AGENCY OUTLINE[1]

  1. INTRODUCTION. Agency is a consensual contractual relationship between the Principal or master and the agent or servant. An agent may be an employee. Partners are agents of each other and the Partnership. Corporate officers and Directors are agents of the corporation. Issues usually involve whether the Agent can bind the Principal in contract and tort.
  2. CREATION OF RELATIONSHIP
  3. Principal must have contractual capacity. Minors cannot be principals except for necessaries.
  4. Agent need only have minimal capacity, thus a minor can be an agent.
  5. Agents cannot represent both parties in a transactions nor may the agent act secretly on his own account.
  6. There are few formalities. No consideration is necessary. No writing is required. Relationship may be created by express agreement, which gives the agent actual authority to bind the principal; the principal may hold a person out as his agent to a third party, creating apparent authority; or the principal may agree to be bound after the fact, which is called ratification.
  7. AGENT MAY BIND PRINCIPAL IN CONTRACT
  8. If the agent had actual authority the principal will be bound to the contract with a third party even if the principal and the agency relationship is unknown to the third party. The agent cannot be held liable for breach of the principal if the agent acted within the scope of his authority.
  9. Express authority is that conferred by the agreement, whether written or oral.
  10. Implied authority is that the agent reasonably believes he has as a result of principal’s actions. It can be implied from a grant of express authority, be implied from custom and usage, it can be implied by the principal’s acquiescence to series of unauthorized acts, because of emergency.
  11. Termination of actual authority
  12. Lapse of specified time, or if no time specified a reasonable time.
  13. By happening of a specified event.
  14. By change of circumstances, such as destruction of the subject matter of the agency, change in business conditions, change in laws, insolvency of principal or agent, unilateral act by either party.
  15. An agency is revocable at the will of either party unless it is coupled with an interest or is given as security.
  16. Apparent authority. Where the principal holds out another as possessing authority, inducing a third party to reasonably believe authority exists. Based on the reasonable belief of the third party.
  17. Lingering apparent authority is when the agent had actual authority, that authority is terminated, and a third party has a history of dealing with the agent while she had apparent authority. Agent has actual authority until principal notifies third party. Death or incapacity of the principal terminates all authority without notice to agent or third party.
  18. Ratification occurs when the agent had no authority, actual or apparent, but the principal approves of the agent’s actions after the fact. Principal will be bound to the contract. The agent will be relieved of liability for acting outside the scope of his authority. Principal must know all the facts, must accept the entire transaction, have capacity. The ratification may be expressed or be implied by acceptance of the benefits of the contract or silence by principal. Ratification can only be done by a disclosed principal.
  19. LIABILITIES OF PARTIES
  20. If agent had authority principal is bound.
  21. If principal is disclosed agent is usually not bound unless
  22. Parties intended agent be bound
  23. Only principal may enforce contract.
  24. A partially disclosed principal is one whose existence but not identity is known. An undisclosed principal whose existence is unknown to third parties.
  25. Both agent and principal are bound if principal is partially disclosed.
  26. Both agent and principal are bound if principal is undisclosed.
  27. If principal is disclosed only principal, not agent, can enforce the contract.
  28. If principal is partially disclosed or undisclosed principal or agent may enforce contract.
  29. Principal may not enforce contract if agent, by affirmative misrepresentation, has fraudulent concealed the identity of the principal.
  30. DUTIES OF AGENT TO PRINCIPAL.
  31. Duty of loyalty. Fiduciary duty of agent to principal is undivided loyalty. Self-dealing or taking secret profits or representing two principals with adverse interests is a breach.
  32. Duty of obedience. An agent must obey all reasonable directions of principal.
  33. Duty of reasonable care. Includes duty to notify principal of information relating to the agency. Knowledge is imputed to principal.
  34. Principal has remedies:
  35. Damages for breach of contract, damages in tort.
  36. Action for secret profits.
  37. Accounting. An action in equity.
  38. Withhold compensation for intentional tort or intentional breach of fiduciary duty.
  39. DUTIES OF SUBAGENT TO PRINCIPAL AND AGENT.
  40. Powers of agent may include appointment of subagent. Subagent owes same duties to principal as agent.
  41. Agent also liable to principal for subagent’s breach of duties.
  42. If subagent was not authorized subagent has no liability to principal.
  43. DUTIES OF PRINCIPAL TO AGENT
  44. Compensation. No duty to compensate subagent.
  45. Reimbursement to agent and subagent.
  46. Duty to cooperate.
  47. Agent’s remedies
  48. Breach
  49. Agent’s lien
  50. TORT LIABILITY OF PRINCIPAL
  51. Based on respondeat superior. Must be a employer/employee relationship and servant must be acting within scope of employment. Liability is joint and several. Master-employer may also be directly liable for negligent hiring, training and supervision.
  52. Scope of employment. Act must be within the duties of the servant. Three tests: whether conduct was of the same general nature as that for which the employee was hired; whether the conduct was substantially removed from authorized time and space limits of the employment; whether the conduct was actuated by purpose to serve master.
  53. Small deviations are detours and fall within scope of employment. Major deviations are frolics which are outside scope of employment. Employee may return to the master’s business after frolic.
  54. Serious criminal acts are usually outside the scope of employment.
  55. Intentional torts are usually outside scope of employment unless it furthers thepurposes of the principal.
  56. Principal not responsible for torts of independent contractor.
  57. Most important factor is right to control the servant.
  58. Agent has distinct business
  59. Where great skill is required of agent more likely IC
  60. If agent uses own tools and facilities
  61. If agent is paid on a per job basis.
  62. But principal is liable for torts of IC if it is a nondelegable duty. Or of it is an inherently dangerous activity such as blowing things up.
  63. Principal liable for torts of authorized subagent.

[1] Copyright 2007 Daniel Wilson. Unauthorized use is prohibited and will be reported to the appropriate licensing authorities. This material is drawn from released Colorado bar exam essay questions.