Chapter 16 Business Law "Agency Law"

Principal

a person who has someone else acting for him

Agent

a person who acts for someone else

1. a principal

2. an agent

3. must mutually consent that the agent will act on behalf of the principal and

4. be subject to the principals control

5. thereby creating a fiduciary relationship

to create an agency relationship there must be:

Fiduciary Relationship

a trustee acts for the benefit of the beneficiary always putting the needs of the beneficiary above his own.

Yes

Do agents have fiduciary duty to their principals?

1. A Written agreement

2. A Formal agreement

3. Compensation

What elements are not required for a written agreement?

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.

Duty of Loyalty

an agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency relationship

1. Duty of Loyalty

2. Duty to obey Instructions

3. Duty of Care

4. Duty to Provide Information

What are the four duties that agents owe to principals?

No but they are allowed to if the Principal consents

Are agents allowed to receive outside benefits that the principal is an aware of?

Confidential information

agents must keep _________ private even if the fiduciary relationship has been terminated

False. But can when the relationship ends

True/False Agents are allowed to compete with their principal in any matter within the scope of the agency business

True

True/False Unless otherwise agreed, an agent may not act for two principals whose interests conflict

True.

Example: Matt Damon hires script reader she cannot sell him a script she wrote herself without first telling him that she wrote it,

True/False If a principal hires an agent to arrange a transaction, the agent may not become a party to the transaction without the principal's permission.

No

Is an agent allowed to engage in inappropriate behavior that reflects badly on the principal even if they are off duty?

1. No Outside benefits

2. Must keep Info Confidential

3. Must not Compete with Principal

4. No conflict of interest between 2 principals

5. No dealing with the principal behind the scenes

6. Must act appropriately

What are the components of Duty of Loyalty? 6 things

False

True/ False an agent must obey her principals instructions even if the principal directs her to behave illegally or unethically

Yes

Is an agent with special skills held to a higher standard because she is expected to use those skills?

Gratuitous Agent

someone who lacks the skills that would make them be held to a higher standard when asked to due a favor. Are not held liable unless they commit gross negligence not ordinary negligence

Duty to Provide Information

an agent has a duty to provide the principal with all of the information in her possession that she has a reason to believe the principal wants to know. Also has a duty to provide accurate information.

1. Damages

2. Profits

3. Rescind

What are the three remedies for a principal if an agent breaches a duty?

1. duty to compensate as provided by the agreement

2. Duty to reimburse for reasonable expenses

3. Duty to cooperate

What are the duties of Principals to agents?

1. Expenses incurred by an agent carrying out the principals wishes

2. Expenses resulting from a tort brought by a third party and the agent did not know that he was committing a tort

3. Expenses of the agent from the liability she incurs by entering into a contract with a third party.

What are the three categories for reimbursable expenses?

1. Principal must provide an opportunity to work

2. Principal cannot unreasonably interfere with the agents ability to accomplish the task

3. Principal must perform her part of the contract

What are the three ways that a principal fulfills his duty to cooperate?

1. Term agreement

2. Agency at will (both can terminate)

3. Wrongful termination

What are the three ways to terminate an agency agreement?

True

True/False Gratuitous agents has both the power and the and the right to walk out of an agreement

1. If agent/principal fails to keep her license

2. If one (usually the Principal) bankrupts during agreement and it affects their ability to perform

3. One of them dies or becomes mentally incapacitated

4. If an agent violates her duty of loyalty

What are 4 situations in which a party can get out of an agency agreement for no longer being able to perform?

1. Change of law

2. Loss or destruction of the subject matter

What two changes in circumstances allow for an agency agreement to terminate immediately?

1. The agent had authority

OR

2. the principal ratifies the acts of the agent

The principal is liable for the acts of the agent if...

Express Authority

words or conduct that, when reasonably interpreted, cause the agent to believe the principal desires her to act on the principals account.

Implied Authority

unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it

Apparent Authority

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 to reasonably believe that the agent is authorized

Ratification

if a person accepts the benefit of an unauthorized transaction or fails to to repudiate it, then he is as bound as if he had originally authorized it. he has _______ the act

Subagent

someone who is hired by the agent. Example: Restaurant manager hires chefs and waiters

Intermediary Agent

someone who hires subagents

Fully Disclosed, Fully Disclosed Principal

A is ________ _________ if the third party knows of his existence and identity. an agent is not liable for any contracts she makes on behalf of a _______ ________ ______

Unidentified Principal

In the case of the _______ ________ the third party can recover from either the agent or the principal. Third party knew of existence but not his identity

Undisclosed Principal

Third party did not know of his existence. Can recover from either the agent or the principal

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

Exception to the rule on undisclosed recipients: a third party is not bound to the contract with an undisclosed principal if....

False

True/False an employer is not liable for a tort committed by its employee acting within the scope of employment or acting with authority

Respondeat Superior

latin for "let the master answer" the employer is liable for all misbehavior of the employee because they have control over them so they should be able to prevent them from misbehaving

No sir

Are principals liable for torts committed by an independent contractor?

Exception to Employers not being liable for the actions of independent contractors.

principal is liable for the torts of an independent contractor if the principal has been negligent in hiring or supervising her

True

True/ False principals are only liable for torts that an employee commits within the scope of employment

Authorization

an act is within the scope of employment, even if expressly forbidden, if it is of the same general nature. Employee Speeding while on the job.

Abandonment

the principal is liable for the actions of the employee that occur at work but not for the actions that transpire when they are not at work

1. the employee intended to serve some purpose of the employer

OR

2. the employer was negligent in hiring or supervising this employee

A principal is not liable for the intentional torts of an employee unless...

False

True/False a principal is not liable for an employee who commits a nonphysical tort when the employee acted with express, implied, or apparent authority

True

True or False Agents are always liable for their own torts