Agency

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apgiering
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93835
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Agency
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2011-07-13 00:05:02
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NY Bar Exam
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NY Bar Exam Flashcards
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  1. Define agency
    The legal relationship whereby an agent is authorized to represent a principal in business dealings with third parties.
  2. Does a principal need contractual capacity?
    Yes. Thus, a minor's appoitnment of an agent is voidable (except in certain cases involving minors in the entertainment industry), and incompetents and unincorporated organizations cannot be principals.

    NOTE: A principal must have contractual capacity but an agent need not. An agent only needs to have minimal mental capacity.
  3. Can an agent be disqualified?
    Yes. An agent can be disqualified for representing both parties, self-dealing, or failing to have a required license.
  4. Is consent of both parties required to create an agency relationship?
    Yes.
  5. Is consideration required to create an agency relationship?
    No consideration is necessary.
  6. Is a writing requires to create an agency relationship?
    Generally no writing is required except where the contract the agent is to enter into on the principal's behalf is for an interest in land for more than one year (statute of frauds).
  7. What are the modes of creating agency relationship?
    The agency relationship may be created by an act of the parties or by operation of law.
  8. How do you create an agency relationship by act of parties?
    Parties may create an agency by agreement between the principal and agent (i.e., apparent or inherent authority), or ratification.
  9. How do you create an agency by operation of law?
    1) Estoppel - requires third-party reliance on the principal's communication.

    2) Statute - statutes creating agencies are usually designed to accomplish a limited purpose.
  10. What are the three forms of authority by which a principal can be bound on an agent's contract?
    • Actual authority
    • Apparent authority
    • Inherent authority
  11. Define actual authority.
    Authority that the agent reasonably believed she possesses based on the principal's dealings with her. It may be express or implied.
  12. What is express authority?
    That which is actually contained within the four corners of the agency agreement. It is effective even if it was granted mistakenly or because of misrepresentation.
  13. What is implied authority?
    Implied authority is that which the agent reasonably believes she has as a result of the principal's actions.
  14. What types of authority does implied authority include?
    • Incidental to express authority;
    • Arising out of custom known to the agent;
    • Resulting from prior acquiescence by the principal;
    • To take emergency measures;
    • To agree to a settlement during litigation;
    • To delegate authority in cases of ministerial acts, where circumstances require, where performance is impossible without delegation, or where delegation is customary;
    • To pay for and accept delivery of goods where there is authority to purchase;
    • To give general warranties as to fitness and quality and grant customary covenants to land sales, collect payment, and deliver where there is authority to sell; and
    • To manage investments in accordance with the "prudent investor" standard.
  15. How can termination of actual authority occur?
    • Lapse of a specified or reasonable time;
    • The happening of a specified event;
    • A change in circumstances, including destruction of the subject matter of the authority, insolvency of the agent or principal, and a change in the law or business conditions;
    • Agent's breach of fiduciary duty;
    • Either party's unilateral termination (although such termination may constitute a breach of contract); or
    • Operation of law (e.g., death or loss of capacity of either party except where a durable power of attorney--written authority that says it will not terminate on the principal's disability--is present).
  16. Are some agencies irrevocable?
    Neither an agency coupled with an interest nor a power given as security may be unilaterally terminated by the principal if the agency was given to protect the agent's (or a third party's) rights and it is supported by consideration. Neither will such agencies be terminated by operation of law.
  17. What is the basic theory of apparent authority?
    Apparent authority arises from reasonable beliefs of third parties. If a principal directly or indirectly holds out another as possessing certain authority, thereby inducing reasonable reliance by others on that authority, the person so held out has apparent authority, even though as between himself and the principal such authority has not been granted.
  18. Will the principal be liable for the actions of an imposter appearing to have authority?
    Yes, if the principal negligently permitted the imposter to be in a position to appear to have actual authority.
  19. Can an agent have apparent authority after his actual authority has terminated?
    Yes, he will have apparent authority to act on the principal's behalf as to all third parties with whom the principal knows he dealt unless and until the third parties receive either actual or constructive notice of the termination.
  20. What if the agent's actual authority has been terminated but there is a writing manifesting authority?
    The agent's apparent authority is not considered to be terminated.
  21. What is the effect of death or incompetency of the principal on the authority of the agent?
    It terminates all authority of the agent without notice to either the agent or third parties.

