ch 14 Agency Relationships in Business Law

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Questions and Answers

What type of agent is designated to perform all acts legally granted to an agent under a general power of attorney?

Gratuitous Agent

Special Agent

Universal Agent (correct)

Subagent

Which type of authority is based on the principal's clear verbal or written instructions?

Universal Authority

Express Authority (correct)

Apparent Authority

Implied Authority

In which scenario is an agent acting as a Gratuitous Agent?

An employee receives a salary for their work.

A real estate agent is compensated by the property owner.

A contractor is hired to remodel a house and receives a fee.

A friend helps another friend sell their car without expecting payment. (correct)

Agency by Estoppel occurs when the principal's behavior leads a third party to believe that the agent has authority. This is also known as what?

Apparent Authority Signup and view all the answers

What is a key characteristic of a Special Agent?

Authorized to represent the principal in specific transactions. Signup and view all the answers

What must a disclosed principal fulfill upon entering into a contract with a third party via an agent?

The principal must honor the contract and can be sued if failing to do so. Signup and view all the answers

Which factor is least likely to be considered in determining if a hired party is an independent contractor?

The hired party's age and experience. Signup and view all the answers

Which of the following duties is NOT required of an agent toward the principal?

Compensation Signup and view all the answers

What must a principal do to effectively terminate an agent's apparent authority?

Give notice to third parties about the termination. Signup and view all the answers

Which statement about vicarious liability is true?

The employer is generally not liable if the tort was not authorized. Signup and view all the answers

Which best describes an implied employment contract?

Terms are inferred from employee handbooks and established practices. Signup and view all the answers

In the context of agency law, which statement regarding an independent contractor is true?

Independent contractors are not typically subject to employee laws. Signup and view all the answers

Which scenario would most likely hold the principal liable for an agent's tort?

The agent committed a tort while performing their job duties. Signup and view all the answers

Which of the following is a correct statement about tort liability?

Liability only extends to authorized torts committed during employment. Signup and view all the answers

In the context of agency termination, what is NOT a valid reason for ending the agency relationship?

The agent’s performance exceeding the expectations. Signup and view all the answers

Which scenario correctly illustrates the concept of apparent authority?

A principal fails to inform a third party that the agent is no longer authorized. Signup and view all the answers

What does 'negligent hiring' refer to?

Failing to conduct background checks on employees. Signup and view all the answers

Which duty of the principal towards the agent does NOT include compensation?

Perform Signup and view all the answers

What could lead to the legal assumption of an employer-employee relationship?

The employee's work is closely supervised by the employer. Signup and view all the answers

Study Notes

Agency Relationships

An agency is formed when an agent agrees to act on behalf of a principal.
Agents can bind the principal to contracts within their given authority.
Types of Agents:
- Universal Agent: Authorized to perform all legally permissible acts on behalf of the principal (often with a power of attorney).
- General Agent: Authorized to conduct all transactions related to a specific business.
- Special Agent: Authorized to perform specific transactions, typically for a limited time.
- Agent Coupled with an Interest: Agent pays for the right to represent the principal.
- Gratuitous Agent: Agent volunteers services without payment.
- Subagent: Agent authorized to delegate authority to another agent.
Agency can be created by:
- Agreement (written or oral)
- Ratification: Principal approves the agent's actions (express or implied).
- Estoppel: Principal's actions create a reasonable belief in a third party that the agent has authority.

Types of Authority

Actual Authority (Real Authority):
- Express Authority: Based on specific instructions (written or oral).
- Implied Authority: Authority to complete tasks reasonably necessary to fulfill agent's purpose.
Apparent Authority: Created by the principal's actions, leading a third party to reasonably believe the agent has authority.

Duties

Principal's Duties to Agent: Cooperation, compensation, reimbursement, and indemnification.
Agent's Duties to Principal: Loyalty, obedience, performance, reasonable care, accounting, and notification.

Liability for Contracts

Disclosed Principal: Principal's identity is known to the third party; principal is liable.
Apparent Authority and liability for principal: Principal liable if third party contracts with agent based on apparent authority.
Undisclosed Principal: Principal's identity is unknown; agent is liable.

Terminating Agency Relationships

Agency ends through agreement, fulfillment of purpose, termination by one party, operation of law, or withdrawal of authority; notice to third parties is crucial.

Agency and the Employment Relationship

Employment Relationships

Employer-Independent Contractor: Contractor is not controlled by the employer; employer avoids certain taxes.
- The employer doesn't hold liability for the independent contractor.
Determining Independent Contractor status: Courts evaluate factors like employer control, distinct occupation, supervision, skill, tools/supplies, relationship length, compensation type, and integration into employer's workforce.
Employer-Employee: Employee's work is controlled by the employer; can be an agent.

Employees as Agents

Some employees are agents, authorized to make business decisions and enter into contracts.

Employment At-Will

Common law allows employers to dismiss at-will employees without cause.
Statutory grounds for employee lawsuits for wrongful dismissal may exist.

Employment Contracts

Express Contracts: Explicit agreement defining employment terms.
Implied Contracts: Created by actions, statements, or practices of the employer/employee.
Implied Covenant of Good Faith and Fair Dealing: Some states extend this to the employment relationship.

Tort Liability

Principal's Liability: Principal is liable for torts committed by agents if authorized or occurring within the scope of employment.
Unauthorized Torts: Agent is liable; principal generally isn't.
Vicarious Liability (Respondeat Superior): Principal is liable for torts of agent acting within the scope of employment.
Negligent Hiring: An employer may be held liable for an employee's negligent action if the hiring process was deemed to be negligent and the employer failed to perform proper background checks.

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Description

This quiz explores the various types of agency relationships and their formation. Participants will learn about the roles of agents, including universal, general, special, and gratuitous agents. Test your understanding of how agency is created and the implications of agency authority in contractual agreements.