AGENCY MINI REVIEW
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THE AGENCY RELATIONSHIP (AGENT + PRINCIPAL)
I. BASICS: consensual + contractual;
 **Contractual Capacity: Principal  MUST have capacity; Agent  only MINIMAL capacity (not contractual capacity)
 Formalities: Formalities are NOT required (don’t need writing) UNLESS equal dignities (when A enters into a land K
on behalf of P that must be in writing, then agency K must also be in writing, provided A can convey to 3 rd person)
II. FIDUCIARY DUTIES OF AGENT TO PRINCIPAL *****
 LOYALTY: ** A must put P’s interest first and exclusively – A can NOT benefit in a conflict of interest
 Opportunity Fact Pattern: If opportunity arises during agency, A must first offer it to P w/ FULL DISLCOSURE
of MATERIAL FACTS, and give P a REASOANBLE OPPORTUNITY to purchase – if P declines then A can do it
 Duty of Care: A must exercise REASONABLE CARE in performing their duties
 Duty of Obedience: A must obey REASONABLE INSTRUCTIONS
 Duty to Account for $ & Property Received: Any $ the A gets in course of duties is P’s not A’s
 Duty Not to Serve as Dual Agent: Can NOT serve as “dual” agent UNLESS A discloses it to both P’s and both agree
III. FIDUCIARY DUTIES OF PRINCIPAL TO AGENT
 Duty to Reimburse: P must reimburse for REASONABLY INCURRED expenses
 Duty to Indemnify: P must indemnify A for REAOSONABLY INCURRED LEGAL LIABILITIES
 Duty to Compensate: P must compensate A if EITHER 1) agreement expressly provides for it OR 2) agreement is
silent on it (“implied” rt to pay) BUT if expressly provides for NO pay, no duty to compensate (“gratuitous” agency)
 Duty to Cooperate: P can NOT INTERFERE w/ A’s duties AND must AFFRIMATIVELY AID where reasonably required
IV. REMEDIES FOR BREACH OF DUTY
 Basic Remedy: DAMAGES  put in position would have been in but for the breach
 Addt’l Remedies For Breach of Loyalty:
 A is NOT entitled to compensation during period of breach if breach was INTENTIONAL
 A CONSTRUCTIVE TRUST can be imposed to get “opportunity” property at the A’s cost
CONTRACT PROBLEMS (AGENT + PRINCIPAL + THIRD PARTY)
I. AUTHORITY: If there was actual, apparent, or ratified authority there is a K b/w P and 3P; otherwise K b/w A and 3P
 Actual: Authority “granted” by the P to the A (express or implied)
 Express  P used WORDS to grant authority (Precisely and NARROWLY construed)
 Mistake/Fraud NOT grounds to invalidate the authority
 Implied  Authority which A REASONABLY BELIEVES they have based on CONDUCT of P
 Sources: 1)Incidental to Express Authority; 2)Industry Custom A Knows; 3)Prior Acquiescence by P;
4)Emergency Business Measures (A has implied auth to act in reasonable prudent manner)
 Delegation: ** There is NOT implied authority for A to delegate to someone else UNLESS exception
applies (industry custom, prior dealings, emergency, routine functions – purely mechanical acts)
 A Represent More than 1 P in Same Transaction: ** Only allowed if A gives full disclosure to both P’s
and they both approve, otherwise can’t
 Termination  The INSTANT the agency terminates, A’s authority to act on behalf of P IMMEDIATELY ends
EVEN IF A does NOT KNOW it has ended
 Methods: 1)K term ending 2)Unilateral act of EITHER party 3)A breaches duty of LOYALTY 4)Material
Change in Circumstances 5) ***Death or Incapacity – INSTANTLY ends authority
 Exception: Agency Coupled w/ an Interest (when A has an interest it can’t be terminated unilaterally by
P – usually to repay debt to/borrow $ from A – A must have a present power to exercise rt to property)
 Apparent: No actual, but based on 3P REASONABLE BELIEF A has authority
 TEST: P “cloaked” A w/ APPEARANCE of actual authority + 3P REASOANBLY RELIED on the appearance
(Holding Out Test)
 ***Secret Limiting Instruction: A has actual authority but P gave a limiting instruction secretly to A. A goes
beyond that instruction  P bound b/c apparent - A beached duties of obey & loyalty so P can get damages
