Agency

חוֹקCA

Cal. Civ. Code § 2295

Civ. Code § 2295 (agent and agency defined)

“An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency.” Paraphrase: an agent is a person who deals with outsiders for someone else; that someone is the principal, and the relationship is agency.

אלמנטים

Assent, benefit, control

Check each element against the facts:

1. 1.Assent: Both sides agree, by words or conduct. The agreement need not be a contract, and it need not be in writing.
2. 2.Benefit: The agent acts for the principal, not for the agent’s own account. A buyer who resells goods acts for the buyer’s own account.
3. 3.Control: The principal has the right to direct what the agent does. Day-to-day supervision is not required; the right is enough.

כל האלמנטים הנדרשים.

נקודת מפתח

Labels do not control. Control does. Look for the right to direct the work, the right to end the relationship, and who bears the risk of the business.

מִקרֶה

Gorton v. Doty, 57 Idaho 792, 69 P.2d 136 (1937) (Supreme Court of Idaho 1937)

מִקרֶה

A. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d 285 (Minn. 1981) (Supreme Court of Minnesota 1981)

טיפ לבחינה

Do not skip formation because it looks obvious. Write one short paragraph: an agency exists because the company assented to the manager acting for it, the manager agreed, and the company controlled the work. It takes 40 seconds and earns the first point.

הערות מפתח

1. 1.Agency = assent + benefit + control. No writing, payment or formal appointment is needed.
2. 2.Control means the right to direct the work, not actual supervision.
3. 3.Labels do not control; a creditor or franchisor that takes control becomes a principal.
4. 4.A gratuitous agent is still an agent; a minor may be an agent.
5. 5.Exception: California’s equal dignities rule requires written authority for contracts that must be in writing.

אלמנטים

Breaches of the duty of loyalty

Each of the following is a breach unless the principal consents after full disclosure:

1. 1.Self-dealing: The agent deals with the principal as an adverse party, or acts for the other side, without disclosure.
2. 2.Secret profits: The agent takes a material benefit from a third party (a kickback, a commission) because of the agent’s position.
3. 3.Competing: The agent competes with the principal, or helps a competitor, while the agency lasts.
4. 4.Misuse of property or information: The agent uses the principal’s property or confidential information for the agent’s own or a third party’s benefit.
5. 5.Taking an opportunity: The agent takes a business opportunity that belonged to the principal.

כל אחד מספיק.

פֶּתֶק

California: employee indemnity

In California, an employer must also indemnify an employee for necessary expenses and losses caused by doing the job (Cal. Lab. Code § 2802(a)). Mention it only when the call names California.

נקודת מפתח

A breach of loyalty needs no proof of harm. The agent gives up the profit even if the principal lost nothing. Consent after full disclosure is the only defense.

טיפ לבחינה

When an agent profits from a breach, write the words disgorgement and constructive trust. The call often comes from Remedies, and those two words are on the grader’s list. Then add damages for any separate loss.

הערות מפתח

1. 1.The agent is a fiduciary and owes loyalty, obedience and care.
2. 2.Loyalty breaches: self-dealing, secret profits, competing, misuse of property or information, taking an opportunity.
3. 3.Consent after full disclosure cures a conflict; nothing else does.
4. 4.The principal owes compensation, indemnity and fair dealing (in California, also Lab. Code § 2802(a) for employees).
5. 5.Remedies: damages, disgorgement and constructive trust, rescission, loss of compensation, termination.

אלמנטים

Ratification checklist

Ratification binds the principal only if all of these are true:

1. 1.Act on the principal’s behalf: The agent acted, or claimed to act, for the principal.
2. 2.Principal existed: A corporation not yet formed cannot ratify; it adopts (Chapter 4).
3. 3.Knowledge: The principal knew the material facts, or chose to affirm without wanting to know them.
4. 4.Affirmance: Words, or conduct such as accepting benefits, suing on the contract, or silence when objection was expected.
5. 5.Whole transaction: The principal takes the burdens with the benefits; no partial ratification.

כל האלמנטים הנדרשים.

חוֹקCA

Cal. Civ. Code § 2309

Civ. Code § 2309 (equal dignities rule)

“An oral authorization is sufficient for any purpose, except that an authority to enter into a contract required by law to be in writing can only be given by an instrument in writing.” Paraphrase: if the contract itself must be written, the agent’s authority must be written too.

IRAC

לְהַנפִּיק

Whether [principal] is bound by the contract that [agent] made with [third party].

כְּלָל

The principal is bound by actual authority (the principal’s manifestation to the agent) or apparent authority (the third party’s reasonable belief, traceable to the principal). Otherwise, only ratification or estoppel binds the principal.

בַּקָשָׁה

Here, actual authority: what did [principal] tell [agent], and was the act usual for the task? Apparent authority: what did [principal] do that reached [third party]? [Third party] will point to [title / past dealings]. However, [principal] will argue that only [agent] spoke. Ratification: did [principal] learn the material facts and keep the benefits?

מַסְקָנָה

Therefore, [principal] is [bound / not bound] because [actual authority / apparent authority / ratification / none of these].

טיפ לבחינה

Analyze actual authority, then apparent authority, then ratification, with a heading for each. Say so even when actual authority clearly fails. Actual and apparent authority each appeared on 6 of the last 50 exams.

הערות מפתח

1. 1.Actual authority: the principal’s manifestation to the agent; express or implied.
2. 2.Apparent authority: the third party’s reasonable belief, traceable to the principal.
3. 3.Ratification: affirmance with knowledge of material facts; retroactive; all or nothing.
4. 4.Disclosed principal: agent not a party. Unidentified or undisclosed: the agent is a party too.
5. 5.California: Civ. Code § 2309 requires written authority for contracts that must be written.

