining written authority from the corporation 2. When the agent acts in the presence of the principal, the rule does NOT apply 3. When the agent's act of signing is merely formality, then the agent does NOT need written authority to sign.

Criteria used by the courts: Consider the following questions:

1. How much control does the employer exercise over the details of the work? 2. Is the worker engaged in an occupation or business distinct from that of the employer? 3. Is the work usually done under the employer's direction or by a specialist without supervision? 4. Does the employer supply the tools at the place of work? 5. For how long is the person employed? 6. What is the method of payment-by the time period or at the completion of a job? 7. What degree of skill is required of the worker?

The requirements for ratification can be summarized as follows:

1. The agent must have acted on behalf of an identified principal who subsequently ratifies the action. 2. The principal must know all of the material facts involved in the transaction. If a principal ratifies a contract without knowing all of the facts, the principal can rescind (cancel) the contract 3. The principal must affirm the agent's act in its entirety. 4, The principal must have the legal capacity to authorize the transaction at the time the agent engages in the act and at the time the principal ratifies. The third party must also have the legal capacity to engage in the transaction. 5. The principal's affirmation (ratification) must occur before the third party withdraws the transaction 6. The principal must observe the same formalities when ratifying the act as would have been required to authorize it initally

Apparent authority and estoppel

A court can apply the doctrine of agency by estoppel when a principal has given a third party reason to believe that an agent has authority to act. If the third party honestly relies on the principal's representations to his or her detriment, the principal may be estoppel (prevented) from denying that the agent had authority

Authorized Acts -Disclosed or partially disclosed principal

A disclosed or partially disclosed principal is liable to a third party for a contract made by the agent. If the principal is disclosed, the agent has no contractual liability for the nonperformance of the principal or the third party. If the principal is partially disclosed, in MOST states the agent is also treated as a party to the contract, and the third party can hold the agent liable for contractual nonperformance.

Example of Implied agreement of an agency relationship

A hotel expressly allows only Trey to park cars, but Trey has no employment contract there. The hotel's manager tells Trey when to work, as well as where and how to park the cars. The hotel's conduct manifests a willingness to have trey park its customers cars, and Trey can infer from the hotel's conduct that he has the authority to act as a parking valet. Thus, there is an implied agreement that Trey is an agent of the hotel and provides valet parking services for hotel guests.

Cooperation

A principal has a duty to cooperate with the agent and to assist the agent in performing their duties. The principal must do nothing to prevent that performance

Principal's rights and remedies against the agent

A principal has contract remedies for an agent's breach of fiduciary duties. The principal also has tort remedies if the agent engages in misrepresentation, negligence, deceit, libel, slander, or trespass. In addition, any breach of a fiduciary duty by an agent may justify the principal's termination of the agency. The main actions available to the principal are constructive trust, avoidance, and indemnification

Liability for Agent's Misrepresentation

A principal is exposed to tort liability whenever a third person sustains a loss due to the agent's misrepresentation. The principal's liability depends on whether the agent was actually or apparently authorized to make representations and whether the representations were made within the scope of the agency. The principal is always directly responsible for an agent's misrepresentation made within the scope of the agent's authority.

Principal's Tortious Conduct

A principal who acts through an agent may be liable for harm resulting from the principal's own negligence or recklessness. Thus, a principal may be liable if he or she gives improper instructions, authorizes the use of improper materials or tools, or establishes improper rules that result in the agent's committing a tort.

Principals's Authorization of Agent's Tortious Conduct

A principal who authorizes an agent to commit a tort may be liable to persons or property injured thereby, because the act is considered to be the principal's NOTE: The agent acting at the principal's direction can be liable as a tortfeasor (One who commits a wrong, or tort), along with the principal, for committing the tortious act even if the agent was unaware that the act was wrong.

