Business Law- 4210 Agency

agent's liability on negotiable instruments

a. an agent will be liable on a negotiable instrument if the agent signs his/her own name without indicating the existence and the identity of the principal b. If the act is authorized the agent can expect reimbursement from the principal for the amount paid on the negotiable instrument c. To avoid liability on the instrument, the agent must indicate that the signing is in a representative capacity (as an agent for another party) d. the agent will also be liable on a negotiable instrument if the agent signs the principal's name without authority. this is forgery

principal's liability on negotiable instruments. will be liable if either are true:

a. an agent with authority signs the principal's name b. the principal signs his own name

principal's duties and obligations- compensation

a. If not amount is expressly mentioned, it will be the reasonable amount as determined by the court b. the compensation may be on a contingent fee basis

agent's duties and obligations-termination

a. after the agency relationship is terminated, the former agent cannot continue to act as the principal's agent b. the duty not to disclose confidential info regarding the agency continues, however, even after the agency is terminated

financial powers

a. an agent who sells goods for cash, and has possession of the goods has the authority to collect the cash b. the agent has no implied authority to accept credit in place of cash c. payment to an agent lacking authority to accept the payment does not discharge the debt-the third party would still be required to make payment to the principal

creation of agency- agreement but not a contract

a. both the principal and the agent agree to the relationship, but the agreement is not a contract because it lacks some of the required elements b. the agreement can be shown by the principal's and agent's conduct c. because it is not necessary that the agreement be a contract, consideration is not a requirement for the creation of agency

the principal can enforce their rights in the following ways:

a. by suing for the legal remedy of damages b. by seeking an equitable remedy, such as an injunction, specific performance, rescission of the contract, or an accounting c. by revoking the agency

apparent authority

a. comes from the words or actions of the principle that lead a third party to reasonably believe and act upon the belief that actual authority exists in the purported agent b. belief and reliance are shown when the third party makes a contract with the purported agent c. apparent authority is determined from the view of the third party dealing with the purported agent d. the words or actions must come from the principal, not the purported agent, or order to create apparent authority

an agency relationship is terminated by operation of law without notice being required in the following circumstances:

a. death of the principal or agent- it is not necessary that the other party have knowledge of the death b. insanity of the principal or agent- "" c. bankruptcy of the principal""- the agency relationship is not terminated if the agent becomes bankrupt d. impossibility of performance e. the performance of the agency becomes illegal

third party's rights against the agent

a. for contracts- if the principal was undisclosed or partially disclosed, the agent can be sued on the contract. If the principal was disclosed at the time of making the contract, the agent cannot be sued on the contract b. for torts of the agent- the third party can sue the agent for the agent's torts against the third party

agent's rights against the third party

a. for the usual situation involving a disclosed principal and a contract, the agent has no rights against the third party because the agent is not a party to the contract b. If the agent is liable on the contract due to the fact the principal is undisclosed or partially disclosed, the agent has whatever rights come from the contract c. the presence or absence of the agency relationship does not affect the rights of the agent on the contract

power to appoint subagents

a. general rule- an agent cannot appoint subagents in order to delegate the agent's duties and obligations b. this is because the principal selects the agent based on personal qualifications c. If the duties of the agent are purely ministerial, mechanical, or routine, an exception is allowed an the agent may appoint a subagent d. If duties require skill, judgment, no subagent may be appointed unless the principal gives permission

notice to third parties

a. generally, the principal should give personal notice of termination of the agency to any third party who has dealt with the agent b. published notice of termination fo the agency is generally sufficient notice to any third parties who have not dealt with the agent previously c. acts of the agent after a termination by operation of law cannot bind the principal or the principal's estate based on a theory of apparent authority

ratification

a. occurs when the principal gives approval of an act previously done by the purported agent for the principal without authority b. when the act happens, it must have been done for the purported principal, not for the purported agent c. the ratification must also occur within a reasonable time

principal's rights against the agent

a. performance of the agency contract by the agent b. indemnification from the agent/employee if obligated to pay damages for the torts of the agent/employee in a suit by a third party based upon the doctrine of respondeat superior c. the principal has the right to sue the agent for breach of this fiduciary duty

subagent

a. person appointed by an authorized agent to act for the agent b. if the agent is authorized to appoint a subagent, the acts of the subagent are binding on the principal. c. IF the agent lacks authority to appoint a subagent, the subagent's acts are not binding on the principal

agency law involves the following relationships:

a. principal and agent b. employer (master) and employee (servant) c. principal and independent contractor

renunciation by the agent

a. renunciation takes place when the agent acting alone withdraws from the agency relationship

the agent is not liable on a contract in the following instances:

a. the agent contracts for a disclosed principal b. the principal ratifies an unauthorized contract made by the agent for the principal. In this case, the agent is treated as if it were authorized from the beginning c. the third party elects to hold the newly discovered principal liable on a contract

the agent is personally liable to the third party on a contract in the following instances:

a. the agent makes the contract in her own name. the principal would either be undisclosed or partially disclosed b. the agent guarantees the performance of the principal, and the principal fails to perform c. the agent contracts for a nonexistent principal and makes no guarantees d. the agent acts without authorization from the principal in making the contract

the principal can still be liable on the agency relationship because

a. the agent may still have apparent authority from the view of third parties with whom the agent has previously dealt b. these third parties should be given actual notice of the dismissal of the agent by letter, by phone, or in person

agent's duties and obligations- indemnification

a. the agent must indemnify the principal if the principal pays damages in a legal action for the wrongful acts of the agent

customary authority

authority that comes from the customs of that type of business

express authority

authority that is stated in spoken or written words by the principal

respondeat superior- the principal is liable whether the tort was (blank) or (blank). The principal is liable whether the tort was defined as ....

authorized/unauthorized. intentional, negligence, or liability without fault

operation of law

automatically without any action needed by the parties. all authority of the agent is terminated, even apparent authority, when the termination is by operation of law

if the revocation is contrary to the agency contract the principal could...

be liable for breach of contract if the breach is not justified because while principals have the power to terminate the agency, they may not have the legal right to do so

the third party can withdraw from the contract (blank), but not after

before ratification by the principal

the principal can expressly ratify the unauthorized act by indicating the intent to be (blank)

bound

Special agent- broker

brings the seller and buyer together. the broker is a special agent of one of the two parties and has very limited implied authority

the agency relationship can be used in either (blank) or (blank) situations

business, personal

the relationship is (blank) and can be (blank) or (blank) from the conduct of the parties

consensual, expressed, implied

agent's liability w/ undisclosed principal

does not know person is acting as an agent. liable. once discovered, the third party can also sue the principal but cannot recover from both

an employee can be an agent if the employee is also given the authority to...

enter contracts with third parties that are binding on the principal

oral or written statements to either the third party or the agent can result in an (blank)

express ratification

mutual agreement of both principal and agent

if the both mutually agree to end the agency relationship, it ends

time period ends

if the principal and agent have agreed that the agency relationship will end after an express period of time, the lapse of the time will terminate the agency relationsip

legal capacity of the principal

if the principal does not have legal capacity to enter a contract, the principal does not have the capacity to appoint an agent. in other words, if a principal cannot legally enter a contract directly, they cannot do so indirectly through an agent

the principal may be held liable for torts against third parties committed by agents are employees of the principal, but not for torts committed by (blank)

independent contractors

agency relationship can be formed...

oral, written, or the agency can be created by some conduct of the principal that may be interpreted by a third party as an intention to appoint an agent

gratuitous agent

person who agrees to act as an agent without expectation of compensation. the relationship is generally the same as in the case of a compensated agent, except that a gratuitous agent has no obligation to act for the principal unless the gratuitous agent has caused the principal to reasonably rely on the agent to perform the act

disclosed principal

person whose existence and identity are known to the third party at the time of making the contract with the agent

agent's liability w/ a nonexistent principal

personally liable if agent contracts with third person by representing that the agent acts for a fictitious or nonexistent principal. the agent would be breaching the implied warranty of authority that is made to the third party

undisclosed principal

principal whose existence and identity are not known to the third party at the time of contracting. From the third party's point of view, the agent appears to be acting on their own behalf

partially disclosed principal

principal whose existence is known to the third party at the time of contracting with the agent. The specific identity of the principal, though, is unknown to the third party

franchiser and franchisee: this relationship is normally that of (blank) and (blank)

principal, independent contractor

the principal who deals with the independent contractor is sometimes called a (blank)

proprietor

by operation of law: a spouse or while who...

purchases necessities for the family is the agent of the other spouse

the agent has the right to...

represent the principal and make contracts with third parties on behalf of the principal

If the relationship is an agency coupled with an interest, the principal cannot...

revoke the agency

incidental authority

same as implied authority

If formed by contract it must...

satisfy the requirements of a contract

the principal contracts for the end result, but the principal has no right of direction or control while...

the activity is being performed

third party's liability

the agency relationship on the other end of the contract does not affect the liability of the third party. the third party is liable even if the principal is undisclosed or partially disclosed

If the renunciation is contrary to the agency contract...

the agent could be liable for the breach of contract if the breach is not justified

an agency coupled with an interest is an agency relationship where...

