Quiz Show

Donna M. Kesot, CPCUCPCU 530 Agency Law

March 13, 2013

The parties to an agency?

Agent & Principal•Agency is a fiduciary relationship where the agent holds a position of trust, manages the principal’s affairs or funds, and has a duty to the principal to act in a trustworthy manner.

•Principal: the party in an agency that authorizes the agent to act on that party’s behalf

•Agent: the party that is authorized by the principal to act on the principal’s behalf

Establish agency relationship (3):

By Appointment: The principal authorizes the agent to act in her behalf and the agent assents to the appointment. Can be express of implied. Real property requires principal’s signature.

By Estoppel: The principal’s words or conduct cause a 3rd

party to reasonably believe that an agency exists and the 3rd party materially relies upon the words or conduct, e.g. consignee given space in a shop. Not a genuine agency, protects 3rd Party only.By Ratification: Results when a principal adopts (ratifies) the act of another who has purported to act for the principal and has neither the power nor authority to perform the act for the principal, e.g. insurance agents without LOA. Principal may refuse to approve unauthorized acts.

Match the duty to the party:

Loyalty & Obedience

Compensation

Accounting

Reasonable Care

Expense Reimbursement

Principal to Agent

Agent to Principal

Agent to Principal

Principal to Agent

Subagent to Principal

Duties are not owed for dishonest, immoral, or illegal acts

4 Conditions of Ratification:

Agent purports to act for “someone”

Principal must ratify entire transaction, not just favorable parts

Principal must ratify before 3rd party withdraws from the agreement

Principal must have all material facts available before the ratification is binding

Joint & severable liability:

• The liability of multiple defendants either collectively or individually for the entire amount of damages sought by the plaintiff regardless of their relative degree of responsibility. (Deep pockets)

7 Agency Terminations:Just cause (fraud, criminal activity, flagrant contract violation)

Lapse of time (expiration or reasonable period)

Accomplishment of purpose

Revocation (requires notification by word or act)

Renunciation (agent’s termination of the relationship, “I quit”)

Death or Incapacity (incapacity of principal terminates agency, incapacity of agent confers right to terminate agency to principal)

Changed Circumstances ( e.g. bankruptcy, discovery oil on land)

TRUE or FALSE?TRUE or FALSE?If the principal’s words or actions lead a 3rd party to believe that an agency exists, the principal cannot subsequently deny the agent’s authority to act on the principal’s behalf.

Independent Contractor = A person hired to perform services for another under the direction and control of the other party

TRUE or FALSE?FALSE

Real Answer:Independent Contractor = A person or organization hired to perform services without being subject to the hirer’s direction and control regarding work details.

Respondent superior• The legal principle under which an employer is

vicariously liable for the torts of an employee acting within the scope of employment

• Let the master answer because the employer controls or has the right to control how the agent performs the assigned work.

TRUE or FALSE?TRUE or FALSE?

In contracts arranged by agents, both the principal and agent may have right of recovery against 3rd parties.

A.

B.

C.

D.

E.

A principal may be liable to a 3rd party for misrepresentation by an agent when:

A, B & C

When an agent does not have actual authority, misrepresents a particular subject, but has no assets, whether the principal knew about the misrepresentation or not.

The principal intended that an agent make a misrepresentation during the transaction.

When an agent has actual or apparent authority to make true statements about a particular subject, whether the principal knew about the misrepresentation or not.

A & B only

The principal intended that an agent make a misrepresentation

during the transaction. & When an agent has actual or apparent authority to make true statements about a particular subject, whether the principal knew about the misrepresentation or not.

Certain tasks which do not require judgment or discretion

Ministerial DutiesNondelegation Rule: Generally an agent cannot delegate their duties except:1. Ministerial duties (no judgment required)2. Customary appointments (custom of the particular

business)3. Emergency appointments (to protect the principal’s

interest)

Ministerial describes an act or a function that conforms to an instruction or a prescribed procedure. It connotes obedience, performed without the use of judgment by the person performing the act or duty.

Principal is directly liable for to a 3rd party for an agent’s tort because of 5 responsibilities:

Selecting appropriate individuals as agents

Giving them clear instruction

Providing them with appropriate tools, equipment, and materials

Monitoring their performance

Discharging those who do not perform appropriately