Disclosed Principal

A principal whose identity is known by the third party at the time the contract is made by the agent.

tort and contract remedies EXAMPLE

Aaron, a builder who has just constructed a new house, contracts with a real estate agent, Ben, to sell the house. The contract calls for the agent have an exclusive 90 day listing and to receive 6% of the selling price when the home is sold. Ben holds several open houses and shows the home to a number of potential buyers. One month before the 90 day listing is terminated, Aaron agrees to sell the house to another buyer-not the one to whom Ben has shown the house-after the 90 day expires. Aaron and the buyer agree that Aaron will reduce the price of the house by 3% because he will sell it directly and thus will not have to pay Ben's commission. In this situation, if Ben learns of Aaron's actions, she can terminate the agency relationship and sue Aaron for damages, including the 6%commission she should have earned on the sale of the house.

Apparent Authority

Actual authority (express or implied) arises from what the principal makes clear TO THE AGENT. Apparent authority, in contrast, arises from what the principal causes a third party to believe. An agent has apparent authority when the principal, by either word or action, causes a third party reasonably to believe that the agent has authority to act, even though the agent has no express or implied authority.

REQUIREMENTS of the agency relationship

Agency relationships are consensual-that is, they come about by voluntary consent and agreement between the parties. Generally, the agreement need not to be in writing, and consideration is required -A person must have contractual capacity to be a principal. Those who cannot legally enter into contracts directly should not be allowed to do so indirectly through an agent. Any person can be an agent, however, regardless of whether he or she has the capacity to contract (including minors)

Demand for Accounting

An agent can also withhold further performance and demand that the principal give an accounting. For instance, a sales agent may demand an accounting if the agent and principal disagree on the amount of commissions the agent should have received for sales made during a specific period of time

Implied Authority

An agent has implied authority to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency. Authority can also be implied by custom or inferred from the position the agent occupies. NOTE, however, that an agent's implied authority cannot contradict his or her express authority. Thus, if a principal has limited an agent's express authority, then the fact that the agent customarily would have such authority is irrelevant.

Notification

An agent is required to notify the principal of all matters that come to their attention concerning the subject matter of the agency. This is the duty of notification, or the duty to inform. -Generally, the law assumes that the principal is aware of any information acquired by the agent that is relevant to the agency-regardless of whether the agent actually passes on this information to the principal. It is a basic tenet of agency law that notice to the agent is notice to the principal

Implied Authority EXAMPLE

Archer is employed by Packard Grocery to manage one of its stores. Packard has not expressly stated that Archer has authority to contract with third persons. Nevertheless, authority to manage a business implies authority to do what is reasonably required (as is customary or can be inferred from a manager's position) to operate the business. This includes forming contracts to hire employees, to buy merchandise and equipment, and to advertise the products sold in the store.

Apparent Authority -Pattern of conduct EXAMPLE

Bailey is a traveling salesperson with the authority to solicit orders for the goods of Carlon Industries (the principal). Because she does not carry any goods with her, she normally would not have the implied authority to collect payments from customers on Carlon's behalf. Suppose that Bailey does accept payments from Jayco Enterprises, however, and submits them into Calon's accounting department for processing. If Carlon's does nothing to stop Bailey from continuing this practice, a pattern develops over time. Thus, the principal confers apparent authority on Bailey to accept payments from Jayco.

E-Agent Example

Bingo wants to purchase 3 copies of the 3 different books (a total of 9 items). The e-agent mistakenly records an order for 33 of a single book and does NOT provide an on-screen verification of the order. If 33 books are then sent to Bingo, he can avoid the contract to purchase them.

Performance(Gratuitous Agent) Example

Bower's friend Allen is a real estate broker. Allen offers to sell Bower's vacation home at no charge. If Allen never attempts to sell the home, Bower has no legal cause of action to force her to do so. If Allen does attempts to sell the house to Frank, but then performs so negligently that the sale falls through, Bower can sue Allen for negligence.

Employer-Independent Contractor relationships examples

Building contractors and subcontractors are independent contractors. A property owner who hires a contractor and subcontractors to complete a project does not control the details of the way they preform their work.

Exception to Obedience

During emergency situations, however, when the principal cannot be consulted, the agent may deviate from the instructions without violating this duty.Whenever instructions are not clearly states, the agent can fulfill the duty of obedience by acting in good faith in the manner reasonable under the circumstances.