    EXCEPTION: For a bank honoring transactions for a customer's account until it learns of the customer's death or incompetency and has a reasonable time to act.
  22. What are the three situations where an agent exceeds his authority, yet the principal is still bound?
    • Prior Acts
    • Position
    • Secret Limiting Instructions
  23. Define prior acts.
    Where the principal previously permitted the agent to exceed his authority and knows that the third party is aware of this, the principal is bound by the agent's unauthorized act.
  24. Define position.
    Where the agent is in a position that customarily carries with it certain responsibilities, the principal is liable for the agent's acts that come within these customary responsibilities.
  25. Define secret limiting instructions.
    Where the principal secretely limits the agent's actual authority, and the agent acts beyond that limitation, the principal will be bound by the agent's act.
  26. Define inherent authority.
    Inherent authority results in the principal's being bound even though the agent had no actual authority to perform the particular act. This occurs because courts wish to protect innocent third parties rather than a principal who gave some actual authority to the agent.
  27. What are some examples of inherent authority?
    • Respondeat Superior
    • Conduct Similar to that Authorized
    • Improper Disposition of Goods
  28. Under the doctrine of respondeat sueprior, is the principal held liable for the torts of her employee committed within the scope of employment?
    Yes.
  29. Where an agent exceeds his actual authority, but the conduct is similar to acts authorized, will the principal be held liable?
    Yes.
  30. Will an agent be held liable for the disposition of her goods by an agent possessing them?
    Yes, if the agent was given some indicia of ownership, or if the goods disposed of were sold by an agent who is a dealer in the particular goods.
  31. How can an agency relationship be created by ratification?
    An agency relationship is created by ratification when an "agent" purports to act on behalf of a "principal" without any authority at all, but the "principal" subsequently validates the act and becomes bound.
  32. Does ratification give the transaction retroactive effect?
    Yes, unless the "principal" lacked contractual capacity at the time the "agent" entered into the unauthorized transaction (in which case the "principal" is deemed to have "adopted" the contract), or unless retroactivity would interfere with intervening third-party rights.
  33. Upon ratification, is the "agent" relieved of liability for breach of his implied warranty of authority?
    Yes.
  34. What are the prerequisites of ratification?
    For ratification to occur, the "principal" must know (or have reason to know) all material facts, accept the entire transaction, and have capacity (be competent and of legal age).
  35. Does ratification require consideration?
    No, it is a unilateral act of the "principal."
  36. What are methods of ratifying?
    Ratifying may be express or implied through the conduct of the "principal." Such conduct would include acceptance of the transaction's benefits, silence if there is a duty to disaffirm, and suing on the transaction.
  37. What may be ratified?
    Generally, a "principal" may ratify anything she could legally do, unless performance was illegal at the time of ratification, the third party has withdrawn, or there has been a material change in circumstances.
  38. May an undisclosed "principal" ratify?
    No.
  39. If there is a ratification, may an "agent" treat the contract as his own?
    No.
  40. Is the principal liable to the third party on a contract entered into by her agent?
    Yes, if the agent had valid authority to act.
  41. Is the agent liable to a third party?
    The agent's liability depends on whether the principal was disclosed. If disclosed, the agent is not liable. If undisclosed or partially-disclosed, the agent is liable.
  42. What is a disclosed principal?
    Existence and identity are known to the third party.
  43. Is a disclosed principal liable on the contract?
    Yes.
  44. If there is a disclosed principal, is an agent liable on the contract?
    Generally, no.