the agent has an interest in the subject matter of the agency. the subject matter is a property interest or a security interest

agent's duties and obligations- competition

the agent must not compete with the business activity of the principal

agent's duties and obligations-due care

the agent must use reasonable care and not be negligent in carrying out the agency

the authority, or power, of an agent is...

the capacity to change the legal status of the principal by dealing with third partiesd

actual authority

the combination of express & implied authority

the relationship could be found to be that of employer and employee if...

the franchiser exercises significant control over the franchisee in running the franchise

legal capacity of the agent

the make a contract fo the principal, an agent does not need contractual capacity, only the principal needs capacity to enter a contract

termination of the agency- revocation by the principal

the principal acting alone can revoke the authority of the agent because an agency is a consensual relationship requiring the consent of both parties

ratification is possible only when...

the principal knows all the important terms of the contract

principal's duties and obligations-indemnity

the principal must indemnify the agent if the agent suffers expenses from a legal action from carrying out the agency

principal's duties and obligations- reimbursement

the principal must reimburse the agent if the agent spends their own funds to carry out the agency

principal's duties and obligations- warnings

the principal must warn the agent of any dangers and unreasonable risks involved in the employment

an implied ratification can result if...

the principal retains the benefits and advantages of the contract with the third party

the independent contractor acts fo the benefit of the principal but not under (blank)

the principal's control

principal's duties and obligations

the the agent owes a fiduciary duty to the principal, but the principal does not owe a fiduciary duty to the agent

ratification retroactively acts as an acceptance by the principal of (blank)

the unauthorized contract from the date the contract was made

examples of operation of law: necessity

this happens by operation of law when an emergency situation develops and the agent is given power to act beyond normal authority. usually these conditions exist when the following are true: a. the agent cannot contact the principal for instructions b. failure to act will cause substantial loss to the principal

true/false: not every employee is an agent

true

true/false: ratification cannot generally be retracted once done

true

true/false: the principal is liable on contracts made by an agent if the agent has authority to act on behalf of the principal

true

true/false: the statute of frauds requires an agency contract to be in writing to be enforceable if the contract cannot be performed within one year from the time of making the contract

true

true/false: the minor agent could disaffirm the agency contract because this is a voidable contract to the minor agent

true- however, this would not impact any contracts entered for the principal with third parties prior to the disaffirmance

true/false: contracts made by a minor agent are legally binding on the adult principal

true. these contracts with third parties would not be voidable by the adult principal even though the agent was a minor

ostensible authority

Another term for apparent authority.

the factor is sometime called (blank)

a commission merchant. the factor receives a commission form the sale and sells in his/her own name

special agent- factor

a factor receives the possession of some other person's property to sell for a commission. The factor is a special agent, having only that implied authority that relates to the sale of the property.

agency

a fiduciary relationship between two persons when one person (the agent) acts for the benefit and under the control of the other person (the principal) and has the power to affect the legal relationships of the principal

power of attorney

a formal instrument, usually acknowledged by a notary public, to confer authority on an agent.

special agent-lawyer

a lawyer handles a particular case for the client. the lawyer is a special agent of the client and has only implied authority as it relates to the particular case

special agent-auctioneer

a person who auctions the seller's property. once the property has been sold, the auctioneer acts as an agent for both the seller and the buyer to transfer legal title

agent's duties and obligations- accounting

a. the agent must keep records for examination by the principal b. the agent must not commingle the principal's property with his own c. the agent is legally liable commingling causes a loss d. If the agent uses the principal's funds for their own purpose, the principal can sue the agent for the return of the funds. If the agent has purchased property with the funds, the principal can generally elect to take the property even if it is of greater value

agent's duties and obligations- give notice of info

a. the agent must transmit important info to the principal b. failure to do this could be costly to the principal because notice to the agent is legally equivalent to notice to the principal c. the agent can be held liable for any damages that result from the failure to give notice

agent's duties and obligations- obedience

a. the agent should follow instructions unless they are criminal or illegal b. if the agent fails to follow instructions, the agent is personally liable for any loss incurred by the disobedience

termination

a. the agent's actual authority ceases when the agency is terminated b. the agent still has apparent authority from the viewpoint of third parties with whom the agent has dealt c. these third parties must be given actual notice of the termination to end apparent authority d. for those third parties who have not dealt with the agent, constructive notice is adequate to end the apparent authority e. publishing the termination in a newspaper having general circulation is adequate constructive notification as to those third parties

implied authority

a. the authority that is commonly and customarily needed to conduct the purpose of the agency b. implied authority is needed to fill in the gaps to carry out the agent's express authority c. it cannot come from words or conduct of the agent d. it can vary from one location to another & among different types of businesses

the authority of the agent is determined by the principal and can come only from the principal. authority comes from the consent of the principal