Reimbursements and indemnification EXAMPLE

For instance, if the agent, on the principal's behalf, forms a contract with a third party, and the principal fails to preform the contract, the third party may sue the agent for damages. In this situation, the principal is obligated to compensate the agent for any costs incurred by the agent as a result of the principal's failure to perform the contract.

Cooperation and Exclusive Agency

For instance, when a principal grants an agent an exclusive territory, the principal creates an *exclusive agency*, in which the principal cannot complete with the agent or appoint or allow another agent to compete. If the principal does so, he or she violates the exclusive agency and is exposes to liability for the agent's lost profits.

Agent's duties to the principal

Generally, the agent owes the principal 5 duties- performance, notification, loyalty, obedience, and accounting

Express Authority -Power of attorney

Giving an agent a *power of authority* confers express authority. The power of attorney is a written document and is usually notarized (A document is notarized when a *notary public*-a public official authorized to attest to the authenticity of signatures-signs and dates the document and imprints it with their seal of authority.) MOST states have statutory provisions for creating a power of authority. -Power of Attorney can be SPECIAL (permitting the agent to perform specified acts only), or it can be GENERAL (permitting the agent to transact all business for the principal). -Use with great caution and usually only in exceptional circumstances. -Ordinarily, a power of attorney terminates on the incapacity or death of the person giving the power.

Principal

Have the right to control the agent's conduct in matters entrusted to the agent.

Authorized acts

If an agent acts within the scope of her or his authority, normally the principal is obligated to perform the contract regardless of whether the principal was disclosed, partially disclosed, or undisclosed. -Whether the agent may also be held liable under the contract, however, depends on the disclosed, partially disclosed, or undisclosed status of the principal.

Unauthorized Acts

If an agent has NO authority by nevertheless contrcats with a third party, the principal cannot be held liable for the contract. It does NOT matter whether the principal was disclosed, partially disclosed, or undisclosed. The agent is liable.

Unauthorized Acts -Implied Warranty

If the principal was disclosed, or partially disclosed, and the agent contracts with a third party without authorization, the agent is liable to the third party who relied on the agency status. -Thr agent's liability here is based on his or her breach of the implied warranty of authority., not the breach of the contract itself. An agent impliedly warrants that he or she has the authority to enter a contracvt on behalf of the principal.

Express Authority -The Equal Dignity Rule

In MOST states, this rule requires that if the contract being executed is or must be in writing, then the agent's authority must also be in writing. Failure to comply with the equal dignity rule can make a contract voidable *at the option of the point of the principal*. The law regards the contract at the point as a mere offer. If the principal decides to accept the offer, the acceptance must be ratified, or affirmed, in writing(or electronic record)

Indemnification

In certain situations, when a principal is sued by a third party for an agent's negligent conduct, the principal can sue the agent for indemnification-that is, for an equal amount of damages. the same holds true if the agent violates the principal's instructions.

Rights and Remedies of agents and principals

In general, for every duty of the principal, the agent has a corresponding right, and vice versa. When one party to the agency relationship violates his or her duty to the other party, the remedies available to the non-breaching party arise out of contract and tort law. These remedies include monetary damages, termination of the agency relationship, an injunction, and required accountings

Independent Contractors

Independent contracts are not employees because by definition, those who hire them have no control over the details of their work performance.

Agency relationship

Involves two parties, one of the parties, called the agent, agrees to represent or act for the other, called the principal.

Creating the agency relationship

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

Constructive Trust EXAMPLE

Lee, a purchasing agent for Mark, receives cash rebates from a customer. If Lee keeps the rebates for himself, he violates his fiduciary duty to his principal, Mark. On finding out about the cash rebates, Mark can sue Lee and recover them.

Liability for contracts

Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized. Principals are classified as disclosed, partially disclosed, or undisclosed.

