Agency Law Basics

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Questions and Answers

Which type of authority allows an agent to do what is reasonable based on the principal's implied consent?

Implied authority (correct)

Apparent authority

Inherent authority

Express authority

Which of the following actions cannot be delegated by the principal according to the text?

Engaging in business negotiations

Voting in an election (correct)

Hiring employees

Signing a contract

What is the primary role of the agent in a fiduciary relationship?

To monitor the activities of the principal

To act on behalf of the principal (correct)

To advise the principal without obligation

To represent their own interests

What defines apparent authority in the context of agency?

Authority created by the principal's actions or statements. Signup and view all the answers

What does it mean when a principal has the capacity to delegate to an agent?

The principal must have mental capacity to perform the act themselves. Signup and view all the answers

What issue might arise regarding mental capacity in an agency relationship?

It could prevent the principal from forming an agency relationship. Signup and view all the answers

What is the role of principals' express statements in establishing authority?

They provide guidelines for the agent's future actions. Signup and view all the answers

When is a written contract necessary in an agency relationship?

There is typically no requirement for a written contract. Signup and view all the answers

What duty does an agent have regarding the principal's reasonable instructions?

The agent must obey the principal's reasonable instructions. Signup and view all the answers

In what situation is an agent not required to notify the principal?

When the agent receives confidential information. Signup and view all the answers

What standard must an agent meet when acting on behalf of the principal?

The agent must act with care, competence, and diligence normally exercised by agents in similar circumstances. Signup and view all the answers

What is the agent's responsibility regarding property received during agency business?

The agent must give the principal any property received. Signup and view all the answers

Under which condition can an agent adjust their duty of care?

If the nature of the work requires a higher or lower standard of care. Signup and view all the answers

What action should be taken if the principal's instructions are unclear?

The agent has a duty to seek clarification from the principal. Signup and view all the answers

Which of the following is NOT a duty of the agent to account?

Retaining all benefits without reporting to the principal. Signup and view all the answers

What may an agent NOT do with the principal's property?

Blend the principal's funds with their own. Signup and view all the answers

What is required for a principal to be bound by the agent's actions?

The agent must have some type of authority. Signup and view all the answers

Which of the following statements best describes the distinction between employees and independent contractors?

Employees typically have more control exerted over their work than independent contractors. Signup and view all the answers

What does the duty of loyalty entail for an agent?

Agents must avoid conflicts of interest unless fully disclosed to the principal. Signup and view all the answers

What is a key aspect of clients' confidentiality according to fiduciary duties?

Agents must not disclose confidential information acquired through relationships unless agreed upon by the principal. Signup and view all the answers

Which of the following is NOT an example of a fiduciary duty owed by an agent to a principal?

Duty of competitive engagement. Signup and view all the answers

In what situation might an agent legally represent both parties in a transaction?

When full disclosure and consent are given by both parties. Signup and view all the answers

What must an agent do if they wish to compete with the principal?

Obtain consent from the principal with full knowledge of relevant facts. Signup and view all the answers

Which of these actions would violate the conflict of interest principle for an agent?

Accepting gifts from a third party without the principal's knowledge. Signup and view all the answers

What must be true for vicarious liability to apply to a principal?

All specified conditions regarding the agent's conduct must be met. Signup and view all the answers

Which scenario does NOT lead to vicarious liability?

The employee's actions occur considerably outside authorized hours. Signup and view all the answers

In which case is a principal directly liable for an agent's conduct?

The agent had actual authority during the incident. Signup and view all the answers

What factor can negate vicarious liability?

The agent's actions are motivated by personal gain. Signup and view all the answers

How is principal liability established if the agent is not an employee?

Via authorization or ratification of the agent’s conduct by the principal. Signup and view all the answers

Which condition is NOT required for the principal's liability to be established?

Agent must be under the principal's supervision. Signup and view all the answers

What differentiates direct liability from vicarious liability for a principal?

