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Agency

Creation

I. Definition
a. Agency is a consensual relationship requiring (i) requiring a manifestation of
consent by the P that an A shall act on Ps behalf, and (ii) consent by A to so act
under Ps control.
II. Capacity
a. P must have contractual capacity but A need NOT have contractual capacity
(only minimal capacity).
b. Disqualified from being A if representing both parties; not licensed and law
requires.
c. Effect. P could disaffirm a K made with A when lacking contractual capacity (say b/c
was a minor).
III. Formalities
a. Writing. DO NOT need a writing, but the SOF may under the Equal Dignity Rule
i. Effect. If K entering on behalf of the P falls within the SOF, likely need one for
A relationship too.
b. Consideration. Not required; if not given, termed a gratuitous agency.
c. Legal purpose. A relationship must be for legal purpose.
IV. Authority for creation (4)
a. Actual Authorityauthority A reasonably thinks possesses based on Ps dealings
RE Actual with him.
Authority, Ask: i. As will see, brings with it whatever reasonable authority is needed to
>requisite complete the task.
formalities ii. Can be express or implied
>express or 1. ExpressP expressly tells A to act on Ps behalf.
implied present
a. Mistake. Even if P (i) mistakes A ID or (ii) subject matter of K,
>whether been
terminated express authority may exist.
b. A induces P by misrep. will not affect extent of authority
actually granted.
2. ImpliedPs conduct leads A to believe
a. Ex. Even when does something unauthorized initially, but if goes
un-objected.
iii. Termination of
1. Actual Authority must exists when A enters into a K, can terminate
in six ways:
2. (i) After a specified time, a reasonable time (if not specified), or a
specified event occurs
3. (ii) By a change in circumstances (subject of A is destroyed, drastic
change in business condictions, change in relevant laws, insolvency of
A or P; OR BREACH OF A FID. DUTY).
4. (iii) By a change of law making the act illegal.
5. (iv) when A terminates (remember A is consensual)
6. (v) when P terminates, unless the power is coupled with an interest.
a. note: not irrevocable just by saying so. If coupled with loan then
irrevocable.
i. Sharing in the proceeds not enough to make irrevocable
(saying sell my car for 15% not enough).
7. (vi) on death, incapacity or bankruptcy of P or A, unless coupled with
an interest.
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a. Exception: Durable powers of attorneynot terminate on
incapacity.
b. Irrevocable Agenciescoupled with an interest.
8. Termination occurs when receive the information (no matter how).
b. Apparent Authority (ostensible authority)
i. Created when P leads T to think A has authority, though A doesnt, and T
reasonably believes it.
1. Equitable doctrine.
2. Reasonable belief must be created by Ps manifestations (silence
sufficient), not As (As assertion insufficient).
ii. Can linger even after actual authority terminates.
1. Look at from Ts perspective. To destroy P should notify T. Test is
whether T knows or reasonably should have known of the termination.
iii. In determining whether As position customarily includes the act performed
look at General v. Special Agent
1. General agentone authorized to engage in (i) series of transactions
(ii) involving a continuity of service.
2. Special agentauthorized to engage in one or more transactions not
involving continuity of service.
iv. Inherent Authoritymay be grounds to find P liable; in balancing harm,
court may place on P who let the A loose on the world.
v. Common situationimproper disposition of goodsgenerally
possession of Ps goods not entitle A to transfer them. Must have either (i)
Indicia of ownership or (iii) Dealer in goods.
c. Ratification
i. If A contracts w/out actual or apparent authority, P can still ratify by (i)
expressly affirming the K; (ii) accepting the benefits; (iii) suing T on it.
ii. Requirements (5):
1. A must have been acting on Ps behalf. (Note will try to trick)
2. P must have knowledge of all material facts.
3. P must accept the entire transaction (P cant sue for K price &
simultaneously disavow misrepresentation made by A).
4. P must have contractual capacity both at time of ratification & at
time of original transaction (b/c ratification is retroactiverelates back
to original agreement)
a. BUT exception for corporation.
5. Requires some manifestation of intent by P, either express or
implied (acts, words, silence, retention of benefits).
6. No consideration need.
iii. Effect.
1. Ratification is retroactiverelates back to original agreementunless
incapacity; intervening rights of innocent party.
a. P becomes bound to K
b. A relieved of liability
iv. Note: B/c act must be entered into by A on behalf of P, undisclosed P cannot
ratify b/c T never relied upon his existence; can in tort situation as long as
intended to act on Ps behalf.
v. Examples
1. Lease behalf of not-yet formed corporation. Can corporation ratify after
formed? Yes, but not an entity unknown to A (must have been entered
on Ps behalf).
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2. A sells P car for 6k without authority; P later sells to F (an innocent
purchaser) for 5k. P cannot ratify earlier sale.
d. Agency by Estoppel
i. Cf. apparent authority. Very similar, but Indiana as separate means of
creating A relationship.
ii. Requirements: P must have (i)(a) made false representations or concealed
material facts with (b) intent for T to rely upon them; and (ii) T must have
changed his position in reasonable reliance upon Ps representations.
iii. Gives rise to ostensible authority.
e. Note: Agency may also be created by statute; usually for limited purpose.
V. Implied/incidental authority authority A (not T) reasonably believes has as result
of Ps actions.
a. Includes all authority (i) reasonably necessary to accomplish the purpose of an
established agency and can arise by custom, title, or task (ministerial, must be
possible); (ii) implied by acquiescence; (iii) implied b/c emergency if P CANNOT
be contact
b. Specific situtations.
i. Authority to sell property gives rise to incidental authority to (i) warrant
title, quality of the goods; (ii) to receive payment on Ps behalf (in cash);
(iii)Deliver goods
ii. Authority to purchase gives rise to incidental authority to (i) pay the
purchase price; (ii) purchase on Ps credit; (iii) receive delivery
VI. Delegation to subagent
a. Only if P consents
b. Though can be implied (i) If A is unable to lawfully complete personally; (ii) an
emergency situation and cannot communicate with P; (iii) It is established usage;
(iv) ministerial or mechanic act

