Question 1.1
Agency is the binding, legal relationship that is created when the agent, acting under the authority of the principal, acts on the principal’s behalf before third parties. Pursuant to agency principles, if the agent commits a tort against a third party while acting under the principal’s authority, the principal will be liable for the agent’s tortuous conduct. Similarly, if the agent, acting under the principal’s authority, enters into a contract with a third party on the principal’s behalf, the principal will be liable for the terms of the contract.
There are different kinds of agency relationships that exist between an agent and a principal. One type of agency relationship is general. Under general agency theory, an agent has authority, without any limitations, to perform any conduct or action in connection with a specific occupation, business, or trade. The authority of the agent is limited to the extent of the scope of the particular occupation, business, or trade. Another type of agency relationship is a special. Under a special agency theory, the agent’s authority is restricted to the specific task or responsibilities the agent was directed to carry out. A special agency relationship limits the agent’s authority to act much more so than a general agency relationship.
Question 2
An express agency agreement is created when the principal, through spoken or written words, authorizes the agent to act on his or her behalf. An implied agency agreement is created when the specific facts or circumstances surrounding the principal/agent relationship give the agent implied authority to act. Agency by necessity is created when there is emergency situation that requires the agent to act immediately absent proper authorization from the principal. Agency by estoppel is created when a third party is under the mistaken belief that the agent has proper authority to act on the principal’s behalf and the principal fails to correct the third party’s mistaken belief. Agency by ratification is created when an agent does not have proper authority to act, but the principal later ratifies the agent’s conduct.
When third parties enter a contract with Joe under the mistaken belief that Joe has the proper authority to act, agency by estoppel is created. This is because Joe holds himself out to third parties as having the authority to enter contracts, and the third parties are relying on Joe’s authority in good faith.
There are a number of ways to terminate the agency relationship. An agency relationship can terminate after a certain period of time elapses, when the objective of the agency relationship is achieved, by agreement between the principal and the agent, or upon the occurrence of certain events.
The court would most likely find that the agency relationship had terminated upon the landlord’s death. Because the agent’s authority terminated when the landlord died, even though both parties were unaware of this event, the agency relationship terminated. Therefore, the contract for the renewal of the lease terms would be invalid.
Question 3
An agent has actual authority to act when the principal expressly gives the agent authority to act on the principal’s behalf. An agent has apparent authority when there is no express grant of authority, yet through the principal’s word or conduct, a reasonable person would believe that the agent had the authority to act.
