Understanding Agency Relationships

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Questions and Answers

What is necessary for a principal to be bound by an agent's actions?

The agent must provide written documentation of actions.

The agent must have a signed contract.

The agent must have some type of authority. (correct)

The agent must work for the principal.

What is a key difference between employees and independent contractors?

Employees are subject to more control from the principal. (correct)

Independent contractors must complete tasks by a set schedule.

Employees cannot choose how to complete their tasks.

Independent contractors have less responsibility than employees.

Which duty does an agent owe regarding conflicts of interest?

Agents must always prioritize their own interests.

Agents can compete with the principal in all situations.

Agents can have conflicts of interest as long as they disclose them.

Agents must avoid conflicts of interest unless the principal consents. (correct)

What defines confidential information for an agent?

Information valuable to the principal that is not widely known. Signup and view all the answers

Under what condition can an agent disclose confidential information?

When the principal agrees to it. Signup and view all the answers

What should an agent avoid doing when conducting the principal's business?

Competing with the principal without consent. Signup and view all the answers

Which scenario represents a breach of duty by the agent?

An agent using confidential information against the principal's wishes. Signup and view all the answers

What is one of the primary fiduciary duties of an agent?

Duty to maintain confidentiality. Signup and view all the answers

What defines a fiduciary relationship between a principal and an agent?

The agent acts under the control of the principal. Signup and view all the answers

Which statement is true regarding the capacity of a principal to delegate to an agent?

A person must have the capability to perform the act themselves. Signup and view all the answers

Which of the following is an example of a non-delegable obligation of a principal?

Signing a will. Signup and view all the answers

What is implied authority in an agency relationship?

Authority assumed based on the principal's actions. Signup and view all the answers

Which type of authority is created through the principal's explicit statements?

Express authority. Signup and view all the answers

Which of the following best describes apparent authority in an agency relationship?

Authority perceived by third parties based on principal's behavior. Signup and view all the answers

When can an agent typically act on behalf of the principal?

Whenever reasonable actions are assumed to be desired by the principal. Signup and view all the answers

What does the nature of agency typically include?

Acts necessary for carrying on business. Signup and view all the answers

Under what condition can an agency be terminated by operation of law?

The accomplishment of agency objectives becomes impossible. Signup and view all the answers

What type of authority does an agent have when the principal explicitly communicates authorization?

Express authority. Signup and view all the answers

What happens to an agent's authority once the agency is terminated?

Both express and implied authority end. Signup and view all the answers

Which of the following is a condition that ends apparent authority?

The third party receives actual notification. Signup and view all the answers

Which of the following actions cannot be assumed as part of an agent's implied authority?

Selling real property without express consent. Signup and view all the answers

How can a principal bind themselves to an agent's unauthorized contract?

By ratifying the contract post-factum. Signup and view all the answers

What is apparent authority primarily based on?

Communications between the principal and third party. Signup and view all the answers

If the principal dies, which type of authority ends automatically?

Both express and apparent authority. Signup and view all the answers

In which situation is an agent most likely to be liable on an authorized contract?

When the principal is undisclosed Signup and view all the answers

What conditions must be met for a principal to be liable for torts committed by their agent?

The agent must be acting within the scope of employment Signup and view all the answers

What does it mean if a principal is described as a 'partially disclosed principal'?

The third party knows the agent is acting on behalf of someone but not who Signup and view all the answers

Under what circumstance would a third party not be able to hold an agent liable?

If there is a written agreement stating otherwise Signup and view all the answers

What is a key factor that determines if an agent is liable on a contract made on behalf of the principal?

Whether the principal was disclosed, partially disclosed, or undisclosed Signup and view all the answers

What condition would lead to a third party believing that the agent is the principal?

The principal is an undisclosed principal Signup and view all the answers

What does it indicate if an agent is recognized as having the authority to act for the principal?

The agent is acting within the principal's scope of authority Signup and view all the answers

When is an agent not liable for transactions when acting on behalf of a principal?

If the principal is disclosed Signup and view all the answers

What must be true for a principal to be held vicariously liable for an agent's tortious conduct?

The tort must occur within the authorized time and location. Signup and view all the answers

What is a key difference between vicarious liability and direct liability?

Direct liability requires the principal to be negligent. Signup and view all the answers

In the context of vicarious liability, what does it mean for an agent's actions to be "motivated at least in part to serve the employer"?

The agent's conduct should primarily benefit the employer. Signup and view all the answers

If any one of the criteria for vicarious liability is missing, what happens?

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

In what scenario would a principal be liable for an agent's actions if the agent was not acting within the scope of employment?

If the principal ratifies the agent's conduct. Signup and view all the answers

What does it mean for the principal to be negligent regarding the agent?

It refers to failing to supervise the agent adequately. Signup and view all the answers

For which of the following actions is the principal not liable under vicarious liability?

The agent acted outside the scope of their authority. Signup and view all the answers

Which condition does not need to be met for a principal to be held liable for an agent's tortious conduct?

The agent must be an employee of the principal. Signup and view all the answers

Study Notes

Agency Overview

Agency allows one party (agent) to act on behalf of another (principal).
Oral contracts can be valid in establishing an agency relationship.
A fiduciary relationship arises, where the agent acts under the principal's control.

Capacity to Enter Agency Relationships

Individuals must have the capacity to act as principals and agents.
Mental capacity issues can impact the formation or continuation of the agency.

Non-Delegable Obligations

Certain acts must be performed by the principal personally, including signing wills, voting, or jury duty.

Authority Types

An agent must possess authority to bind the principal:
- Express Authority: Clearly stated by the principal (written or oral).
- Implied Authority: Acts necessary to carry on the business or reasonable actions inferred from the principal’s conduct.
- Apparent Authority: A third party reasonably believes the agent has authority based on the principal's behavior.

Principal-Agent Relationship

Distinctions exist between employees and independent contractors based on the principal's control:
- Employees are subject to more control over performance.
- Independent contractors retain freedom in how they complete tasks.

Fiduciary Duties of the Agent

Duty of Loyalty:
- Agents must avoid conflicts of interest.
- Agents cannot compete with the principal directly.
- Dual representation requires consent from both parties.
Confidentiality:
- Agents are obligated to keep valuable information confidential unless agreed otherwise.

Termination of Agency

Agency can terminate by operation of law, often due to principal's death or incapacity.
Upon termination, authority (express, implied, apparent) usually ends, although apparent authority may linger until the third party is notified.

Principal's Contract Liability

Principals are liable for contracts made by agents with express, implied, or apparent authority.
Ratification by the principal can bind them to unauthorized contracts.

Types of Principals in Contract Liability

Disclosed Principal: Third party knows agent is acting for a principal.
Partially Disclosed Principal: Third party knows of the agent but not the principal; agent remains liable unless otherwise agreed.
Undisclosed Principal: Third party is unaware of the principal; agent is liable as the principal.

Tort Liability of the Principal

A principal may be liable for torts committed by employees if:
- The tort occurs during employment or within an authorized time/context.
- The employee’s actions are related to serving the employer’s interests.
Liability depends on multiple factors being present, including the nature and timing of the agent’s actions.

Types of Liability

Vicarious Liability: Principal is liable for torts of agents performed within their employment scope.
Direct Liability: Principal can be found at fault if conducting their own negligence or mismanagement in directing the agent.

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Description

This quiz explores the nuances of agency relationships, focusing on the principles of fiduciary duties and the capacity of agents and principals. Test your knowledge on oral contracts and the roles within various agent-principal dynamics. Ideal for those studying business law.