1. Agency Law

Agency Law

Playlist: 10 Videos: 27 Minutes



Topic: Learning Material

Introduction to Agency Law
Agency law concerns the legal relationship by which one person acts on behalf of another. This chapter will examine the agency relationship and the legal duties owed by principal and agent. It will focus upon the scope of the agency relationship — particularly in the context of the employer-employee relationship. It will introduce the concept of vicarious liability and provide the elements necessary for a principal to be held liable for the actions of the agent. This topic will include liability for contracts entered into by the agent and torts committed by the agent. For further written and video explanation, discussion and practice questions, see Agency Law (Intro)

What is an “Agency” relationship?
  • “Principal”
  • “Agent”
  • Interact with “third parties”

For further written and video explanation, discussion and practice questions, see What is an "agency" relationship?

What are the type of agent?
  • Limited Agent
  • General Agent

For further written and video explanation, discussion and practice questions, see What are the types of agent?

Agency - “Employee vs Independent Contractor”
  • Employee
  • Independent Contractor

For further written and video explanation, discussion and practice questions, see Employee vs. Independent Contractor

What are the types of “Principal”?
  • Disclosed
  • Undisclosed
  • Partially Disclosed

For further written and video explanation, discussion and practice questions, see What are the types of principal?

Requirements for a “Principal-Agent Relationship”
  • Express Agency
  • Implied Agency
  • Ratification of Actions by Agent
  • Agency by Estoppel
  • Agency by Necessity

To learn more about these manners of forming an agency relationship and for further written and video explanation, discussion and practice questions, see What is required to form a principal-agent relationship?

Duties of the Principal to the Agent
  • Compensate
  • Reimburse
  • Indemnify

To learn about these duties, and or further written and video explanation, discussion and practice questions, see What are the duties of a principal?

Duties of the Agent to the Principal
  • Loyalty
  • Duty of Care
  • Information
  • Obedience
  • Accounting

For further written and video explanation, discussion and practice questions, see What are the duties of an agent?

Authority of an Agent to Bind a Principal
  • Actual Authority
  • Implied Authority
  • Apparent Authority

To learn more about these types of authority, and for further written and video explanation, discussion and practice questions, see What is the authority of Agent to Bind Business in Contract?

Agent’s Liability to Third Parties
  • “Scope of authority” - Not liable.
  • Act on behalf of the principal - disclose that agency relationship to third party.

For further written and video explanation, discussion and practice questions, see When are agents liable to principals and third parties?

When is a Principle Liable for the Torts of an Agent?
  • “Vicarious liability”.
  • Respondeat superior”.
  • “within the scope of the agency”.

For further written and video explanation, discussion and practice questions, see When does the Agency Relationship Terminate?

What is a “Frolic and Detour”?
  • “Frolic and detour”
  • Acting outside the scope of her employment
  • For the benefit of someone other than the employer.

For further written and video explanation, discussion and practice questions, see What is a "Frolic and Detour"?

When does the agency relationship terminate?
  • Withdrawal by Either Party
  • Withdrawal by Both Parties
  • Termination by the Principal
  • Renunciation by the Agent
  • Duties of Agent Complete
  • Death or Incapacity
  • Bankruptcy

For further written and video explanation, discussion and practice questions, see When does the Agency Relationship Terminate?


Flashcard: Study Practice

Q1
______________ is a relationship in which a party acts on behalf of and with the authority of another party.

Q2
The __________________________ appoints or authorizes the ______________ to act on her behalf.

Q3
______________ has a special purpose and limited authority to act on behalf of the principal. Unless specifically limited by the principal, actions done in furtherance of that purpose are within the scope of the agent’s authority.

Q4
_______________ has broad authority to act on behalf of the agent. The scope of the agency is not limited to a special purpose.

Q5
An _______________ is an agent hired to perform a service for the principal but is generally not under the direct control or supervision of the principal.

Q6
An _______________ is a general agent who works exclusively for the business in the functions for which she is hired. The employer exercises extensive control over the nature, time, and manner of work carried out.

Q7
A _______________ is a separate business that is hired to perform services for or on behalf of another person or business. The employer does not directly control the manner and method by which the individual carries out her duties.

Q8
Absent specific instructions to do a task leading to liability, an employer is not liable for the actions of an independent contractor taken on behalf of the principal. True or False

Q9
Which of the following are categories of principal?

