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New York Bar Exam - Agency


undefined, object
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What is agency?
Legal relationship whereby an agent is authorized to represent a principal in business dealings with third parties.
How do you determine if a person is an agent of the principal?
1) Assent - the must be some sort of agreement between P and A
2) Benefit - A's conduct is for the benefit of P
3) Control - P must have the power to control or supervise A.
What capacity is necessary to form an agency relationship?
1) Principal - Must have contractual capacity
2) Agent - Needs only minimal capacity

**eg, a minor could be an agent but not a principal
When can an agent be disqualified?
An agent may be disqualified for representing both parties, self-dealing, or failing to have a required license.
What other formalities are necessesary to create an agency relationship?
Consent is required but, but writing and consideration are not required.

**Note: Since no consideration is required, one could agree to serve gratuitously and be saddled with the duties of an agent.
What are the ways of creating an agency relationship?
1) Acts of parties
2) Operation of law
What acts of the parties will form an agency relationship?
1) By agreement between the principal and agent (i.e., actual authority),
2) Holding out by the principal (i.e., apparent or inherent authority), or
3) Ratification of the agents acts by the principal.
How is an agency relationship created by operation of law?
1) Estoppel - 3rd party has relied on principal's communication
2) Statute - Ussually designed to accomplish a limited purpose (eg, out of state motorist statute)
How do you analyze whether a principal will be bound on agent's contract?
1) Determine whether an agency relationship existed
2) Determine whether the agent had actual, implied, or apparent authority
3) If not determine if ratification of the contract occured.
What is actual authority?
Authority that the agent reasonably believes she possesses based on the principal’s dealings with her.

**It may be express or implied.
How is actual authority terminated?
Termination can occur by:
1) Lapse of a 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 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
6) Operation of law (e.g., death or loss of capacity of either party except where a durable power of attorney—written authority that says it will not terminate on the principal’s disability—is present).
When is an agency irrevocable?
Neither an agency coupled with an interest nor a power given as security may be unilaterally terminated by the principal if:
1) the agency was given to protect the agent’s (or a third party’s) rights, and
2) it is supported by consideration.
What is apparent authority?
Authority that arises from reasonable beliefs of third parties.

**ie, if the principal holds out another as possessing authority and that 3rd party reasonably relies
What is it important to discuss regarding apparent authority?
You need to discuss what transpired between the principal and the third party.
Can principal be liable for an imposter posing as an agent?
If he negligently permits an imposter to be in a position to appear that have agency authority.
When will a former agent's authority extend to apparent authority?
he will have apparent authority to act on the 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.
What is the effect of death or incompetency of the principal?
Terminates all authority of the agent without notice to either the agent or third parties.

**There is a limited exception for a bank honoring transactions for a customer’s account until it learns and has a reasonable time to act.
When will the principal be liable for an agents acts outside of his authority based on position?
Where the agent is in a position that customarily carries with it certain responsibilities, the principal is liable for the agent’s acts that come within these customary responsibilities.
When will the principal be liable for an agents acts outside of his authority based on prior acts?
Where the principal previously permitted the agent to exceed his authority and knows that the third party is aware of this.
What is inherent authority?
Inherent authority results in the principal’s being bound even though the agent had no actual authority to perform the particular act.
What are some example of inherent authority?
1) Respondeat Superior
2) Conduct similar to that authorized
3) Improper disposition of goods
What is Respondeat Superior?
the principal is held liable for the torts of his employee committed in the scope of employment
What is "conduct similar to that authorized"?
Where an agent exceeds his actual authority, but the conduct is similar to acts authorized, the principal will be held liable.
What is improper disposition of goods?
The principal will be held liable for the disposition of her goods by an agent possessing them if:
1) the agent was given some indicia of ownership, or
2) the goods disposed of were sold by an agent who is a dealer in the particular goods.
What is agency by ratification?
When an “agent” purports to act on behalf “principal” without any authority at all, but the “principal” subsequently validates the act and becomes bound.
What are the prereqs for ratification?
“principal” must:
1) know (or have reason to know) all material facts,
2) accept the entire transaction, and
3) have capacity (be competent and of legal age).
What are the methods of ratifying?
It can be express or implied by the principal's conduct.

**eg, acceptance of the benefits of the transaction
What may be ratified?
Generally, a “principal” may ratify anything she could legally do, unless:
1) performance was illegal at the time of ratification,
2) the third party has withdrawn, or
3) there has been a material change in circumstances. Only
Who may ratify?
Only a disclosed or partially disclosed “principal” may ratify.

**An “agent” may not treat the contract as his own.
What are the liabilities between the 3rd party and the principal?
The principal will be liable to the third party on a contract entered into by her agent if the agent had valid authority to act.
What is the liability between an agent and a 3rd party, when the principal is disclosed?
A disclosed principal (existence and identity known to the third party) is always liable on the contract, and the agent generally is not liable.
What are the exceptions to agent liability when principal is disclosed?
An agent is liable if the parties to the contract intended the agent to be liable
What is the liability between an agent and a 3rd party, when the principal is partially disclosed or undisclosed?
It results in liability for both the principal and the agent.

**3rd party can sue either and judgment against one does not bar suit against the other.
When is the principal's disclosure relevant to liability?
Only when considering the agent's liability. Any type of principal will be bound so long as he had the authority.
What is the 3rd party's liability to the diclosed principal and agent?
Only the principal may enforce the contract and hold the third party liable.
What is the 3rd party's liability to the undiclosed or partially disclosed principal and agent?
Either the principal or agent may enforce the contract and hold the third party liable.

**Note that if the agent enforces the contract, the principal is entitled to all of the rights and benefits thereunder.
When may the principal not enforce the contract?
If there has been an affirmative fraudulent misrepresentation of the principal’s identity
What are the agents duties to the prinicpal?
1) Fiduciary duty of loyalty
2) Obedience to reasonable directions
3) Reasonable care

**This is in In addition to any express contractual duties that the agent owes the principal
What are principal's remedies against the agent?
1) Tort actions
2) Actions for secret profits
3) Equitable actions for an action
4) Contract actions
What are the principal's duties to the agent?
1) duties imposed by their contract, reasonable compensation, and reimbursement for expenses.
2) Cooperate with the agent and not unreasonably interfere with the agent’s performance.
What are the agent's remedies?
1) Contractual remedies
2) Right to a possessory lien for any money due from principal

**agent is entitled to reasonable compensation when the agreement is silent.
What is the liability of a principal to a subagent?
Principal generally has no duty to compensate subagent, even if the agent had authority to hire a subagent.
When will the principal be liable for torts committed by an agent?
1) There is an agency relationship
2) The agents tortious act was within the scope of the relationship.

**Intentional torts are generally outside the relationship UNLESS conduct was authorized by P, naturally flows from employment, motivated by futhering P's interest.
What tort liability under respondeat superior?
It imputes joint and several liability to the employer-principal for torts committed by the employee-agent within the scope of the employee’s employment.
What is the effect of the employers derivative liability?
The nonliability of an employee results in the nonliability of the employer

**Note: the personal defense of the employee that don't go to liability do not bar recovery frome the employer
How do you determine whether someone is an independent employee or a contractor?
An principal has no right to control the manner and methods in which an independent contractor performs his job, but does have such control over an employee.
What is an employee by estoppel?
Where a principal creates the appearance of an employer-employee relationship upon which a third party relies, that principal will be estopped from denying the relationship and will be liable under the doctrine of respondeat superior.
How does the scope of employment affect liability?
An employer is only liable for torts of his employee if they occur within the scope of employment.
How do you determine the scope of employment?
1) the connection between the 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.

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