Agency Law- Comm Law II (Notes 8/27)

agency definition

A consensual fiduciary relationship in which one person (agent) consents to act on behalf of another and under control of another

elements of agency

consent, control, and benefit. these are known as the 3 elements.

fiduciary duties with agency

loyalty, obedience, care, good faith

specific note on the element of control

doesn’t mean micromanagement- it just means the agent is being told the limits of their abilities by the principal.

agency purpose

can be done for anything except voting in a government election or executing a will.

Agency formation by agreement of parties

an actual physical agreement creates actual authority- both express and implied.

express authority

exists when both parties consent to the relationship

implied authority

the authority to take actions reasonably necessary to carry out the express tasks.

how is express authority determined in courts?

reasonable person test- would a RP in the role of the agent think the principal authorized the agent to act?

Examples: real estate brokers, employment contracts

implied authority requirements

1. the act is reasonable necessary to accomplish the objectives set out by the express authority

2. and it is closely connected to the express authority

types of implied authority

1. usual: routinely exercised with the principal’s knowledge and without their objection

2. customary: authority is typically held by someone in a similar position to the agent

3. arising from a business relationship

Apparent Authority/Agency by Estoppel definition

the principal’s conduct leads a 3rd party to reasonable believe that someone is authorized to act on their behalf.

key element of apparent authority

1. representation by principal (includes silence by the p, an ongoing relationship after the termination of an agent, and the job/position of the principal). Based on P’s conduct.

difference between objective tests for actual and apparent authority

• whose perception are we measuring?

  • Actual is agent, apparent is the 3rd party.

agency by ratification

When P affirms or accepts an unauthorized act done by someone purporting to be their agent.

key requirements of ag by ratification

1. the person purported to act as an agent

2. P had knowledge of all material facts

3. P accepted the entire transaction

4. P has the capacity to authorize the act both at the time of it happening and at the time of ratification

5. ratification occurs before the 3rd party withdraws

how does agency by ratification occur?

1. Express: P says yes to the deal

2. Implied: P’s behavior says yes to the deal

Both give the agent actual authority.

Agency by operation of law

in certain situations, law itself creates an agency-like authority regardless of actual agreement with a principal because public policy or necessity demands it

key categories of agency by operation of law

1. agency by necessity (emergency authority)

2. spousal or family necessity doctrine

duties of the agent to the principal

1. duty of loyalty: must act in P’s best interest

2. duty of obedience: must do job properly

3. duty of care and diligence: exercise a reasonable amount of care. There’s a higher standard here for professionals such as lawyers, accountants, or doctors.

4. duty to account (sometimes): with money assets, all money must be accounted for.

5. duty to notify (disclosure): must keep P reasonably informed

6. duty of confidentiality

duties of the principal to the agent

1. duty to compensate

2. duty to reimburse and indemnify (indemnify means if agent is sued, P has to reimburse)

3. duty to cooperate

4. duty regarding safe conditions- will discuss more under employment law

5. duty of good faith and fair dealing (treat agents with respect)

remedies for breach of agent duties

1. damages (most common)

2. Accounting

3. Disgorgement of profits

4. rescission of contract

5. termination of agency

6. punitive damages (for particularly egregious conduct)

modes of termination of an agency relationship

1. mutual agreement

2. revocation by the P

3. renunciation by the agent

4. lapse in time

termination of agency relationship by operations of law

1. death

2. incapacitated principal

3. bankruptcy

4. destruction of subject matter

5. change in law

critical problem with termination

apparent authority can survive actual termination!

when is an agent liable?

when there is a partially disclosed or undisclosed principal.

When is a principal liable?

when the agent has fully disclosed them, they are the only one liable. in partially disclosed or undisclosed, they are still liable, but the agent shares liability. they are not liable when the agent is acting without authority or in fraud/misrepresentation.