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72 Cards in this Set

  • Front
  • Back
Is agency a consensual relationship?
Yes, but not all contract formalities are required to create agency
Is capacity required of the principal in order to enter into a contract through an agent?
Yes, but the capacity of the principal is more than the capacity required of the agent
What are the 2 examples of parties who cannot be principals?
Minors – these contracts are voidable

Unincorporated organizations – but the members may be held liable as principals
How much capacity does the agent need?
Can minors and incompetents become agents?
Yes, in certain situations
What are 3 ways that parties can be disqualified as agents?
- By representing both parties without consent

- By self-dealing

- By not being licensed when one is required
In the formality of creating an agency, what is the one thing needed?
What are 2 things that are not needed in WV to form an agency relationship?
Consideration & a writing
What the 2 modes of creating an agency relationship?
- By an act of the parties

- By operation of law
What are the 3 acts and types of authority that qualify to create an agency relationship?
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
What is different about these 3 ways when a contract has been procured for the principal through the agent?
What are the 2 operations of law that create agency relationships?
Estoppel & statute
What are the 3 duties an agent owes to his principal?
Loyalty, Obedience & Care
In what 2 ways can the duty of loyalty be breached?
By having adverse interests or representing two parties with adverse interests
What is the duty of obedience?
To follow all reasonable directions

– the principal is still liable, but the agent is then liable to the principal for any loss
What are the 3 elements of the duty of reasonable care?
- 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
Are the standards of reasonable care the same for compensated and gratuitous?
Yes, except for any specials skills the compensated agent might have.
What are 4 remedies that a principal might have from the agent for breach of duty?
Action for damages, action for secret profits, accounting and withholding of compensation
What are 2 ways that a principal may bring an action for damages against an agent for breach of duty?
Breach of contract (only for compensated agents)


in tort (all agents)
What can be recovered in an action for secret profits?
The principal may recover any actual profits or property held by the agent
What is an action for accounting?
The court handles in complicated situations
When can the principal withhold compensation?
Intentional tort
breach of fiduciary duty
Does a sub-agent owe any duty to the principal?
Yes, the same as the agent
Does a sub-agent owe any duty to the agent?
Yes, the same as the duties to the principal
What if the sub-agent was appointed by the agent without authority?
Then the sub-agent owes no duty to the principal and the agent will be responsible for performance and any loss
What 3 duties does the principal owe the agent?
Duties imposed by operation of law,
duties imposed by contract
the duty to cooperate
What are the 2 duties imposed by operation of law?
Compensation and reimbursement unless the loss was entirely the agent’s fault
Does the principal have any duty to compensate a sub-agent?
What is the standard for cooperation with the agent by the principal?
The principal must cooperate in a way that has been reasonably contemplated by the parties and not unreasonably interfere with the agent’s performance
What are the 2 remedies of the agent?
Breach of contract, but the agent must mitigate damages
an agent’s lien unless the contract provides otherwise
What are the 2 types of real estate agency contract?
What is a non-exclusive contract?
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
What is an exclusive contract?
Broker gets commission when she or anyone else produces a buyer that is ready, willing & able to buy
When the principal has been entered into a contract by an agent, what are the steps to determine authority?
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
What are the 2 types of actual authority?
What is the standard for actual authority?
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
What is express authority?
Authority contained within the 4 corners of the agency agreement whether written or oral
Which other area of law are grants of authority similar to in the way in which they are interpreted?
Contract law
How is extravagant language in grants of authority treated?
Usually limited, broad grants are interpreted as to the business actually intended by the parties
Which will prevail between specific and general language?
How free are agents to act?
As they reasonably believe the principal intended due to words and acts
Can express authority exist when there has been a mistake?
May the mistake involve identity of the agent?
May the mistake involve the subject matter?
Does misrepresentation of the agent affect the extent of the express authority?
What is implied authority?
What the agent (not the 3rd party) reasonably believes he has due to the actions of the principal
What are the 4 ways that implied authority can arise?
Implied from express authority

Implied from custom & usage

Implied by acquiescence

Implied because of emergency or necessity
What is authority Implied from express authority?
– express authority granted to the agent to accomplish a particular result implies authority to use all means necessary to achieve that result
what is authority Implied from custom & usage?
– 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
What is authority Implied by Acquiescence?
– 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
What is authority Implied Because of Emergency or Neccessity?
– 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
Does the agent have the authority to delegate in general?
No, because agency is a consensual relationship
But in what cases will the principal be held to have impliedly consented to delegation of authority?
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
What are ministerial acts?
– purely mechanical acts, like a store manager hiring college students to help her take inventory for the store owner
What is "Delegation required by circumstances"?
– like when a contractor hired to build a house hires an electrician to wire it, the principal/homeowner would be aware of this need
What implied authorities do the authority to purchase and/or sell generate?
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
What standard is used to construe the authority of agents with the authority to manage investments?
The "prudent investor" standard
In whose name are the investments titled in?
The principal, unless the agent is clearly instructed to take the title in some other manner
How can actual authority be terminated?
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
What changes in circumstance are sufficient to terminate the agency relationship?
destruction of the subject

matter of authority

drastic changes in business conditions

change in relevant laws

insolvency of the agent or principal (if relevant)
What 2 types of agencies are irrevocable, even unilaterally by the principal or by operation of law?
Where the agent has an interest in the agency subject matter

Power is given for security
When does an agent have an interest in the subject matter?
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.
When is power given by security?
In a collateral situation.

Example: the agent has power to sell the property if the principal defaults on a loan
What is the Restatement’s view of agency interests?
All the powers are treated as powers given as security and there are 2 more requirements to meet.
What are the 2 extra requirements for agency interests in the Restatement?
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
What is another name for apparent authority?
Ostensible authority
What is apparent authority?
Even if the agent doesn’t really have
What are the 3 types of apparent authority?
Agent has no actual authority of any type

Agent has some present actual authority

Inherent Authority / Inherent Agency Power
What is the basic theoretical difference between apparent authority and actual authority?
Apparent authority arises out of reasonable beliefs of 3rd parties, whereas actual authority arises out of the reasonable beliefs of agents
Can an agent create apparent authority without the principal?
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
What else is necessary besides the “Holding Out” Principal?
A 3rd party must also reasonably rely on the “holding out”.
What if the 3rd party has a duty to inquire about the agent’s ability to act?
Then apparent authority cannot be established