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72 Cards in this Set
- Front
- Back
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Is agency a consensual relationship?
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Yes, but not all contract formalities are required to create agency
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Is capacity required of the principal in order to enter into a contract through an agent?
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Yes, but the capacity of the principal is more than the capacity required of the agent
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What are the 2 examples of parties who cannot be principals?
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Minors – these contracts are voidable
Unincorporated organizations – but the members may be held liable as principals |
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How much capacity does the agent need?
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Minimal
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Can minors and incompetents become agents?
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Yes, in certain situations
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What are 3 ways that parties can be disqualified as agents?
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- By representing both parties without consent
- By self-dealing - By not being licensed when one is required |
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In the formality of creating an agency, what is the one thing needed?
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Consent
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What are 2 things that are not needed in WV to form an agency relationship?
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Consideration & a writing
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What the 2 modes of creating an agency relationship?
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- By an act of the parties
- By operation of law |
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What are the 3 acts and types of authority that qualify to create an agency relationship?
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Agreement – actual authority
The principal holds another out as his agent – Apparent authority Principal may agree to the relationship by previous unauthorized acts of the agent – ratified authority |
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What is different about these 3 ways when a contract has been procured for the principal through the agent?
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Nothing
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What are the 2 operations of law that create agency relationships?
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Estoppel & statute
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What are the 3 duties an agent owes to his principal?
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Loyalty, Obedience & Care
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In what 2 ways can the duty of loyalty be breached?
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By having adverse interests or representing two parties with adverse interests
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What is the duty of obedience?
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To follow all reasonable directions
– the principal is still liable, but the agent is then liable to the principal for any loss |
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What are the 3 elements of the duty of reasonable care?
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- A compensated agent has to carry out his agency in light of community standards and according to his level of special skills
- A gratuitous agent has to use reasonable care, whatever is used by agents in similar positions. - There is a duty to notify the principal of anything affecting the relationship |
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Are the standards of reasonable care the same for compensated and gratuitous?
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Yes, except for any specials skills the compensated agent might have.
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What are 4 remedies that a principal might have from the agent for breach of duty?
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Action for damages, action for secret profits, accounting and withholding of compensation
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What are 2 ways that a principal may bring an action for damages against an agent for breach of duty?
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Breach of contract (only for compensated agents)
and in tort (all agents) |
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What can be recovered in an action for secret profits?
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The principal may recover any actual profits or property held by the agent
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What is an action for accounting?
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The court handles in complicated situations
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When can the principal withhold compensation?
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Intentional tort
or breach of fiduciary duty |
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Does a sub-agent owe any duty to the principal?
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Yes, the same as the agent
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Does a sub-agent owe any duty to the agent?
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Yes, the same as the duties to the principal
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What if the sub-agent was appointed by the agent without authority?
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Then the sub-agent owes no duty to the principal and the agent will be responsible for performance and any loss
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What 3 duties does the principal owe the agent?
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Duties imposed by operation of law,
duties imposed by contract and the duty to cooperate |
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What are the 2 duties imposed by operation of law?
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Compensation and reimbursement unless the loss was entirely the agent’s fault
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Does the principal have any duty to compensate a sub-agent?
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No
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What is the standard for cooperation with the agent by the principal?
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The principal must cooperate in a way that has been reasonably contemplated by the parties and not unreasonably interfere with the agent’s performance
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What are the 2 remedies of the agent?
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Breach of contract, but the agent must mitigate damages
and an agent’s lien unless the contract provides otherwise |
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What are the 2 types of real estate agency contract?
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Non-exclusive
and exclusive |
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What is a non-exclusive contract?
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Subject to a prior sale, broker is entitled to commission even though the sale may not be consummated, contract can be modified to make sure she gets compensation when sale is complete, she must provide a buyer who is ready, willing & able to buy
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What is an exclusive contract?
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Broker gets commission when she or anyone else produces a buyer that is ready, willing & able to buy
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When the principal has been entered into a contract by an agent, what are the steps to determine authority?
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Actual authority – then the principal is liable, whether or not the 3rd party knew; also the agent cannot be held liable to the principal because it was within the scope of authority
If no actual authority, then is there apparent authority – in this case the principal is still bound to the contract, but the agent may be liable to the principal for acting outside the scope of authority |
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What are the 2 types of actual authority?
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Express
& Implied |
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What is the standard for actual authority?
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The amount of authority that the agent reasonably thinks he has based on the principal’s dealings with him & that the authority has not been terminated
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What is express authority?
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Authority contained within the 4 corners of the agency agreement whether written or oral
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Which other area of law are grants of authority similar to in the way in which they are interpreted?