 ***Lingering Authority: Actual auth terminated but A continues to act on P’s behalf  P bound b/c apparent
 Proper Notice Rule: To avoid P must give TIMELY and PERSONAL notice to customer’s A has dealt w/
before + Publication for rest of world (newspaper, trade publication)
 ***Written Authority Ended: P authorizes A to enter into K by giving written authority but when agency ends
don’t get written authority back  P is bound b/c apparent authority
 Ratification: Authority granted AFTER K was attempted to be made w/o authority
 TEST: P KNOWS all mat’l facts + P expressly/impliedly ratifies + Ratification can NOT alter terms
 Not Effective: 3P DIES/incapacitated at time of ratify; 3P withdraws before ratify; P is undisclosed
AGENCY MINI REVIEW
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II. LIABILITY
 3P is Plaintiff:
 Principal  Liable if ANY kind of authority (actual, apparent, ratified)
 Agent  Liable if 1) No valid authority (breach of “implied warranty of authority) 2) P was partially disclosed
(identity concealed) OR 3)P was undisclosed (fact there was a P at all concealed)
 TIP: Don’t discuss type of P when discussing liability of P (irrelevant) only relevant for liability of A – P&A
both liable if there was valid authority + P was partially disclosed or undisclosed
 3P is Defendant:
 Disclosed P Only the P (NOT the A) can enforce the contract
 Partially Disclosed/Undisclosed P  EITHER P or A can enforce the contract (if A enforces it is for P) UNLESS
P fraudulently concealed his identity - then P can’t enforce OR could increased burden to 3P
TORT PROBLEMS (Respondeat Superior=Vicarious Liability)
I. RULE: Principal (ER) WILL be vicariously liable for torts committed by an agent (EE) IF Employer/Employee relationship
exists AND tort committed w/in the scope of employment
 Independent Kers: NOT variously liable for indep contractors UNLESS inherently dangerous activity
 Employer vicariously liable for torts by agent IF employer-employee + w/in scope of employment
II. EMPLOYER-EMPLOYEE RELATIONSHIP
 Factors: Employee v. Independent K
1. How person Designated
2. How Paid (Ind Ker  paid by hr or job; EE  salary)
3. Who’s Tools Used (Ind Ker  bring own tools; EE  use ER’s tools)
4. CONTROL OR RIGHT OF CONTROL (greater control more likely EE)
 Sub-Employees: ER NOT liable if EE hired them WITHOUT authority (are liable if had authority) UNLESS business
emergency
 Borrowed Employees: Original ER IS liable UNLESS there has been clear shift in CONTROL to the “borrowing” ER
 Independent Contractor: *** ER only liable if inherently dangerous activity (use poison, explosions, guns,
demolition, electricity, other things that become dang under the circ)
III. SCOPE OF EMPLOYMENT
 TEST: If any 1 factor missing then it is either a detour or a frolic
 Conduct “of the kind” EE hired to perform  reasonably similar job description
 Tort occurred “on the job”  time and space facts
 EE “intend to benefit” the ER  only has to be partial intent to benefit ER
 Conclusions:
 All 3 Met  Conduct w/in scope of employment and ER IS vicariously liable
 Slight Deviation  DETOUR and ER IS vicariously liable
 Large Deviation  FROLIC and ER IS NOT vicariously liable
 Intentional Torts/Force/Violence: **** ER NOT liable for intentional tort of EE involving force or violence (battery,
assault, violent trespass to land – damages land) UNLESS force is FORESEEABLE
 Foreseeable:
 Force is authorized – police, security guard, bouncers, football players
 Friction generated by type of employment – repo people, debt collection
 Sexual Assault Cases:*** ER can be liable if FORESEEABLE (V under sedation, diminished capacity – doctors,
therapists, clergy)
IV. MISCELLANEOUS
 Indemnification: If ER liable for EE’s tort, ER has right to indemnification from EE
 Release: If EE is released from liability, ER can NOT be vicariously liable
 Note: Distinguish b/w when ER vicariously liable and when ER liable for own negligence for negligent supervision or
negligent selection/hiring