Loyalty

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

Agency by agreement

Most agency relationships are based on express or implied agreement that the agent will at for the principal and that the principal agrees to have the agent so act. It can be in the form of a express WRITTEN or ORAL agreement. An agency relationship can also be implied by CONDUCT

Performance -Gratuitous Agents

Not all agency relationships are based on contract. In some situations the agent acts gratuitously-that is, without payment. A gratuitous agent CANNOT be liable for breach of contract because there is no contract. He or she is subject ONLY TO TORT LIABILITY. Once a gratuitous agent has begun to act in an agency capacity, they have the duty to continue to perform in that capacity. A gratuitous agent must preform in an acceptance manner and is subject to the same standards of care and duty to perform as other agents.

Unauthorized Acts -Third Party's knowledge

Note that if the third party knows at the time the contract is made that the agent does NOT have authority, then the agent is Not liable. Similarly, if the agent expressed to the third party uncertainty as to the extent of her or his authority, the agent is NOT personally liable.

Created by the principal's conduct

Note that the acts or declarations of a purported agent in and of themselves do not create an agency by estoppel. Rather, it is the deeds or statements of the principal that create an agency by estoppel.

Fiduciary

Noun: Refers to having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking Adjective: "fiduciary relationship" means that the relationship involves trust and confidence

Liability for torts and crimes

Obviously, any person, including an agent, is liable for her or his own torts and crimes. Whether a principal can also be held liable for an agent's torts and crimes depends on several factors, which we examine here. In some situations, a principal may be held liable NOT only for the torts of an agent but also for torts committed by an independent contractor

Agency by ratification

On occasion, a person who is in fact not an agent (or who is an agent acting outside the scope of her or his authority) may make a contract on behalf of another (principal). If the principal approves or affirms that contract by word or by action, an agency relationship is created by RATIFICATION. Ratification involves a question of intent, and intent can be expressed by either words or conduct.

Duties of agents and principals

Once the principal-agent relationship has been created, both parties have duties that govern their conduct. Each party owes the other the duty to act with the utmost good faith.

The Equal Dignity rule EXAMPLE

Pam (the principal) orally asks Austin (the agent) to sell a ranch that Pam owns. Austin finds a buyer and signs a sales contract (a contract for an interest in reality MUST BE IN WRITING) on behalf of Pam to sell the ranch. The buyer can NOT enforce the contract unless Pam subsequently ratifies Austin's agency status IN WRITING. Once the sales contract is ratified, either party can enforce rights under the contract.

Indemnification Example

Parker (the principal) owns a used-car lot where Moore (the agent) works as a sale-person. Parker tells Moore to make no warranties for the used cars. Moore is eager to make a sale to Walter, a customer, and adds a 50,000-mile warranty for the cars engine. Parker may still be liable to Walter for engine failure, but if Walter sues Parker, Parker normally can then sue Moore for indemnification for violating his instructions.

Principal's Tortious Conduct EXAMPLE

Parker knows that Audrey's driver's license has been suspended but nevertheless tells her to use the company truck to deliver some equipment to a customer. If someone is injured as a result, Parker will be liable for his own negligence in instructing Audrey to drive without a valid license.

Notification example

Perez, an artist, is about to negotiate a contract to sell a series of paintings to Barber's Gallery for $25,000. Perez's agent learns that barber is insolvent and will be unable to pay for the paintings. The agent has a duty to inform Perez of Barber's insolvency because it is relevant to the subject matter of the agency, which is the sale of Perez's paintings.

Partially disclosed principal

Principal whose identity is not known by the third party. Nevertheless, the third party knows that the agent is or may be acting for a principal at the time the contract is made

Undisclosed Principal

Principal whose identity is totally unknown by the third party. In addition, the third party has no knowledge that the agent is acting in an agency capacity at the time the contract is made

Ratfication

Ratification occurs when the principal affirms, or accepts responsibility for, an agent's unauthorized act. When ratification occurs, the principal is bound to the agent's act, and the act is treated as if it had been authorized by the principal from the outset. Ratification can either be EXPRESS or IMPLIED. If the principal does NOT ratify the contract, the principal is NOT bound, and the third party's agreement with the agent is viewed as merely an unaccepted offer. Because the third party's agreement is an unaccepted offer, the third party can revoke it at any time, without liability, before the principal ratifies the contract. The agent, however, may be liable to the third party for misrepresenting their authority.

