Agency Law Practice Flashcards

Flashcards covering the fundamentals of Agency Law, including the creation of agency relationships, types of authority, liability in contract and tort, and fiduciary duties.

Agency Relationship

A relationship created to extend a principal’s economic reach and utilize an agent's expertise, where the principal can be held liable for the agent's acts in contract or tort.

Assent

Both parties must manifest agreement to work with one another; it can be informal and is what courts look to when a principal tries to disclaim the relationship.

Benefit

A component of creating an agency relationship where the agent agrees to work for the principal’s advantage.

Control

A component of an agency relationship where the agent agrees to work subject to the principal’s direction, which can be slight but must be present.

Principal

Any legal person or entity with legal capacity, such as a corporation, LLC, or partnership, that exerts control over an agent.

Legal Capacity

The requirement to be a principal, which excludes minors, intoxicated individuals, the mentally ill, and unincorporated associations.

Unincorporated Associations

Groups such as book clubs or people who like to hang out together that lack the legal capacity to be a principal.

Minimal Capacity

The requirement for an agent, meaning they must be able to consent to the relationship, perform tasks for the principal, and be subject to the principal's control.

Employee-type Agent

An agent dominated or controlled intensely by the principal, where the employer has the right to control the physical conduct of the work.

Independent Contractor

An agent who maintains a high level of independence, is usually paid a fixed fee, owns their own tools, and whose physical conduct of work is not controlled by the principal.

Unilateral Termination

The ability for either the principal or the agent to end the agency relationship without the other party's consent.

Actual Authority

Communication between the principal and the agent that authorizes the agent to enter into a contract.

Actual Express Authority

Authority created when a principal uses written or spoken words to convey authority to the agent.

Requisite Intent

The requirement that an agent subjectively thinks they are doing what the principal wanted and that belief is objectively reasonable.

Actual Implied Authority

Authority created through written or spoken words or other conduct conveying authority to take steps necessary to achieve the principal's objectives.

General Business Custom

Common trade usage or established practices between an agent and principal used to determine the scope of actual implied authority.

Apparent Authority

Authority created by communication between a principal and a third party that causes the third party to reasonably believe the principal consents to the agent's acts.

Revocation

The necessary step a principal must take to end apparent authority; otherwise, the principal remains liable to the third party.

Ratification

A communication between the principal and a third party or agent after a contract is made, relaying knowledge of the terms and acceptance of the benefits.

Disclosed Principal

A situation where the third party knows the agent is acting on behalf of a principal and knows exactly who that principal is.

Partially Disclosed Principal

A situation where the third party knows the agent is acting for someone but does not know the identity of the principal.

Undisclosed Principal

A situation where the third party does not know the agent is working for anyone else.

Respondeat Superior

The legal doctrine under which a principal is liable to a third party for the tortious acts of their agent.

Employer-Employee Relationship (Tort)

The high degree of control required for a principal to be liable for an agent's torts, generally excluding independent contractors.

Inherently Dangerous Task

An exception for independent contractors where the principal remains liable for torts because of the nature of the work.

Negligent Hiring

An exception where a principal is liable for an independent contractor's torts if the principal was careless in selecting the contractor.

Scope of Employment

Actions taken by an agent that intended to benefit the principal, were the kind they were hired to perform, and occurred on the job.

Frolic

A significant deviation from an assigned work path that falls outside the scope of employment.

Detour

A minor deviation from an assigned work path that remains within the scope of employment.

Intentional Torts

Acts generally outside the scope of employment unless they occur within job limits, are motivated to benefit the principal, and are the kind of act the agent was hired to do.

Fiduciary Duties

The obligations agents owe to their principals, regardless of whether the agent is paid for their services.

Duty of Reasonable Care

The agent's obligation to perform their tasks with the appropriate level of diligence and competence.

Duty of Obedience

The agent's obligation to follow the reasonable instructions provided by the principal.

Duty of Loyalty

The agent's obligation to act solely in the best interest of the principal and avoid conflicts of interest.

Usurping a Business Opportunity

A breach of the duty of loyalty where an agent takes a business chance for themselves instead of disclosing it to the principal.

Secret Profits

Profits an agent earns through their work for the principal that they do not share with or disclose to the principal.

Kickback

An example of a secret profit, such as a purchasing agent accepting a 'consulting fee' from a supplier.

Moonlighting

Competing against the principal or working for competitors while still serving as an agent, which is a breach of loyalty.

Termination of Authority by Death (Agent)

The rule that actual express authority terminates immediately upon the death of the agent.

Termination of Authority by Death (Principal)

The rule that an agency relationship is over only when the agent has actual knowledge of the principal's death.

Contract Liability: Disclosed Principal

In this scenario, either the principal or the third party can be sued for breach of contract.

Contract Liability: Partially Disclosed Principal

In this scenario, the third party, the principal, or the agent can be sued.

Contract Liability: Undisclosed Principal

In this scenario, only the third party or the agent can be sued; the third party cannot sue the principal.

Agent

A person or legal entity that acts on behalf of a principal and has minimal capacity.

Third-Party victim

A contractual third party or a tort victim who initiates a lawsuit due to a mess-up by an agent.

Economic Reach

One of the primary reasons to create an agency relationship, allowing a principal to get 'more bodies out there' doing things for them.

Heavy-handed Principal

A principal that exerts high levels of control, such as an employer, leading to higher liability.

Chill Principal

A principal that does not exert significant control, leading to less liability for the agent's actions.

Communication (Actual Authority)

The interaction specifically between a principal and an agent that establishes the agent's power to bind the principal.

Communication (Apparent Authority)

The interaction specifically between a principal and a third party that creates a reasonable belief of agency.