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7 Cards in this Set

  • Front
  • Back
01 Formation of an Agency
(1) by an agreement

(2) if there is authority to act on behalf of the principal

(3) by ratification
03 Formation of an Agency through an Authority to Act
may arise from an act by the parties or by law

(1) actual
i. express - limited by the principal's intent, but can be created even without intent (e.g., in case of a mistake)
ii. implied - inferred from express authority, allows to do the incidental, customary, and necessary acts required to effectuate the purpose of the agency

(2) apparent - requires:
i. the agent's appearance of authority
ii. a manifestation by the alleged principal to the third party as to the existence of the authority
iii. reasonable reliance by the third party to his detriment

i. lingering - if actual authority has ended and the third party, with whom the agent has dealt, does not receive actual or constructive notice of the termination
ii. excessive - if the principal has permitted the agent to exceed his authority in the past and the principal knows that the third party is aware
iii. imposters - if the principal negligently allows an imposter to appear to have authority

(3) inherent - intended to protect innocent third parties. Examples:
i. respondeat superior
ii. conduct that is similar in nature to the agent's authorized acts
05 Formation of an Agency by Ratification
(1) express ratification - by oral or written words with unequivocal intent to approve

(2) implied - when the principal's conduct shows authorization. Examples:
i. acceptance of the benefit of the agent's act
ii. conducting further business in accordance with the agent's act
iii. remaining silent or failing to disavow after a reasonable time has passed

(3) by estoppel - if:
i. the principal acts in such a way that a reasonable person could believe that he authorized the act, and
ii. a third party reasonably detrimentally relies on this conduct
02 Formation of an Agency by Agreement

(1) consent by the principal and agent. No consideration required

(2) no writing required. Exception - when an agent relies on a written contract for sale of an interest in realty greater than 1 year, the party must show:
i. writing authorizing to sign
ii. the principal ratified such a signing on his behalf

(3) proper capacity of the principal - cannot be principals:
i. minors (voidable)
ii. incompetents (void)
iii. non-profit organizations - members can be held jointly liable for assenting to or authorizing tortious conduct

There are no requirements of competency of the agent!
04 Factors of Implied Actual Authority
(1) implied from express authority - when a particular task is authorized, all reasonably necessary means are within the scope of the authority
(2) implied from custom or usage - which the agent knows to exist
(3) implied from the principal's acquiescence - to a series of unauthorized acts, which leads the agent to reasonably believe that he has authority to continue
(4) implied from emergency or necessity - where an agent must act without any specific guidance, the agent can take any reasonable action he sees fit until he receives guidance

(5) an agent has no right to delegate his authority. Exceptions - a principal can be found impliedly consented to delegation if:
i. ministerial tasks
ii. construction contracts
iii. customary activities
iv. impossibility - if becomes impossible to fulfill for the agent

(6) authority to make purchases or receive goods - may pay out of his own funds and be reimbursed OR may use the principal's funds

(7) if the agent has the authority to sell, he also can:
i. issue general warranties regarding the quality and quantity
ii. accept payments
iii. promise to deliver

(8) authority to manage investments (Prudent Investment Standard) - must be purchased:
i. in the principal's name, OR
ii. explicitly as an agent acting on the principal's behalf
Termination of Agency
(1) (mutual) consent
(2) lapse of time:
i. automatically if a date specified
ii. after reasonable time of no date specified
(3) upon occurrence of a specified event - automatically
(4) structural changes - a change in circumstances which causes the agent to know that the principal does not need the agency. Examples:
i. the destruction of the subject matter
ii. a drastic change in business conditions (e.g., insolvency)
iii. a drastic change in the law
(5) revocation
Revocation of Agency
any communication of such unilateral termination is acceptable, unless otherwise agreed:

(1) by principal - as a general rule, at any time for any reason. Exception: if the agency states a specific termination date, must be for a valid reason, otherwise, breach of contract

(2) by agent - but risks breaching the contract

(3) by law:
i. death of the principal or agent - regardless of whether the other party has knowledge of the death. Exceptions:
1 - durable power of attorney, i.e., a written expression of authority to enter into a transaction which contains obvious language of survival
2 - if the agency was established to protect the agent's interest and was supported by consideration. Look whether the agent received a security interest

ii. the principal's incompetency - immediately terminated if adjudicated, any subsequent transaction is void. If not adjudicated - void if the third party has knowledge of the principal's incapacity at the time of the transaction