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Contract law
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How is extravagant language in grants of authority treated?
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Usually limited, broad grants are interpreted as to the business actually intended by the parties
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Which will prevail between specific and general language?
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Specific
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How free are agents to act?
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As they reasonably believe the principal intended due to words and acts
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Can express authority exist when there has been a mistake?
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Yes
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May the mistake involve identity of the agent?
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Yes
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May the mistake involve the subject matter?
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Yes
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Does misrepresentation of the agent affect the extent of the express authority?
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No
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What is implied authority?
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What the agent (not the 3rd party) reasonably believes he has due to the actions of the principal
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What are the 4 ways that implied authority can arise?
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Implied from express authority
Implied from custom & usage Implied by acquiescence Implied because of emergency or necessity |
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What is authority Implied from express authority?
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– express authority granted to the agent to accomplish a particular result implies authority to use all means necessary to achieve that result
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what is authority Implied from custom & usage?
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– unless specifically directed otherwise, an agent has implied authority to act in accord with general custom or usage. However, the agent must have knowledge of the custom or usage
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What is authority Implied by Acquiescence?
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– the principal’s acceptance of, or failure to abject to, a series of unauthorized acts that reasonably leads the agent to believe that he has authority to do the same acts in the future
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What is authority Implied Because of Emergency or Neccessity?
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– agent has no specific instructions on what to do in case of emergency; he can take reasonable necessary measures until the principal can be contacted
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Does the agent have the authority to delegate in general?
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No, because agency is a consensual relationship
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But in what cases will the principal be held to have impliedly consented to delegation of authority?
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Ministerial acts
Delegation required by circumstances Custom – ex: principal hires agent to manage an apartment building, agent is implied to have authority to hire janitors Impossibility – when acts cannot be performed by the agent |
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What are ministerial acts?
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– purely mechanical acts, like a store manager hiring college students to help her take inventory for the store owner
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What is "Delegation required by circumstances"?
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– like when a contractor hired to build a house hires an electrician to wire it, the principal/homeowner would be aware of this need
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What implied authorities do the authority to purchase and/or sell generate?
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Authority to pay – agent may use principals funds or credit
Authority to accept delivery Authority to warrant – including warranties for persona property & covenants for real property Authority to collect – only if the agent has possession of the goods, payment must be in cash or custom dictates otherwise Authority to deliver |
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What standard is used to construe the authority of agents with the authority to manage investments?
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The "prudent investor" standard
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In whose name are the investments titled in?
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The principal, unless the agent is clearly instructed to take the title in some other manner
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How can actual authority be terminated?
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By lapse of time -
Does it have to be a specified time? No, if the time is not specified, then the courts will imply termination within a reasonable time By happening of an event – the agency agreement can specify an event By change of circumstances – By breach of agent’s fiduciary duties – By unilateral act of principal or agent – By operation of law – death or loss of capacity |
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What changes in circumstance are sufficient to terminate the agency relationship?
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destruction of the subject
matter of authority drastic changes in business conditions change in relevant laws insolvency of the agent or principal (if relevant) |
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What 2 types of agencies are irrevocable, even unilaterally by the principal or by operation of law?
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Where the agent has an interest in the agency subject matter
Power is given for security |
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When does an agent have an interest in the subject matter?
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When the agent has an immediate, exercisable right. Commission alone is not enough.
Example: when a principal gives an agent property to sell to pay off a debt to the agent, the principal gets the excess amount. |
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When is power given by security?
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In a collateral situation.
Example: the agent has power to sell the property if the principal defaults on a loan |
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What is the Restatement’s view of agency interests?
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All the powers are treated as powers given as security and there are 2 more requirements to meet.
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What are the 2 extra requirements for agency interests in the Restatement?
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Grant must be supported by consideration
The grant of authority must have been given to protect a debt, other duty or title of the agent or 3rd person |
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What is another name for apparent authority?
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Ostensible authority
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What is apparent authority?
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Even if the agent doesn’t really have
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What are the 3 types of apparent authority?
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Agent has no actual authority of any type
Agent has some present actual authority Inherent Authority / Inherent Agency Power |
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What is the basic theoretical difference between apparent authority and actual authority?
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Apparent authority arises out of reasonable beliefs of 3rd parties, whereas actual authority arises out of the reasonable beliefs of agents
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Can an agent create apparent authority without the principal?
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No, the principal must have done something or failed to object to something that causes a 3rd party’s belief. What is this called? The “Holding Out” Principal
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What else is necessary besides the “Holding Out” Principal?
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A 3rd party must also reasonably rely on the “holding out”.
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What if the 3rd party has a duty to inquire about the agent’s ability to act?
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Then apparent authority cannot be established
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