Apparent Authority and Estoppel

Apparent Authority and Estoppel

Principal, by either word or act, causes 3rd party to reasonably believe that Agent has authority to act for Principal.

If 3rd party changes legal position by relying on Principal’s representations, Principal is estopped from denying Agent had authority to contract.

Implied Authority

Implied Authority

Inferred or conferred by custom, Agent’s position or what is reasonably necessary to carry out express authority.

What the Agent reasonably thinks the Principal means.

Express Authority

Express Authority

Can be oral or written.

“Equal Dignity Rule.”

§ If law requires written contract, Agent’s authority must be in writing. Failure to comply with the rule renders contract voidable. 

§ Exceptions:

•    Officer acting for Corporation.

•    Agent acts in Principal’s presence.

Power of Attorney (ordinary v durable).

Scope of Agent’s Authority

Scope of Agent’s Authority

Principal is liable for acts entered into by Agent when she gives Agent either actual or apparent authority:

§  Actual Authority: express or implied.

§  Apparent Authority: estoppel, emergency and ratification.

Agency, Liability to Third Parties and Termination

Introduction

ü Is Principal liable for contracts entered into by his Agent?

ü Is Agent liable for contracts entered into for Principal?

ü When is a third party liable to Principal and to Agent?

ü When is Principal liable for the torts of his Agent?

ü When is Agent liable for torts committed while working for Principal?

Rights and Remedies of Agents and Principals

Rights of Agents

§ Right to compensation, reimbursement, indemnification and cooperation.

§ Agent can withhold performance and demand an accounting.

§ Agent can recover damages for past services and future damages.

Principal’s Rights and Remedies:

§ Contract remedies for breach of fiduciary duty and performance.

§ Can sue in tort: libel, slander, trespass, deceit, fraud.

§ Constructive Trust – money/ property agent steals from Principal.

§ Avoidance of contract if agent does not do as told.

§ Indemnification  

Agent’s Duties to Principal & Principal’s Duties to Agent

Agent’s Duties to Principal

Performance: reasonable diligence and skill (special skills).

Notification to P.

Loyalty (no conflict of interest).

Case 31.3:  American Express v. Topel (1999).

Obedience. 

Accounting.

Principal’s Duties to Agent

Compensation (Express or Implied).

Reimbursement and Indemnification.

Cooperation.

Provide safe working conditions.

Formation of the Agency Relationship & Types of Agencies

Formation of the Agency Relationship

ü Consensual Agreement.

ü No consideration required.

ü Principal needs contractual capacity, Agent does not.

ü For any legal purpose.

Types of Agencies

ü Agency by Agreement.

ü Agency by Ratification.

ü Agency by Estoppel.

ü Agency by Operation of Law.

§ Necessaries for family.

§ Emergency.

Agency by Agreement

Formed through express consent (oral or written) or implied by conduct.

Case 31.2:  Acordia of Virginia Insurance Agency v. Genito Glenn (2002).

Agency by Ratification

Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent.

Agency by Estoppel

ü Principal causes a third person to believe that another person is the Principal’s Agent, and the third person acts to her detriment in reasonable reliance on that belief.

Agency by Operation of Law

Agency based on social duty is formed in certain situations when the Agent is unable to contact the Principal.

§ Necessaries.

§ Emergencies.

Employer Liability

Employer Liability

Determining whether the worker is an employee or an independent contract affects liability of Principal/Employer.

§ Tax Liability: Employer liable if employee.

§ Contract Liability: Employer not necessarily liable.

§ Tort Liability: Employer liable for torts of employee within scope of employment.

§ Works for Hire.   Case 31.1:  Graham v. James  (1998).

Agency Formation and Duties

Introduction

ü Agency=Principal and Agent.

ü Agency is the most common and most important legal relationship.

ü Understanding agency is crucial to understanding the legal environment of business.

ü Principals use agents to be able to conduct multiple business operations simultaneously in various locations.  

ü The principal has the right to control the agent in matters entrusted to the agent.

Agency Relationships

ü Agency is a “fiduciary” relationship based on trust and confidence.

ü Distinguish Employee vs. Independent Contractor  Relationships.