Agency

contract liability: partial and undisclosure

a principal is partially disclosed when the agent reveals that he is working for a principal but does not identify the principal a principal is undisclosed if an agent fails to inform the 3rd party that she is working on behalf of a principal

master-servant: liability for agent's torts

a principal may be directly liable for the agent's torts if: a. agent acts with actual authority, or b. principal negligently selects an agent, or c. principal delegates performance of a non-delegable duty to use care

termination and notice

a terminated agency relationship will persist until the nonterminating party receives notice of termination 1. agency relationships can be set up to terminate automatically, upon the occurrence of certain events, or the passage of a certain amount of time 2. Unless the parties agree otherwise, agency relationships automatically terminate after a reasonable amount of time

vocab: dual agent

broker who is acting as both a buyers agent and a sellers agent in the same transaction

vocabulary: buyers agent

helps someone trying to buy property

Contract liability of the principal: actual authority- express

if express - issue is scope of authority to determine scope, use reasonable good faith test → what did agent actually believe and what would a reasonable person believe

contract liability: implied warranty of authority

if the agent enters into the K without authority she breached the warranty of authority the warranty of authority is a doctrine that holds that a person who makes a K on behalf of another person impliedly represents that they have authority to do so when the warranty of authority is breached, no contract is formed but the agent may be personally liable for damages resulting from the breach

contract liability: fully disclosed

if the principal is fully disclosed, the agent is not responsible for the K a principal is fully disclosed when the agent reveals to the 3rd party that (1) she is working on behalf of a principal, (2) and indicates who that principal is the principal will be liable on the K and agent is not

duties of agent: breach by agent

in the event that an agent breaches these duties

master-servant: scope of employment

master is liable for the torts of his servants when such torts are committed in the scope of employment a servant's torts are within the scope of employment when the servant was performing work on behalf of the master when the tort occurred or engaged in conduct subject to the master's control scope of employment test is applied broadly: 1. even a servants unauthorized actions can be deemed within the scope of employment. Courts look to see if the servant was motivated by a desire to serve the master 2. but a serious criminal act will be found outside the servant's scope of employment

agency relationship: manifest assent

parties need only manifest assent to one of them (the agent) will do something for the other (the principal) subject to the principal's control i.e. mutually manifested agreement of service and control

master-servant: commute

servants commute to/from work is not within the scope of his employment but business travel is within scope of employment

Contract liability: when is 3rd party liable

the 3rd party is bound by the K so long as either the agent and/or principal were bound by the K except: if the principal is undisclosed the 3rd party can avoid the contract if: a. the agent falsely represented that he or she was acting alone, or b. either the principal or the agent knew that the 3rd party would not have entered into the K had the 3rd party known who the principal was

when is the agent personally liable for K's

the agent is only personally responsible on the K that the agent entered into on behalf of the principal if the principal was either: 1. undisclosed, or 2. merely partially disclosed

duties of an agent: duty of loyalty

the duty of loyalty requires that an agent put the principal's interest ahead of his own duty of loyalty can vary depending on the agency agreement between the principal and the agent. It can't be eliminated in entirety the duty of loyalty forbids 3 things: a. the agent cannot use the agency relationship for personal gain (on the side); b. the agent cannot usurp a business opportunity; and c. the agent cannot compete with the principal during the period of the agency relationship if an agent works for many principals, the agent has a duty to disclose this fact to all principals involved, as appropriate, and to act in good faith and fairly toward all

when does master-servant relationship exist

the principal has the right and the power to control the ends and means of the agent's activities

Contract liability of the principal: actual authority and 3rd party

third party's awareness of the agent's authority is irrelevant in determining the nature or extent of the agent's authority. what is necessary is that the third party recognizes that the agent is acting on behalf of someone else

agents

to qualify as an agent, one must have minimal capacity -minimal capacity = ability to consent to act on the principal's behalf

Contract liability of the principal: inherent authority

usually found when there is already a clear agency relationship

exceptions to the master servant rule

1. a principal can be liable for the torts of his agent who is NOT a servant, if: a. the agent is performing an inherently dangerous activity, or b. the principal hired an incompetent agent

An agency relationship is created whenever the following elements are present:

1. the principal manifests assent to an agent that: a. the agent act on the principal's behalf, and b. the agent acts subject to the principal's control 2. the agent manifests assent to the principal to act on the principal's behalf

rights of principals: notification

Anything that the agent is told by a 3rd party is chargeable against the principal. Principals have a right of notification a. notification - agent is obliged to provide notice of everything learned that is relevant to the subject matter of the agency relationship

master-servant: scope of employment factors

NY courts look to 5 factors to help determine whether a servant's actions were within the scope of employment: 1) whether the activity that gave rise to the tort is closely connected to the servant's work for the master (in terms of time and place); 2) whether the activity is common to the type of work the servant usually does for the master; 3) the history of relationship between the master and the servant; 4) if the servant departs from the normal methods of pursuing his or her duties; and 5) whether the servant's actions were reasonably foreseeable to the master