A9
Disclosed Principal; Partially-disclosed Principal; Undisclosed Principal

Resource Video: https://thebusinessprofessor.com/types-of-principal-in-an-agency-relationship/

Q10
An agency relationship is created in the following manner(s):

A10
Expressly Granted; Implied in Fact or Law; Ratified by a Principal

Resource Video: https://thebusinessprofessor.com/methods-of-forming-principal-agent-relationship/

Q11
An agency relationship may be implied from the facts or circumstances surrounding an individual’s actions on behalf of another. True or False

Q12
An ___________ arises when the principal acts in a way that demonstrates an intent for an individual to act on her behalf in a way that leads to an agency relationship.

Q13
_________________ occurs when an agent acts be outside of any express or implied authority; however, the principal acknowledges and accepts the agent’s actions.

Q14
If a third-party reasonably relies on an agent’s representation that she has authority to act on behalf of the principal, the principal may be bound by the actions of the agent. This is known as _____________.

Q15
_____________ is a type of agency that arises when one party makes a decision on behalf of another person who is unable to do so. The decision must be essential in nature and it must be in the interest of the principal.

Q16
Generally, a principal owes the following duty or duties to the agent:

A16
Duty to Compensate; Duty to Reimburse; Duty to Indemnify

Resource Video: https://thebusinessprofessor.com/duties-of-a-principal-to-an-agent/

Q17
If the agency agreement does not indicate the terms of compensation, the principal is obligated to provide the agent with reasonable compensation. True or False

Q18
The principal is generally obligated to reimburse the agent for a reasonable amount when ________.

A18
The agent spends funds in the course of her duties.

Resource Video: https://thebusinessprofessor.com/duties-of-a-principal-to-an-agent/

Q19
Generally, a principal must indemnify an agent for liability incurred in the performance of her duties. True or False

Q20
Which of the following is/are NOT a duty or duties of an agent to a principal?

A20
Duty of Loyalty; Duty of Care; Duty of Information & Disclosure; Duty of Obedience; Duty of Accounting

Resource Video: https://thebusinessprofessor.com/principal-and-agent-relationship/

Q21
An agent has the duty of loyalty to act for the principal’s advantage and not to act to benefit herself at the principal’s expense. True or False

Q22
An agent has a duty to exercise ________________ when carrying out the responsibilities of the agency.

Q23
The agent has the following duties with regard of all material information acquired as a result of the agency relationship.

A23
to protect all confidential information of the principal; to keep the principal fully informed

Resource Video: https://thebusinessprofessor.com/principal-and-agent-relationship/

Q24
The agent has NO duty to obey the reasonable instructions from the principal. True or False

Q25
The agent has a duty to account to the principal for monies handled. True or False

Q26
A principal is responsible for any obligations incurred by the agent that are within her authority. True or False

Q27
_______________ is the express authority from the principal allowing the agent to enter into obligations (contracts) on her behalf.

Q28
_______________ concerns the authority to enter into obligations that a reasonable person would imply from the agent’s position, title, or past course of dealings.

Q29
_______________ arises when the agent represents that she has authority to enter into a contract on behalf of the principal. Her actions will bind the principal if a reasonable person would believe those representations.

Q30
_______________ occurs when the principal accepts or takes advantage of the agent’s actions taken on her behalf - even though the actions were not otherwise authorized.

Q31
An agent acting within the scope of her authority is liable to third parties on obligations entered into on behalf of the principal. True or False

Q32
To avoid personal liability for contracts entered into on behalf of a principal, an agent must act on behalf of the principal and disclose that relationship to the third party. True or False

Q33
Whenever an individual is held liable for the actions of another, this is known as _______________.

Q34
A principal is responsible for the tortious acts of an agent pursuant to a doctrine known as _______________.

Q35
An agent may create tort liability for the principal for actions taken by the agent _______________.

A35

Q36
A principal and agent are _________________ liable for torts committed by an agent within the scope of employment.

Q37
________________ is a general defense to vicarious tort liability, which states that the principal should not be liable for the tortious acts of the agent when the agent is acting outside the scope of her employment and for the benefit of someone other than the employer.

A37
Frolic and detour

Resource Video: https://thebusinessprofessor.com/frolic-and-detour/

Q38
A _________ is when an employee abandons the employer’s business objectives and pursues personal interests.

Q39
A ___________ occurs when an employee substantially deviates from an employer’s instructions or rules.

Q40
What situations terminate an agency relationship?

A40
Withdrawal by Either Party, Withdrawal by Both Parties, Termination by the Principal, Renunciation by the Agent, Duties of Agent are Complete, Principal Death or Incapacity, Principal Bankruptcy

Resource Video: https://thebusinessprofessor.com/when-does-agency-relationship-terminate/


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