    • EXCEPTIONS:
    • An agent is liable if the parties to the contract intended the agent to be liable; and an agent may be liable to the third party under his implied warranty that a principal with contractual capacity exists, and that he, the agent, had authority to contract for the principal.
  45. What is a partially disclosed principal?
    One whose existence is known but whose identity is withheld.
  46. Who is liable to a third party if there is a partially disclosed principal?
    Both the principal and the agent are liable. The third party may file suit against the principal and agent, and a judgment against either one is not a bar to suit against the other except to the extent the judgment has been satisfied.

    NOTE: In New York, an undisclosed principal is not liable on a negotiable instrument.
  47. When the principal is disclosed, who can enforce the contract and hold the third party liable?
    Either the principal or agent may enforce the contract and hold the third party liable.

    NOTE: If the agent enforces the contract, the principal is entitled to all of the rights and benefits thereunder.
  48. When may the principal not enforce the contract?
    If there has been an affirmative fraudulent misrepresentation of the principal's identity, or if there is an unforseen increased burden to the third party due to the fact that performance is owed to the principal and not the agent.
  49. What duties does the agent owe the principal?
    Any express contractual duties, fiduciary duties of loyalty, obedience to reasonable directions, and reasonable care under the circumstances (including duty to disclose all relevant information).

    NOTE: Compensation is a proper circumstance to consider when determining the measure of "reasonableness."
  50. What are the principal's remedies against the agent?
    Contract actions (against compensated agents), tort actions, actions for secret profits, equitable actions for an accounting, and withholding of compensation for intentional torts or intentional breaches of the fiduciary duty.
  51. Does an agent have absolute liability to the principal for breaches by a subagent?
    Yes.
  52. What duties does the subagent owe the principal?
    If appointed with proper authorities, the same duties as the agent owes the principal. If the subagent is unauthorized, he owes no duties to the princiapl, but does owe duties to the agent.
  53. What duties does the principal owe the agent?
    All of the duties imposed by their contract, reasonable compensation, and reimbursement for expenses.The principal also generally should cooperate with the agent and not itnerfere with the agent's performance.
  54. If the agency agreement is silent regarding compensation, what compensation is the agent entitled to?
    Reasonable compensation.
  55. Does the principal have any duty to compensate a subagent?
    No, even if the agent had authority to hire the subagent.
  56. What are the agent's remedies?
    A compensated agent has the usual contract remedies against the principal (but has a duty to mitigate damages). Also, an agent has a right to a possessory lien for any money due from the principal.
  57. What does an exclusive contract entitle a real estate broker to?
    To get his commission if anyone produces a ready, willing, and able buyer.
  58. What does a nonexclusive contract entitle a real estate broker to?
    To compensation upon his production of a ready, willing, and able buyer, even though the sale is not consummated.
  59. Does a real estate agent have to be licensed to enforce a claim for commission?
    Yes.
  60. What is the general tort liability of the principal for the agent?
    The doctrine of respondeat superior imputes joint and several liability to the employer-principal for torts committed by the employee-agent within the scope of the employee's employment.

    NOTE: Personal defenses of the employee that do not go tio liability do not bar recovery from the employer.

