Agency Law: Key Concepts, Types, and Duties in Business

Nature of the agency relationship.

A principal uses an agent to act on the principal's behalf in dealings with a third party.

What three parties are involved in a basic agency relationship.

The principal, the agent, and the third party.

What is the usual purpose of an agency relationship.

To allow the principal to create a contract with a third party through the agent.

When does an agent bind the principal.

When the agent acts within the scope of the agent's authority.

What is the agreement between the principal and agent.

A contract.

How can agency be created by express agreement.

By an oral or written agreement appointing the agent.

Why is a real estate agent often not an agent in the strict legal sense.

Because the real estate agent often brings parties together without authority to bind the principal in contract.

What is agency by conduct.

An agency relationship inferred from the principal's actions.

What is agency by estoppel.

A situation where the principal creates or allows an appearance of authority and cannot later deny it if a third party relied on it.

What is apparent authority.

Authority the principal appears to give the agent through words or conduct.

What is agency by operation of law.

Agency that arises from necessity in an emergency when the principal cannot be contacted.

What is an agent of necessity.

A person who may act for another in an emergency to protect the other's interests when communication is impossible.

What common example is used for an agent of necessity.

A ship-master acting to preserve the ship or cargo in an emergency.

What general relationship usually exists before agency of necessity is recognized.

A pre-existing legal relationship between the principal and the agent of necessity.

What duty of good faith does the principal owe the agent.

The principal must deal with the agent in good faith.

What duty of good faith does the agent owe the principal.

The agent must deal with the principal in good faith and loyalty.

What payment duty does the principal owe the agent.

The principal must pay the agreed fee or a reasonable fee.

What indemnity duty does the principal owe the agent.

The principal must indemnify the agent for reasonable expenses properly incurred.

When was an agent entitled to payment at common law.

Immediately upon performance of the service.

What is the agent's duty regarding instructions.

The agent must obey all lawful instructions of the principal.

What is the agent's duty regarding confidentiality.

The agent must keep the principal's information confidential.

What is the agent's duty regarding communication.

The agent must keep in contact with the principal and report important developments.

What does it mean that knowledge of the agent is imputed to the principal.

Notice given to the agent is treated as notice to the principal.

What standard of care must an agent meet.

A standard commensurate with the skills the agent possesses.

What happens if an agent breaches the required standard of care.

The agent is liable to the principal for resulting loss.

What is the agent's duty when receiving money or goods for the principal.

The agent must disclose, account for, and keep them separate.

How should an agent hold the principal's money.

In a trust account or separate account.

What is the agent's duty of utmost good faith.

The agent must place the principal's interests above the agent's own interests.

Can an agent act for both principal and third party at the same time.

Only with express permission.

Can an agent normally delegate duties to a subagent.

No, not without the principal's express or implied authorization.

Why is personal performance normally required from the agent.

Because the principal is entitled to rely on the agent's own skill and judgment.

What happens if an agent makes a secret profit.

The principal can recover the secret profit from the agent.

What happens if an agent takes a benefit from the third party without disclosure.

The agent may lose entitlement to commission from the principal.

What is ratification in agency law.

The principal's later approval of an act done without actual authority.

When must ratification occur.

Within a reasonable time.

Can ratification be implied.

Yes, ratification can be express or implied.

What may imply ratification when an agent exceeded authority.

The principal's failure to promptly repudiate the transaction.

When does ratification take effect.

From the time the agent originally entered the agreement with the third party.

What is disclosed agency.

An agency relationship where the agent reveals that the agent acts for a principal.

What is the effect of disclosed agency on the contract.

The contract binds the principal and the third party.

How does an agent sign in a disclosed agency relationship.

By signing the principal's name and adding the agent's own name as agent or using per procurationem.

What does per procurationem mean.

On behalf of another.

In disclosed agency, does the third party usually have a remedy against the agent.

No.

In disclosed agency, does the agent gain rights under the principal's contract.

No, the agent generally has no right to the benefit of the contract.

What is an unnamed principal.

A principal whose existence is disclosed but whose identity is not.

What is undisclosed agency.

An agency relationship where the agent does not disclose that the agent is acting for a principal.

What may the third party assume in undisclosed agency.

That the agent is the principal.

What liability does the agent face in undisclosed agency.

The agent is liable to perform and liable for damages for breach.

Can an agent enforce a contract in undisclosed agency.

Yes, the agent can enforce the contract against the third party.

What is breach of warranty of authority.

A false representation by a supposed agent that authority exists when it does not.

When can a third party sue for breach of warranty of authority.

When the alleged agent lacked authority but claimed to have it.

What additional claim may arise if the agent intentionally lies about authority.

Fraud.

What happens if an agent lies about the existence or identity of the principal.

The third party may sue the agent for damages and possibly fraud.

Can an undisclosed principal later enforce the contract.

Yes, the principal may come forward and enforce it.

Can the third party sue the undisclosed principal once discovered.

Yes.

Can the third party recover from both principal and agent on the same contract.

No, the third party may sue either principal or agent, but not both.

When is a principal liable in tort for an agent's acts.

When the tortious act is committed while carrying out the duties of the agency agreement.

What tort example is specifically mentioned in the materials.

Fraudulent misrepresentation.

Who is liable when an agent commits fraudulent misrepresentation inducing a contract.

Both the principal and the agent.

What is the effect of innocent misrepresentation by an agent.

The third party may avoid the contract.

How can agency terminate.

Expressly or by implication.

Can agency terminate with notice.

Yes.

What happens to an agency for a particular act once the act is completed.

It automatically expires.

How can incapacity affect agency.

Incapacity can terminate agency, except where the minor issue stated in the text applies.

What is the effect of the principal's bankruptcy on agency.

It terminates the agency agreement.

What happens if an agent contracts after the principal's bankruptcy.

The agent may be liable to the third party for breach of warranty of authority.

What must a principal do when an ongoing agency relationship ends.

Notify relevant third parties of the termination.

What is the effect of failing to notify third parties that agency has ended.

The principal may remain liable because the third party can rely on apparent authority.

What is the agent's liability if the agent acts after termination and causes loss.

The agent may be liable to the principal.

What did Freeman & Lockyer v Buckhurst Park Properties establish.

That ostensible authority arises from a representation by the principal to the third party.

What is the legal effect of ostensible authority in Freeman & Lockyer.

The principal is estopped from denying the contract.

Why do third parties need the doctrine of apparent authority.

Because they usually cannot directly know the terms of the private agency agreement.

Why can a principal be bound even when actual authority was withheld.

Because the principal's conduct may still create apparent authority toward the third party.

What must a principal do if the principal limits an agent's usual authority.

Give notice of the limit to third parties who deal with the agent.

What is the effect of a retailer's usual position as agent regarding sales.

A retailer is normally seen as having implied authority to sell goods in the retailer's possession.

What happens if an agent exceeds actual authority but acts within apparent authority.

The principal is bound to the third party, and the agent may be liable to the principal.

Why should a buyer or lessee be careful when speaking to the other side's agent.

Because the agent's duty is to the seller or lessor, not to the buyer or lessee.

What is the core fiduciary idea in agency law.

The agent must act loyally and in the best interests of the principal.