חוֹקCA

Cal. Civ. Code § 2338

Civ. Code § 2338 (principal liable for agent’s wrongful acts)

“Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as a part of the transaction of such business, and for his willful omission to fulfill the obligations of the principal.” Paraphrase: the principal answers for the agent’s wrongs in the agency’s business.

אלמנטים

Scope of employment factors

Conduct is within the scope when, on balance, these factors point to the job:

1. 1.Kind of work: The act is the kind the employee was hired to perform, or is incidental to it.
2. 2.Time and place: It happened within the authorized time and place of the job, or close to them.
3. 3.Purpose to serve: The employee acted, at least in part, to serve the employer.
4. 4.Enterprise risk (California): California also asks whether the harm is a typical risk of the enterprise.

כל אחד מספיק.

מִקרֶה

Lisa M. v. Henry Mayo Newhall Memorial Hospital, (1995) 12 Cal.4th 291 (California Supreme Court 1995)

מנמוני

The four independent-contractor exceptions.

הִיפּוֹתֵטִי

The delivery driver’s lunch

A furniture company employs a driver to deliver sofas in its truck from 8 a.m. to 5 p.m.. The company sets the route each morning and approves 3 lunch stops on it. At 12:30 p.m., between deliveries, the driver leaves the route to buy lunch at a taco stand 3 blocks away. While turning into the parking lot, the driver fails to yield and hits a pedestrian. The pedestrian sues both. The company argues that the driver was on a personal errand at an unapproved stop.

Is the company liable to the pedestrian?

טיפ לבחינה

Respondeat superior appeared on 7 of the last 50 exams. Always write three headings: employee or independent contractor; scope of employment; and the employee’s own liability. Conclude under each heading.

הערות מפתח

1. 1.Respondeat superior: employer liable for an employee’s tort within the scope of employment.
2. 2.Employee status: the right to control the manner and means; labels do not control.
3. 3.Scope: kind of work, time and place, purpose to serve; California adds enterprise risk.
4. 4.Detour stays in scope; frolic leaves it. Commuting is outside.
5. 5.Intentional torts: within scope if partly meant to serve the employer, or force is expected in the job.
6. 6.Independent contractors: no liability, except the four SAND exceptions.

נקודת מפתח

Revocation ends actual authority as soon as the agent has notice. Apparent authority ends only when the third party knows. A principal who dismisses an agent must tell the agent’s customers.

פֶּתֶק

California: third parties without actual knowledge

If the call is silent, state the traditional rule for death or incapacity and add one sentence on the Restatement notice rule. If the call names California, apply Civ. Code § 2356(b): a bona fide deal binds the principal and successors unless the third party had actual knowledge. A durable power of attorney survives incapacity (Cal. Prob. Code § 4124).

חוֹקCA

Cal. Civ. Code § 2356

Civ. Code § 2356 (termination by revocation, death or incapacity)

Paraphrase: unless the agent’s power is coupled with an interest in the subject of the agency, the agency ends when the principal revokes it, dies or loses capacity to contract. But any bona fide transaction that a person enters into with the agent, without actual knowledge of the revocation, death or incapacity, binds the principal and the principal’s heirs and other successors.

טיפ לבחינה

When the facts say the principal dismissed the agent, revoked authority or died, write two headings: actual authority (ended) and apparent authority (notice to the third party?). Then check ratification: did the principal keep the benefit of the later deal?

הערות מפתח

1. 1.Actual authority ends by revocation (on notice to the agent), renunciation, lapse, accomplished purpose, or death or incapacity.
2. 2.The principal has the power to revoke (except a power given as security), even without the right; wrongful revocation is a breach.
3. 3.Apparent authority lasts until the third party’s belief is no longer reasonable; notify everyone who dealt with the agent.
4. 4.A power given as security is irrevocable and survives death or incapacity.
5. 5.California: Civ. Code § 2356(b) protects bona fide transactions made without actual knowledge.

תרגול · MBE

תרגול · MBE

תרגול · MBE

תרגול · MBE

הִיפּוֹתֵטִי

Mini-essay drill (15 minutes): the $50,000 order

A software company employs a purchasing officer. Her written job description allows her to sign purchase orders up to $10,000; anything larger needs the chief executive officer’s signature. Last year, at a trade show, the chief executive officer introduced the officer to a hardware vendor. He said, “She handles all our purchasing; deal with her,” and moved on. The vendor had no other contact with the company and never saw the job description. Last month, the officer signed a $50,000 purchase order with the vendor for servers, without the chief executive officer’s signature. The vendor delivered the servers. The company installed them and has used them for a month. When the invoice arrived, the chief executive officer read it and saw the $50,000 price and the officer’s signature. He refused to pay, saying the officer had no authority to sign it. The company has not offered to return the servers, and its staff still use them every day.

Is the company bound to pay the vendor? Is the purchasing officer liable to the company? Discuss.

הערות מפתח

Chapter summary

1. 1.Agency = assent + benefit + control; no writing or payment is needed; labels do not control.
2. 2.The agent owes loyalty, obedience and care; the principal owes compensation, indemnity and good faith. Disloyalty: disgorgement.
3. 3.Contract: actual authority (to the agent), apparent authority (to the third party), ratification (with knowledge, retroactive).
4. 4.The agent’s liability depends on disclosure: disclosed, no; unidentified or undisclosed, yes.
5. 5.Tort: employee plus scope of employment; detour in, frolic out; intentional torts only if meant partly to serve the employer; SAND for contractors.
6. 6.Termination: actual authority ends when the agent has notice of revocation; apparent authority lasts while the third party’s belief is reasonable.