Agency Relationship of
Parties/Liability in K

I. P and A
a. A owes P strict fiduciary duty, even if agency is gratuitous:
i. Duty of loyaltyrequires notice to P of all agency matters, no competition
or dual agency without disclosing all material facts.
ii. Duty of reasonable caredepends on any special skills
1. Includes duty to notifyall matters brought to attention of A imputed
on P.
iii. Duty of obediencemust follow reasonable instructions (turning on nature
of task, K, custom)
iv. Duty to indemnify P for As tortious acts (practically no much)
v. Duty to preserve trade secrets (only duty that survives termination).
b. P must (i) compensate (unless A gratuitous), (ii) cooperate, (iii) prevent harm, (iv)
reimburse and indemnify A. (Any imposed by K).
c. Broad range of remedies
i. Breach of Knormal calculationsnote uncompensated A cannot be held
liable for breach of K b/c no K to perform.
1. Note: A has duty to mitigate damages.
ii. Tortany A may be held liable for misuse of Ps property, intentional or
negligent performance, failure to perform.
iii. P could withhold compensation / A has possessory lien for any money due.
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iv. Dont forget Equitable onesconstructive trust (action for secret profits);
accounting.
d. Subagentsowe P same duties.
i. A will still be held liable for breaches of subagent even if exercised diligence
in hiring.
ii. Sub owe A same duties owes P.
iii. Unauthorized sub. Sub owes no duty to P; A alone responsible to P.
II. P and T (assuming A had actual authority or substitute)
a. P always liable to T.
Liability on K, b. T always liable to disclosed P (T knows Ps identity) or to a partially disclosed
Ask: P (T knows P exists, but doesnt know Ps name).
>Valid K c. T is liable to an undisclosed P (T doesnt even know P exists) unless:
enetered
i. Holding T liable would unduly burden T;
A/P
ii. Either P or A knew T wouldnt contract with P; or
authority?
>P iii. T was bargaining for As personal skills or reputation
(un)discl./Par d. If undisclosed P, P and A are alternatively liable to T, and T can raise any
t.? defenses against P that could have raised against A.
III. A and T (remember A is just an intermediary)
a. T is not liable to A unless A has an interest in the subject matter.
b. A liability to T turns on whether P was disclosed, partially disclosed, or undisclosed:
i. Disclosedno liability on K
1. BUT still liable to T for breach of implied warranty if purports to
acting on behalf of P; damages generally limited to actual damages
suffered. (warrant of authority) (ex. includes if lacked capacity)
ii. Undisclosed or partially disclosedboth A and P liable