Contract liability of the principal: 3 types of authority

1. actual 2. apparent 3. inherent

Typical principals and agents

1. employer/employee 2. corporation/corporate officers -in NY, entity whose future incorporation is pending cannot be a principal 3. partnerships/partners

Principals

1. in order to qualify as a principal, one must have legal capacity to posses rights and incur obligations 2. a principal can be an organization, a partnership, or a government agency 3. if the entity lacks capacity it can't be a principal

Contract liability of the principal: authority and estoppel

1. occurs when someone else is enabled to carry on as the principal's authorized agent due to the principal's negligence 2. in apparent authority a third party is led to believe that someone acts with authority because of the principal's own words or conduct BUT in cases of authority by estoppel, the 3rd party is led to believe that someone acts with authority because of the principal's failure to make things clear via the use of ordinary care 3. in an estoppel based argument - the 3rd party can only assert the validity of a contract with the principal if the 3rd party relied on the purported agent's authority to his detriment

rights of an agent

1. receive compensation 2. indemnification 3. fair dealing and good faith 4. have contractual commitment kept 5. work in a safe environment

Contract liability of the principal:actual authority termination

1. revocation 2. agreement with agent re: cessation of authority 3. change in circumstances: if circumstances change so that it would be unreasonable for agent to assume that the authority exists, the authority has been terminated 4. passage of time 5. principals death or cessation of existence 6. agents death or cessation of existence 7. principal's loss of capacity 8. termination mandated by statute

non-servant agent

an agent who is not a servant is either a non-servant or an independent contractor (interchangeable terms) an independent contractor is one who: (1) bears the risk and benefits of good management; (2) maintains a high level of independence (3) is free to work for others (4) agrees to be paid a fixed fee (5) receives payment based on results, (6) is liable for work performed; and (7) accepts responsibility to remedy defects at her own expense

Contract liability of the principal: authority

an agent's actions in entering into a contract on behalf of the principal may bind the agent's principal to that contract Rule: an agent's actions in entering into a contract can bind the principal if the agent acted with authority. If this is the case, the principal becomes a party to that contract and must abide by its terms or face liability for its breach.

vocabulary: sellers agent

helps someone trying to sell property

Contract liability of the principal: actual authority

reasonable good faith standard of intent for express authority- an agent's belief in authority possessed must be reasonably held (objective and held in good faith (subjective) 1. principal's actual intent = irrelevant 2. agent has no authority to act if principal has explicitly taken authority away

duties of agent: duty of obedience

recognized by some courts, which means an agent must act within the scope of his authority and comply with the principal's lawful instructions

duties of agents: duty of care

requires that an agent perform his duties with the reasonable care, competence, and diligence ordinarily exercised by a person in the position duty to keep the principal's property separate from the agent's property and provide an accounting or the principal's property Part of the duty of care is the duty of notice. If an agent learns something that is important for the principal to know, the agent has a duty to tell the principal

Who can terminate an agency relationship and irrevocability

termination is a unilateral right of both the principal and the agent -either may terminate at any time except an irrevocable agency relationship: -principal may not unilaterally terminate an irrevocable agency if the agent has some interest in the subject matter of the agency relationship

rights of principals

the principal has the right to select, control, and terminate an agent -control - a principal does not have the right to require the agent to perform acts that are illegal or against public policy

agency relationship: control

to find control look to find overall direction on the part of the principal: 1. the control element is the right to direct the ultimate objectives of the agency's conduct -agency by appointment = assent to control is explicit and clearly documented -agency by implication = manifestations of assent are not express but found via conduct

vocab: designated sales agent

utilized when one real estate broker is representing multiple clients in the same transaction -designated sales agent will work as a subagent to the original broker

When does agency terminate automatically by operation of law

1. death of principal -two exceptions, notice is required if: i. notice is required for termination of agency relationship between customer and bank, or ii. if person who died is in the military, his agent if holding a written power of attorney, will remain an agent until he receives actual notice of death 2. death of agent 3. principal's lack of capacity -termination occurs on the date at which a judicial determination of incapacity is rendered, except -an agent who has a durable power of attorney in writing can continue serving as agent as long as it expresses principal's intention that it not be affected by loss of capacity exception: if the principal is an artificial person (ie. corporation) and it loses capacity to act, the agents authority to act is terminated as well 4. agent's breach of fiduciary duty -if agent breaches her fiduciary duty to the principal, the agency relationship terminates