a. the burden fo proving the agent's authority rests with the third party who deals with the agent. IF authority cannot be proved, the purported principal is not liable on the contract b. the agent cannot create their own authority c. a third party who deals with an agent, knowing the agent exceeds their authority, does so at their own peril and will not generally be able to hold the principal liable for the agent's unauthorized act

the following factors are sometimes considered in determining whether apparent authority exists:

a. the third party's knowledge of the agent's actual authority and limitations b. the customs in that type of business c. the principal's prior approval of similar activities by the agent

estoppel

a. this is called creation of agency by apparent authority b. occurs when the principal leads a third party to reasonably believe that a person acts as the principal's agent c. the principal is prohibited from denying the existence of an agency relationship if the third party deals with the person as the principal's agent

agent's duties and obligations-loyalty

a. undivided loyalty to the principal with no conflict with the agent's personal interests b. the agent should not disclose confidential information to anyone except the principal c. the agent should not act for two principals unless both principals know and agree the agent may not make a secret profit on the subject matter of the agency d. the agent cannot engage in self-dealing e. an agent who breaches the fiduciary duty of loyalty loses any compensation, fee, or commission that would have been due to that agent f. if the principal finds the agent has been self-dealing, the transaction is voidable at the principal's option

agent's duties and obligations to employees

a. unless they are also agents, employees do not act in a fiduciary relationship to their employer

principal's liability for contracts part 1

a. when the agent had actual (express or implied) authority, the principal is liable on the contract b. when the agent did not have authority but the act was later ratified by the principal, the principal is liable on the contract c. when the purported agent had apparent authority to make the contract, the principal is liable on the contract d. the principal is not liable even if the purported agent represents that she acts for the principal if the act is unauthorized e. settlement before discovery- if an undisclosed principal settles with the agent after the contract is made, after the goods are delivered, and before discovery by the third party, the principal is not liable on the contract. the agent would be liable

Principal is liable for torts of an independent contractor when:

a. work that is inherently dangerous b. work that is illegal c. work that is inseparable from the principal's operation d. work that cannot be delegated

technically no (blank) is created by estoppel, but he principal is legally liable is if there were an agency relationship

agency relationship

a minor can act as a (blank) for an adult

agent

anyone who can act for him/herself can act through an (blank)

agent

by operation of law

an agency relationship can be imposed by operation of law in some unusual circumstances

special agent

an agent who conducts some specific transaction for the principal over a limited period of time. A special agent has less implied authority than a general agent.

general agent

an agent who is authorized to do a series of transactions for the principal for a continuing period of time. A general agent has much implied authority

the agent is referred to as (blank)

an attorney-in-fact, to distinguish them from a lawyer who is an attorney-at-law

If a principal/agent relationship exists, the agent will also be viewed as either...

an employee or an independent contractor

principal's liability for contracts part 2

f. settlement after discovery- principal liable g. notice to agent- notice to the agent or knowledge obtained by the agent within the scope of the agency binds the principal. the principal need not have knowledge to be held liable h. the principal is directly liable on all contracts he makes with other persons i. the principal is vicariously liable on contracts made by authorized acts of agents j. the principal can use the usual defenses to deny liability on a contract. the principal cannot use the defenses that are personal to the agent

true/false the principal is liable on contracts made by an employee or independent contractor unless that person is also an agent

false

true/false: (agency coupled with interest) the principal acting alone can terminate the agency and death, insanity, or bankruptcy of the principal terminates the agency

false

true/false: marriage itself creates an agency relationship

false. one of the spouses can act as an agent for the other spouse, but it is not because of the marriage that the agency exists

third party's rights against the principal

for torts of the agent/employee- the third party can sue the principal for torts of the agent if the agent/employee was acting in the scope and course of the agency when the tort happened (doctrine of respondeat superior)

It must be the principal, not the agent, that...

leads the third party to believe that an agency relationship exists

the word person is used in the (blank) sense, meaning

legal, a corp., partnership, or an individual can be a person and can act as a principal or an agent

agent's liability w/ partially disclosed principal

liable. once the identity of the principal is discovered, the third party could also sue the principal but cannot recover from both

only an employee who is an agent can...

make contracts with third parties for the principal (the employer)

principal's liability for crimes of the agent

not liable unless the principal actually participated in the crime

agent's liability- w/ disclosed principal

not liable- usual situation

the entire contract must be ratified by the principal. Partial ratification of the favorable parts and rejection of the unfavorable parts of the contract are (blank)

not permitted

agent's liability on contracts- general rule

not personally liable on contracts the agent makes for the principle

accomplishment of the purpose of the agency

when the purpose of the agency is done, the agency relationship terminates