Direct liability is based on the principal's own fault. Signup and view all the answers

What happens if one of the necessary conditions for vicarious liability is missing?

The principal is not held liable. Signup and view all the answers

What is the implication of a third party knowing that the agent is acting on behalf of a disclosed principal?

The agent is not liable for the contract. Signup and view all the answers

Under what condition is an agent liable when dealing with a partially disclosed principal?

When a direct agreement exists stating otherwise. Signup and view all the answers

What happens when a third party does not know the identity of an undisclosed principal?

The agent assumes the role of the principal in the eyes of the third party. Signup and view all the answers

When is an employer liable for torts committed by their agent?

When the agent acts within the scope of their employment. Signup and view all the answers

Which situation would exempt an agent from liability in a contract with a partially disclosed principal?

The third party was explicitly informed they could not hold the agent liable. Signup and view all the answers

What key factor is considered when determining the agent's liability on a contract?

The identity and status of the principal. Signup and view all the answers

What does it mean if a principal is partially disclosed?

The third party knows the agent is acting on behalf of someone but doesn’t know who that someone is. Signup and view all the answers

Which of the following correctly describes the liability of an agent acting on an undisclosed principal's behalf?

The agent is deemed to be the principal in the eyes of the third party. Signup and view all the answers

Study Notes

Agency Fundamentals

A written contract is not mandatory to establish an agency relationship; oral agreements are permissible.
A fiduciary relationship involves two parties: the agent acts under the principal's control.
Agents can include roles like sports agents and real estate agents.

Capacity of the Parties

A principal must have the capacity to perform the act themselves to delegate authority to an agent.
Mental capacity issues can affect the formation or continuation of the agency.

Non-Delegable Duties

Certain actions must be performed by the principal personally, such as signing a will, voting, or serving on a jury.

Authority of Agents

Agents must possess authority to bind principals to their actions.
Express Authority: Clearly stated authority, either orally or in writing, e.g., negotiating contracts.
Implied Authority: Authority inferred from the principal's actions that are reasonable for the agent to undertake.

Apparent Authority

Third parties may reasonably believe an agent is authorized based on the principal's behavior or statements.
The principal may create apparent authority by allowing agents to act in certain ways.

Distinction Between Employees and Independent Contractors

The key distinction lies in the principal's control over the agent's performance.
Employees are subject to more control compared to independent contractors.

Fiduciary Duties of Agents

Duty of Loyalty: Agents must avoid conflicts of interest and cannot compete with the principal without consent.
Confidentiality: Agents cannot disclose or use the principal's confidential information unless agreed otherwise, even after the relationship ends.

Duties Agents Must Fulfill

Obey Instructions: Must follow reasonable directives from the principal but not illegal or unethical orders.
Act with Care and Skill: Agents need to exercise a standard level of skill and diligence relevant to their tasks.
Duty to Notify: Agents must inform the principal of important matters affecting the agency.

Duties to Account

Agents must accurately record financial transactions and any benefits received during their agency.
Mixing personal and agency funds is prohibited.

Liability in Contracts

An agent's liability in contracts depends on the nature of the principal (disclosed, partially disclosed, or undisclosed).
A principal is disclosed when the third party knows the agent is acting for them.

Tort Liability of Principals

Principals may be liable for torts committed by agents if:
- The agent is an employee acting within the scope of their duties.
- The tort occurs during authorized times and locations and is motivated by serving the principal’s interests.
Vicarious Liability requires all elements (agent's conduct, scope of employment) to be satisfied for the principal to be liable.

Direct Liability of Principals

Principals can be held directly liable for agents' torts if they acted within their authority or if the principal ratifies the agent's conduct.
Direct liability does not require an agent to be an employee or to act within the scope of employment.

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Description

This quiz covers the fundamentals of agency law, including the intricacies of oral contracts and fiduciary relationships. It discusses the roles of principals and agents, as well as the concept of capacity in delegating authority. Test your knowledge on the key elements of agency relationships.