Tort and contract remedies

Remedies for breach of duty by the principal follow normal contract and tort remedies.

Agents

Represents the principal. By using agents, the principal can conduct multiple business operations simultaneously in various locations

Cooperation EXAMPLE

River City Times Company (the principal) grants Mark (the agent) the right to sell its newspapers at a busy downtown intersection to the exclusion of all other vendors. This creates an exclusive territory within which only Mark has the right to sell those newspapers. If River City Times Company allows another vendor to sell its papers IN THAT AREA Mark can sue for lost profits

Employer-Employee relationship examples

Salesperson (agent) for the store's owner (principal) All employees who deal with third parties

Agency by Estoppel

Sometimes, a principal causes a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on his behalf WHEN THIS OCCURS: The principal is "estoppel to deny" (prevented from denying) the agency relationship. An agency by estoppel arises when the principal's actions have created the appearance of an agency that does not in fact exist.

Reimbursements and *indemnification*

Subject to the terms of the agency agreement, the principal has the duty to indemnify(compensate) an agent for liabilities incurred because of authorized and lawful acts and transactions. -Additionally, the principal must indemnify the agent for the value of benefits that the agent confers on the principal. The amount of indemnification usually is specified in the agency contract. If it is not, the courts will look to the nature of the business and the type of loss to determine the amount. Note that this rule applies to acts by gratuitous agents as well

If they do NOT correctly account in an agency relationship

The agent has a duty to maintain a separate account for the principal's funds and must not intermingle these funds with the agent's personal funds. If a licensed professional (such as an attorney) violates this duty, they may be subject to disciplinary proceedings carried out by the appropriate regulatory institution (such as the state bar association). Of course, the professional will also be liable to the principal (the professional's client) for failure to account.

Agent's rights and remedies against the principal

The agent has the right to be reimbursed and indemnifies, and to have a safe working environment. An agent also has the right to perform agency duties without interference bu the principal.

Loyalty -Actions must be in the benefit of the Principal

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

Express Authority

The authority declared in clear, direct, ad definite terms. Express authority can be given oraly or in writing

Safe working conditions

The common law requires the principal to provide safe working premises, equipment, and conditions for all agents and employees. The principal has a duty to inspect working areas and to warn agents and employees about any unsafe situations. When an agent is an employee, the employer's liability is frequently covered by state workers' compensation insurance. In addition, federal and state statutes often require the employer to meet certain safety standards.

Agency by operation of law

The courts may find an agency relationship in the absence of a formal agreement in other situations as well.

Performance -Standard of care

The degree of skill or care required of an agent is usually that expected of a reasonable person under similar circumstances(generally, this is interpreted to mean ordinary care). If an agent has represented herself or himself as possessing special skills, however, the agent is expected to exercise the degree of skill claimed. Failure to do constitutes a breach of the agent's duty.

Determination of employee status

The determination have to do with the rights and liabilities of the parties. Employees have to pay taxes, such as Social Security and unemployment taxes, for employees but not for independent contractors

Loyalty -Maintain confidentiality

The duty of loyalty also means that any information or knowledge acquired through the agency relationship is confidential. It is a breach of loyalty to disclose such information either during the agency relationship or after its termination. Typical examples of confidential information are trade secrets and customer lists compiled by the principal.

If IRS determines that an employee is misclassified:

The employer will be responsible for paying any applicable Social Security, withholding, and unemployment taxes

Scope of agent's authority

The liability of a principal to third parties with whom an agent contracts depends on whether the agent has the authority to enter legally binding contracts on the principal's behalf. An agent;s authority can be either ACTUAL (express or implied) or APPARENT. If an agent contracts outside the scope of his or her authority, the principal may still become liable by ratifying the contract.

Principal's duties to the agent

The principal also has certain duties to the agent. These duties relate to compensation, reimbursement and indemnification, cooperation, and safe working conditions

*Reimbursements* and indemnification

The principal has a duty to reimburse the agent for any funds disbursed at the principal's request. The principal must also reimburse the agent for any necessary expenses incurred in the course of the reasonable performance of her or his agency duties. Agents CANNOT recover for expenses incurred as a result of their own misconduct or negligence, though.