3 ways an agency relationship can come into being

1. expression (appointment) -principal explicitly appoints someone to be an agent - clear and easy to recognize 2. implication by a principal's conduct -principal behaves in such a way to suggest an agency relationship 3. misinterpretation -principal does not intend to appoint an agent, but through his own fault, he creates an impression of an agency relationship in the mind of a third party -Law applies agency law here to protect the third party

Types of agents

1. gratuitous agents - serves without receiving compensation 2. trustee - agent of a settlor of trust 3. general agent - has authority over a wide variety of tasks undertaken on behalf of the principal 4. special agent - has limited authority over specific transactions or repeated actions 5. sub-agent - someone appointed by an agent to perform functions the agent had agreed to perform on behalf of a principal -agent must have authority from principal to appoint subagent -agent is responsible to the principal for the conduct of the subagent -principal is bound by the conduct of the subagent as if the agent had acted i.e. anything a subagent does should be treated as something the agent did in determining the principal's liability -subagent owes a duty of loyalty to agent AND agent's principal 6. Real estate broker -real estate brokers are agents of their clients -they all must be licensed with the state -A writing is necessary to create an agency relationship for real property transactions -they all must make certain disclosures to their principals that set forth their duties as brokers in their agency relationships -duties of care and loyalty - to exercise reasonable skill and care; to deal honestly, fairly, and in good faith; and to disclose all known facts that materially affect the property value

master-servant: frolic v. detour

frolic - if during course of his duties, a servant engages in some significant deviation for personal reasons, the servant is said to have been on a frolic -frolic = master not liable for servant's tort detour - if the servant takes some minor deviation within the course of performing their duties we will call that a detour and the master is still liable for torts committed

tort liability of an agent

if an agent commits a tort, the agent is always personally liable for his or her own torts, regardless of whether the principal is also responsible

Contract liability of the principal: actual authority- implied

if implied - use reasonable good faith test but evidence more difficult to interpret, so use these rules of thumb: a. business customs and general trade usage within a particular industry can help us figure out what implications can fairly be drawn b. a principal's acquiescence to his agent's actions gives rise to implied authority c. authority to purchase on behalf of the principal may create implied authority to make payments etc d. in an emergency situation affecting the principal, agent has implied authority to take all reasonably necessary measures to protect the principal, e. an attorney's statements in court will bind the principal, her client f. although agents are ordinarily prohibited from delegating their authority, there are certain exceptions where the agent is deemed to have implied authority: -if the delegation is a mere ministerial or mechanical act; -if the agent is required to delegate to a specialist under the law; -if the delegation is consistent with custom or usage in the industry or field; or -if it is impossible for the agent to perform his duties without delegation

Contract liability of the principal: authority and ratification

is a principal's authorization of an agent's or purported agent's actions after the fact and has the effect of binding the principal to those acts ratification can be either express or implied there are 4 factors you need to find for ratification to be effective: 1) principal must have knowledge, 2) comprehensiveness - the principal must ratify the entire transaction or none of it; 3) timeliness - the principal can only choose to ratify a contract if done within a reasonable amount of time so it is not prejudicial to a third party, 4) capacity - to ratify the transaction at the time it occurred

vocab: brokers agent

is an agent of either: 1. listing agent; 2. buyers agent; or 3. tenants agent a broker's agent is NOT the subagent of the ultimate buyer/seller

principal's obligations to the agent

the principal must deal fairly with the agent and in good faith cooperation - principal must cooperate with the agent to help the agent successfully perform her duties contractual duties - act in accordance with the terms of the K he has with his agent unless otherwise agreed to, a principal has the duty to indemnify the agent against losses suffered in connection with actions taken within the agent's scope of authority 1. extends to subagents 2. indemnification does not extend to losses that result from the agent's own fault i.e. negligence, illegal acts, wrongful activity in the event that a principal breaches one of his duties toward the agent, the agent may recover in K or tort law, whichever one is applicable under the circumstances BUT the agent must mitigate damages

Contract liability of the principal: apparent authority

turns on the reasonable good faith belief of the agent based upon the words and conduct of the principal test - an agent has apparent authority if a third party reasonably and actually believes that the agent is acting with authority, based upon the words and conduct of the principal 5 factors help assess whether a 3rd party's belief is reasonable and thus whether apparent authority exists: 1. past dealings between the principal and the agent of which the 3rd party is aware, 2. trade customs regarding how similar transactions are done 3. relevant industry standards 4. a principal's written statements of authority 5. nature of transaction i.e. if it benefits the principal, apparent authority is more likely to be found; if it is a novel transaction, apparent authority is less likely to be found

Tort liability of the principal : terminology

vicarious liability - holding one person responsible for the liabilities of another respondeat superior- form of VL where the person being held responsible is the superior one in the relationship -applies when a principal is held responsible for the torts of its agents in torts - both the agent and principal are held liable -liability for principal turns on: 1) whether a master-servant relationship exists AND 2) whether the agent was acting within the scope of his employment