    NOTE: In addition to liability under the doctrine of respondeat superior, an employer may be liable for her own negligence in hiring or retaining an employee or in supervising or entrusting an employee with specific responsibilities.
  61. What is the first determination that must be made in order to estalbish the liability of the principal under respondeat superior?
    That an employer-employee relationship existed.
  62. Is a principal liable for torts comitted by agents acting as independent contractors?
    No.
  63. What is the determinative distinction between the independent contractor and the employee?
    With the independent contractor, the principal has no right to control the manner and method in which the job is performed, while with the employee, the principal does exercise such control.
  64. What are factors to consider in determining the existence of the right to control?
    • The characterization by the parties;
    • Whether the business is distinct;
    • The customs of the locality regarding supervision of work;
    • The degree of skill required on the job;
    • Whose tools or facilities are used;
    • What the period of employment is (definite and/or short, more likely to be independent contractor; indefinite and/or long, more likely to be employee);
    • What the basis of compensation is (if on time basis, more likely employee; if on job basis, more likely independent contractor);
    • What the understanding of the parties is; and
    • Whether the person was hired to further the principal's business (nonbusiness purpose, e.g., mowing lawn, more likely independent contractor).
  65. Does the doctrine of respondeat superior apply to duly authorized subservants?
    Yes.
  66. What can implied authorization to hire subservants arise from?
    Past practices, emergency situations, or a reasonable necessity to achieve an authorized result.
  67. Is the employer liable for the torts of a subservant engaged without authority?
    No.
  68. Can there exist an employer-employee relationship by estoppel?
    Yes. Where a principal creates the appearance of an employer-employee relationship upon which a third party relies, that principal will be estopped from denying the relationship and will be liable under the doctrine of respondeat superior.
  69. Will a loaning employer be liable for the tortious acts of a loaned employee?
    Not normally.
  70. What is the key issue in determining liability for the loaned employee's torts?
    Whether the borrowing principal or the loaning principal has the primary right to control the emnployee's actions.
  71. When will a principal incur direct liability for the acts of an independent contractor?
    • Where inherently dangerous activities are involved,
    • Nondelegable duties have been delegated, or
    • The principal knowingly selected an incompetent independent contractor (if the principal was merely negligent in selecting the independent contractor, the principal is liable only for her own negligence in selection, not for the contractor's negligence).
  72. What are the factors to consider in determining whether an employee's conduct was within the scope of employment?
    • The connection between the time, place, and occasion of the act;
    • The history of the relationship between the employer and employee;
    • Whether the act is commonly done by such an employee;
    • The extent of departure from normal methods of performance; and
    • Whether the employer could have anticipated the specific act.
  73. Does the employee's conduct need to be actually authorized to be within the scope of employment?
    No.
  74. Does prohibition by the principal necessarily remove conduct from the scope of employment?
    No.
  75. If the nature of the employee's conduct is similar or incidental to that which was authorized, is the conduct within the scope of employment?
    Probably.
  76. Are serious criminal acts normally considered to be outside the scope of employment?
    Yes.
  77. Is a detour within the scope of employment?
    A detour or small deviation from the employer's direction is whtin the scope of employment.
  78. Is a frolic within the scope of employment?
    A frolic or major deviation requiring a substantial departure from employment is beyond the scope of employment.
  79. Once it is shown that the employee has left the scope of employment, can the employer be held liable for the employee's tort?
    Only if there is proof of return.
  80. Does the employer's ownership of the vehicle driven by the employee at the time the employee commits a tort automatically impose liability upon the employer for the tort solely by virtue of the employer-employee relationship?
    No.
  81. Is the employee's invitation to passengers outside the scope of employment?
    Generally, yes, unless expressly authorized by the employer. The employer is not liable for injuries sustained by such passengers.
  82. Is the employer liable for torts caused by the use of substantially different instrumentalities from those authorized (i.e., those creating a greater risk of harm)?
    No.
  83. Are torts caused by an employee's negligent smoking considered within the scope of emplyoment?
    Generally, no, although New York views smoking as necessary to the employer's convenience and, thus, within the scope of employment.
  84. If the employee makes a trip with two purposes, will it be within the scope of employment?
    Yes, if any substantial purpose of the employer is being served.
  85. Is commuting within the scope of employment?
    No.
  86. Are intentional torts normally within the scope of employment?
    No, unless a natural incident of the employee's duties (as where force is authorized), where the employee is promoting the employer's business, or where the nature of the work gives rise to hostilities.
  87. Is a principal liable for an agent's misrepresentations if the agent had actual, apparent, or inherent authority to make statements concerning the subject matter involved?
    Yes.
  88. May an employer ratify an employee's torts?
    Yes, if the normal requirements of ratification are met. In tort ratification situations, pay particular attention to the requirement that the employer must have knwoledge of all material facts.

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