Agency New York

Front 1

Creation of Agency Relationship: Capacity

Back 1

1. Principal must have contractual capacity

2. Agent need only minimal (less than contractual) capacity

3. Agent may be disqualified for:

--(a) Representing both parties

--(b) Self-dealing

--(c) Failing to have a required license

Front 2

Creation of Agency Relationship: Formalities

Back 2

1. Consent of both parties required

2. No consideration necessary

3. No writing necessary unless contract the agent is going to enter into on behalf of principal is within Statute of Frauds (land contract or more than one year)

Front 3

Modes of Creating Agency Relationship

Back 3

1. By Act of Parties

--(a) Agreement between principal and agent (actual authority)

--(b) Holding out of the principal (apparent or inherent authority)

--(c) Ratification

2. By Operation of Law

--(a) Estoppel (requires third party reliance on principal's communication)

--(b) Statute (appointing secretary of state as out-of-state motorist's agent for service of process, etc.)

Front 4

Actual Authority: Express

Back 4

Actual authority may be express or implied.

Express: actually contained within the four corners of the agency agreement.

---Effective even if granted by mistake or misrepresentation

Front 5

Actual Authority: Implied

Back 5

That which the agent reasonably believes she has as a result of the principal's actions.

Implied Actual Authority includes authority:

1. Incidental to express authority

2. Arising out of custom known to the agent

3. Resulting from prior acquiescence by the principal

4. To take emergency measures

5. To agree to a settlement during litigation

6. To delegate authority:
---in cases of ministerial acts,

---where circumstances require,

---where performance is impossible without delegation, or

---where delegation is customary

7. To pay for and accept delivery of goods where there is authority to purchase

8. To give general warranties as to fitness and quality and grant customary covenants in land sales, collect payment, and deliver where there is authority to sell

9. To manage investments in accordance with the "prudent investor" standard

Front 6

Termination of Actual Authority

Back 6

Termination of actual authority occurs by:

1. Lapse of specified or reasonable time

2. The happening of a specified event

3. A change in circumstances, including:
---destruction of the subject matter of the authority,

---insolvency of the agent or the principal, and

---a change in the law or business conditions

4. Agent's breach of fiduciary duty

5. Either party's unilateral termination (although such termination may constitute a breach of contract); or

5. Operation of law (e.g., death or loss of capacity of either party except where a durable power of attorney is present)

Key: Irrevocable agencies

--If agency is coupled with an interest or a power is given as security, it 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.

--These will not be terminated by operation of law, either

Front 7

Apparent Authority

Back 7

If 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.

Front 8

Types of Apparent Authority: When Agent has no Actual Authority

Back 8

1. Imposters: if principal negligently permits an imposter to be in a position to appear to have agency authority, principal will be held liable for imposter's actions undertaken with such authority

2. Lingering Apparent Authority

---(a) Notice may be necessary: where agent's actual authority has terminated he will have apparent authority to act on 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

---(b) Writing Manifesting Authority: If third parties rely on a written authority of the agent, the agent's apparent authority is not terminated

---(c) Death or Incompetency: terminates ALL AUTHORITY of agent without notice to either agent or third parties. Exception for bank honoring transactions of customer's account until it learns of the customer's death or incompetency and has reasonable time to act

Front 9

Types of Apparent Authority: When Agent Exceeds Actual Authority

Back 9

1. Prior Acts: Where principal previously permitted agent to exceed his authority and knows that the third party is aware of this, the principal is bound by agent's unauthorized acts

2. Position: Where agent is in a position that customarily carries with it certain responsibilities, the principal is liable for the agent's acts that come within those customary responsibilities

3. Secret Limiting Instructions: If principal secretly limits agent's actual authority, and agent acts beyond limitation, principal will be bound by agent's act.

Front 10

Inherent Authority

Back 10

Results in the principal being bound even though the agent had no actual authority to perform the particular act.

1. Respondeat Superior: principal held liable for torts of her employee committed within the scope of employment.

2. Conduct Similar to that Authorized: Where agent exceeds his actual authority but the conduct is similar to acts authorized, principal will be held liable

3. Improper Disposition of Goods: principal will be held liable for the disposition of her goods by an agent possessing them 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

Front 11

Ratification

Back 11

Agency relationship created by ratification when an "agent" purports to act on behalf of a "principal" without any authority, but the principal subsequently validates the act and becomes bound.