Agency
Liability in Tort

I. Doctrine of Respondeat Superior


a. If tort committed by servant/employee acting within scope of employment,
then master/employer liable, along with s/e.
b. Step1. Servant vs. independent contractor. Factors
(CBSTookLetterman&PaulSchafferBeyondCarson):
i. Control of the detailsdoes P have the right to?
Tort Liability, Ask: ii. Businessis As business distinct?
>Servant or IC? iii. Specialistis A a specialist?
>Within scope? iv. Tools and Workplacewho provides them?
v. Length of timeshort-term or long?
vi. Payment methodby time or job?
vii. Skill required for the job
viii. Belief and intent of the parties
ix. Contract provision
x. May find employer/employee relationship by estoppel(i) where P creates
appearance and (ii) T relies on the appearance.
c. Step2. Even if S, have to ask, within the scope of employment?
i. Generally.
1. If doing what hired to do, within the scope.
2. If deviating, minor deviation (detour) usually w/in scope; major
deviation (frolic) is not.
ii. Factors (CharliesAngelsTookImplausibleMissionsMonthsBeforeA-team):
1. Control rights

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2. Authorized activity
3. Time and placewhether conduct was substantially removed from
time and space of employment
4. Intentional tort or criminal act
5. Motivewhether conduct at least in part purpose to serve P.
6. Means or instrumentalityownership of; whether instrumentality was
sub. different.
7. Benefits to the masters
8. Acceptance of benefits by them
iii. Note: In close case tip scales in favor of innocent party (IN).
iv. Intentional torts are outside scope unless:
1. Force is used to further Ms business (e.g. bounce)
2. M ratifies the use of force (nice job); or
3. M authorized S to commit an intentional tort (e.g. misrepresentation).
v. RatificationP may ratify unauthorized tortious acts of her employee
same rules---pay attention to knowledge of all material facts
requirement.
d. Effect.
i. M & S are jointly & severally liable to T, but T can get only one total
satisfaction.
1. Meaning can recover from P or A or both.
2. Normally cannot (?) release one without releaseing other normally.
ii. P has right to indemnify for torts; practically this means little.
II. Tort liability for authorized Subservants
a. Analysis revolves around existence/nonexistence of authority to hire.
i. Express; implied (circumstance, past practices emergency)then
employer/employee relationship/respondeat superior.
ii. No authorityP not liable.
III. Tort liability when one general employer loans S to another special employer.
a. Key is whether borrowing P or loaning P has primary right to control the
employee (i.e. the manner and method by which person performs his task)
b. Three factors IN courts consider:
i. (i) Whose business is further by act giving rise to tort?
ii. (ii) What is the scope(?)
iii. (iii) Who has actual control over the employee?
IV. Direct liability.
a. M is liable for own negligence in supervising or hiringfails to train or supervise
employees or check employees criminal record/job history.
i. Note: this is not vicarious liability.
b. P also be liable for IC negligence where inherently dangerous nature or P has a
nondelegable duty to act (keep land safe for invitees).

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