Employer-Independent Contractor relationships

The relationship between a principal and an independent contractor may or may not involve an agency relationship

The third party's reliance must be REASONABLE

The third person must prove that he or she reasonably believed that an agency relationship existed. Facts and circumstances must show that an ordinary, prudent person familiar with business practice and custom would have been justified in concluding that the agent had authority.

Actions by E-agent

These agency principals also apply to e-agents. An electronic agent (E-agent) is a semi-autonomous computer program that is capable of executing specific tasks. For instance, software that can search through many databases and retrieve only relevant information for the user is an e-agent. -They can enter into agreements on behalf of their principals-at least, in those sates that have adopted the act. -If consumers place an order over the internet, and the company (principal) takes the order via e-agent, the company CANNOT later claim that it did not receive the order

Example of operations of law

This may occur in family relationships, such as when one spouse purchases certain basic necessaries and charges them to the other spouses account. The courts often rule that a spouse is liable for payment for the necessaries because of either a social policy or a legal duty to supply necessaries to family members.

Liability for Agent's Misrepresentation -Innocent Misrepresentation

Tort liability based on fraud requires proof that a material misstatement was made knowingly and with the intent to deceive. An agent's innocent misrepresentation is a contract or warranty transaction can also provide grounds for the third party's recission of the contract and the award of damages. Justice dictates that when a principal knows that an agent is not accurately advised of the facts but does not correct either the agent's or the third party's impressions, the principal is responsible. The point is that the principal is always directly responsible for an agent;s misrepresentation made within the scope of authority

UETA (Uniform Electronic Transaction Act)

UETA stipulates that if an e-agent does NOT provide an opportunity to prevent errors at the time of the transaction, the other party to the transaction can avoid the transaction. Therefore, if an e-agent fails to provide an on-screen confirmation of the purchase or sale, the other party can avoid the effect of any errors.

Employee status and "works for hire"

Under the Copyright Act, the employer owns the copyright to the work. When an employeer hires an independent contractor, the contractor usually owns the copyright.

Accounting

Unless the agent and principal agree otherwise, the agent must keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf. This includes gifts from third parties in connection with the agency.

Liability for Agent's Misrepresentation -Apparent liability authority

When a principal has placed an agent in a position of apparent authority-making it possible for the agent to defraud a third party- the principal mat also be liable for the agent's fraudulent acts. For instance, partners in a partnership generally have the apparent implied authority to act as agents of the firm. Thus, if one of the partners commits a tort or a crime, the partnership, itself-and often the other partners personally-can be held liable for the loss

Avoidance

When an agent breaches the agency agreement or agency duties under a contract, the principal has a right to avoid any contract entered into with the agent. This right of avoidance is at the election of the principal.

Emergency Powers

When an unforeseen emergency demands action by the agent to protect or preserve the property and rights of the principal, but the agent is unable to communicate with the principal, the agent has emergency power.

Authorized Acts -Undisclosed Principal

When neither the fact of an agency relationship nor the identity of the principal disclosed, the undisclosed principal is bound to perform just as if the principal had been fully disclosed at the time the contract was made. -When a principal's identity is undisclosed and the agent is forced to pay the third party, the agent is entitled to be indemnified (compensated) by the principal. The principal had a duty to perform, even though his or her identity was undisclosed, and the failure to do so will make the principal ultimately liable. Once the undisclosed principal's identity is revealed, the third party generally can elect to hold either the principal or the agent liable on the contract.

No right to specific performance

When the principal-agent relationship is not contractual, the agent has no right to specific performance. An agent can recover for past services and future damages but CANNOT force the principal to allow him or her to continue acting as an agent.

Compensation

in general, when a principal requests certain services from an agent, the agent reasonably expects payment. The principal therefore has a duty to pay the agent for services rendered. For instance, when an accountant or an attorney is asked to act as an agent, an agreement to compensate the agent for this service is implied.

Obedience

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