4 Agency Free Online FlashCards

What creates an agency relationship?

Agency forms when the principal consents to the agent acting on the principal’s behalf and subject to the principal’s control, and the agent agrees or otherwise consents.

Why might apparent authority persist after actual authority ends?

Actual authority may end, but apparent authority may persist until third parties who reasonably relied on the principal’s earlier conduct receive notice.

What is actual authority?

Actual authority exists when the agent reasonably understands from the principal’s words or conduct that the principal authorized the act.

What does the agent’s duty of loyalty require?

An agent must act for the principal’s benefit within the agency, avoid undisclosed conflicts and self-dealing, and not secretly profit or divert the principal’s business opportunity.

Who is ordinarily the contracting party when the principal is disclosed?

When the agency and the principal’s identity are known, the principal is ordinarily the contracting party for an authorized contract made on the principal’s behalf.

Who is responsible for an agent’s own tort?

An agent remains personally responsible for the agent’s own torts. A principal may also be liable for its own wrongdoing, such as negligent selection or supervision.

Must an agency be formally named, written, or paid?

Generally, no. The parties need not use the word “agency,” and a written contract or payment is usually not required.

What is implied authority?

Implied authority covers acts reasonably necessary or customary to carry out an express assignment, such as hiring an ordinary carrier to arrange a delivery.

What establishes apparent authority?

Apparent authority arises when the principal’s words or conduct would lead a third party reasonably to believe the agent is authorized; the agent’s own claim alone is insufficient.

What is ratification in agency law?

Ratification occurs when a principal, knowing the material facts, affirms an act done or purportedly done on the principal’s behalf. It can bind the principal despite the agent’s lack of authority at the time.

What are the agent’s duties of care and obedience?

The agent must use care, competence, and diligence reasonably expected in the circumstances, and follow the principal’s lawful instructions within the agency’s scope.

What do the agent’s information and accounting duties require?

The agent must disclose relevant information and properly account for money or property received for the principal.