Agent relieved of liability for breach of implied warranty of authority

Gives retroactive effect to the transaction unless:

1. Principal lacked contractual capacity at time agent entered transaction (in which case principal deemed to have "adopted" the contract), or

2. Retroactivity would interfere with intervening third-party rights

Front 12

Prerequisites for Ratification

Back 12

1. Principal must know (or have reason to know) all material facts

2. Principal must accept the entire transaction

3. Principal must have capacity

Front 13

Methods of Ratification

Back 13

Express or Implied

Implied ratification may include:

1. Acceptance of the transaction's benefits

2. Silence if there is a duty to disaffirm

3. Suing on the transaction

Front 14

What May be Ratified and by Whom

Back 14

Principal may ratify anything she could legally do, unless:

1. Performance was illegal at the time of ratification

2. Third party has withdrawn

3. There has been a material change in circumstances

Only disclosed or partially disclosed principal may ratify

Agent may not treat the contract as his own

Front 15

Liability of the Parties: Third Party vs. Principal

Back 15

Principal will be liable for contract entered into by her agent if the agent had valid authority to act

Front 16

Liability of the Parties: Third Party vs. Agent (Disclosed Principal)

Back 16

Agent's liability depends on whether principal was disclosed

"Disclosed Principal": means existence and identity are known to third party

When principal is disclosed, agent will not be liable, unless:

1. Parties intended agent to be liable

2. Implied Warranty of Authority

---(a) That a principal with contractual capacity exists

---(b) That he, the agent, had authority to contract for the principal

Front 17

Liability of the Parties: Third Party vs. Agent (Partially Disclosed and Undisclosed Principals)

Back 17

Partially Disclosed Principal: existence known but identity not known

Undisclosed Principal: neither identity nor existence disclosed

BOTH Agent and Principal and liable

Judgment against one is not a bar to suit against the other except to the extent judgment has been satisfied.

Note: In NY, an undisclosed principal is not liable on a negotiable instrument

Front 18

Third Party Liability to Principal and Agent: Disclosed Principal

Back 18

When principal is disclosed, only the principal (not the agent) may enforce the contract

Front 19

Third Party Liability to Principal and Agent: Partially Disclosed and Undisclosed Principal

Back 19

Either the agent or principal may enforce contract and hold third party liable (if agent enforces, principal entitled to rights and benefits)

Principal may NOT enforce contract if:

1. There has been an affirmative fraudulent misrepresentation of principal's identity, or

2. There is an unforeseen increased burden to the third party due to the fact that performance is owed to the principal and not the agent

Front 20

Liability on Contract: Principal

Back 20

Principal is bound if valid authority existed

Front 21

Liability on Contract: Agent

Back 21

Agent is bound unless principal's existence AND identity are disclosed (disclosed principal)

Also can be held liable for breach of the implied warranty of authority

Front 22

Liability on Contract: Third Party

Back 22

Third Party is bound to principal is valid authority existed

Third Party is bound to agent if principal partially disclosed or undisclosed and agent enforces contract (but principal entitled to contract benefits)

Front 23

Agent's Duties to Principal

Back 23

Agent owes the following fiduciary duties:

1. Duty of Loyalty

2. Obedience to reasonable directions

3. Reasonable care under the circumstances (including duty to disclose all relevant information)

If agent is compensated, he owes the same duty of care, but the measure of "reasonableness" is different because compensation is a proper "circumstance" to consider

Front 24

Principal's Remedies against Agent

Back 24

Principal has remedies against the agent including:

1. Contract actions (if the agent was compensated)

2. Tort actions

3. Actions for secret profits

4. Equitable actions for an accounting

5. Withholding compensation for intentional torts or intentional breaches of fiduciary duty

Front 25

Sub-agents

Back 25

Liability: agent has absolute liability to principal for breaches by sub-agent

Duties: Sub-agents duties depend on whether he was appointed with proper authority

--(a) If appointed with proper authority: sub-agent owes principal same duties as the agent

--(b) If unauthorized: sub-agent owes no duties to the principal, but does owe duties to agent

Front 26

Principal's Duties

Back 26

Principal's owe agents:

1. Duties imposed by their contract

2. Reasonable compensation (if agreement silent regarding compensation)

--(a) Principals have no duty to compensate sub-agent even if properly authorized

3. Reimbursement for expenses

4. Cooperation with agent

5. No unreasonable interference with agent's performance

Front 27

Agent's Remedies

Back 27

Compensated agents have contract remedies (but have duty to mitigate damages)

Agents have a right to a possessory lien for any money due from the prinicipal

Front 28

Real Estate Brokers' Contracts

Back 28

Exclusive Contracts: broker entitled to commission if ANYONE produces a ready, willing, and able buyer

Nonexclusive Contracts: broker entitled to compensation if HE produces ready, willing, and able buyer (even though sale not consummated)

Right to Compensation: must be licensed to enforce a claim for commissions

Front 29

Respondeat Superior

Back 29

Imputes joint and several liability to employer for torts committed by employee within scope of employee's employment.

Liability is "derivative": means that nonliability of employee results in nonliability of employer

--But personal defenses of employee that do not go to liability do not bar recovery from employer

Note: Employer may also be liable for her OWN negligence in hiring or retaining the employee or in supervising or entrusting an employee with specific responsibilities

Front 30

Employer-Employee Relationship

Back 30

Distinction between independent contractor and employee is the right to control the manner and method in which the job is performed

Factors to Consider:
1. Characterization by the parties

2. Whether the business is distinct

3. The customs of the locality regarding supervision of work

4. The degree of skill required on the job

5. Whose tools or facilities are used

6. What the period of employment is

7. What the basis of compensation is (time: employee; job: independent contractor)

8. What the understanding of the parties is

9. Whether the person was hired to further the principal's business (nonbusiness purpose--more likely independent contractor)

Front 31

Respondeat Superior and Subservants

Back 31

Respondeat Superior applies to duly authorized sub-servants

Authorization can be express or implied

Implied authorization can arise from:

1. Past practices

2. Emergency situations

3. Reasonable necessity to achieve an authorized result

Front 32

Employment Relationship by Estoppel

Back 32

If principal creates the appearance of an employer-employee relationship upon which a third party relies, the principal will be estopped from denying the relationship

Front 33

Liability for Acts of Borrowed Employees

Back 33

Loaning principal usually liable

Key Issue; determining whether the borrowing principal or the loaning principal has the PRIMARY RIGHT TO CONTROL the employee's actions

Front 34

Liability for Acts of Independent Contractors

Back 34

Principal will incur direct liability for the acts of independent contractor where:

1. Inherently dangerous activities are involved

2. Nondelegable duties have been delegated, or

3. The principal KNOWINGLY selected an incompetent independent contractor (if principal was merely negligent, principal is liable only for her negligence in selecting, not for the contractor's negligence)

Front 35

Scope of Employment

Back 35

Employer liable for the torts of his employee only if they occur within the scope of employment.

Factors to consider:

1. Connection between time, place, and occasion of the act

2. The history of the relationship between the employer and employee

3. Whether the act is commonly done by such an employee

4. The extent of departure from normal methods of performance; and

5. Whether the employer could have anticipated the specific act

Front 36

Scope of Employment: Frolic vs. Detour

Back 36

Detour: small deviation from the employer's direction--within the scope of employment

Frolic: major deviation requiring substantial departure from employment--beyond the scope of employment

Once it is shown that employee has left the scope of employment, there must be proof of return before the employer will be held liable for the employee's tort

Front 37

Scope of Employment: Motivation to Serve Employer

Back 37

1. Passengers: employee's invitation to passengers, unless expressly authorized by the employer, is outside the scope of employment and employer is not liable for injuries sustained by passengers

2. Unauthorized Instrumentalities: not liable for torts caused by the use of substantially different instrumentalities from those authorized

3. Smoking: In New York, smoking is viewed as necessary to the employee's convenience and so it is within the scope of employment

4. Trips with Two Purposes: If employee makes a trip with two purposes, it will be within the scope of employment if any substantial purpose of the employer is being served

5. Commuting: not within scope of employment

Front 38

Intentional Torts

Back 38

Not normally within the scope of employment unless:

1. A natural incident of the employee's duties (as where force is authorized)

2. Where the employee is promoting the employer's business; or

3. Where the nature of the work gives rise to hostilities