Agents duties to P

Analysis Framework

CLASSIFICATION (DO NOT NEED TO WRITE ON THE ANSWER SHEET) 1. Identify the players: use this framework only if P is suing A; 2. Identify the challenged acts 3. Identify potential legal flaws in the acts (1) Lack of authority (2) Negligence (3) Self-dealing (4) Bad faith

START ANSWERING 1. Authority (1) Does A have actual authority? Need to show agency relationship to have actual authority. (2) Agency: Is A Ps agent? Manifest assent that A shall act a. On Ps behalf b. Subject to Ps control (3) Does A have actual authority to do sth? P manifest A to do that. 2. Fiduciary duties (1) Duty: Does A owe P fiduciary duties? A owes P fiduciary duty because he is Ps Agent. (2) Determine SoR (if A is an agent, agency SoR applies) P is suing A, so agency SoR applies. (3) Application: Negligence: - Rest. 8.08 a. Did A act with care, competence & diligence normally exercised by agents in similar circumstances? b. Special skills/knowledge A has/claims to have are considered in analysis c. Can occur in two ways: I. Failure to act (inaction) II. Carelessness (action) Self-dealing: a. Conflict of Interest occurs when A faces a conflict between his self-interest & his duty to act in Ps interests, in matters connected with the agency relationship (Rest. 8.01, 8.03-8.04) I. Conflicted A transaction Rest. 8.01 General fiduciary principle

An agent has a fiduciary duty to act loyally for the principals benefit in all matters connected with the agency relationship. Rest. 8.03 Acting as or on behalf of an adverse party An agent has a duty not to deal with the principal as or on behalf of an adverse party in a transaction connected with the agency relationship. II. Usurping business opportunity Rest. 8.04 Competition Throughout the duration of an agency relationship, an agent has a duty to refrain from competing with the principal and from taking action on behalf of or otherwise assisting the principals competitors. During that time, an agent may take action, not otherwise wrongful, to prepare for competition following termination of the agency relationship. b. Benefit from fiduciary position: A obtains a benefit by use or by reason of his fiduciary position or of opportunity, knowledge or access to property resulting from it I. Benefit by reason of fiduciary position Rest. 8.02 Material benefit arising out of position An agent has a duty not to acquire a material benefit from a third party in connection with transactions conducted or other actions taken on behalf of the principal or otherwise through the agents use of the agents position. II. Using Ps property Rest. 8.05(1) Use of principals property An agent has a duty not to use property of the principal for the agents own purposes or those of a third party; III. Using Ps confidential information Rest. 8.05(2) Use of confidential information An agent has a duty not to use or communicate confidential information of the principal for the agents own purposes or those of a third party. IV. Usurping Ps business opportunity (Rest. 8.04) overlaps with CoI 3. Approval (1) Consent Rest. 8.06 Principal's consent (1) Conduct by an agent that would otherwise constitute a breach of duty as stated in 8.01, 8.02, 8.03, 8.04, and 8.05 does not constitute a breach of duty if the principal consents to the conduct, provided that (a) in obtaining the principal's consent, the agent

(i) acts in good faith, (ii) discloses all material facts that the agent knows, has reason to know, or should know would reasonably affect the principal's judgment unless the principal has manifested that such facts are already known by the principal or that the principal does not wish to know them, and (iii) otherwise deals fairly with the principal; and (b) the principal's consent concerns either a specific act or transaction, or acts or transactions of a specified type that could reasonably be expected to occur in the ordinary course of the agency relationship. (2) An agent who acts for more than one principal in a transaction between or among them has a duty (a) to deal in good faith with each principal, (b) to disclose to each principal (i) the fact that the agent acts for the other principal or principals, and (ii) all other facts that the agent knows, has reason to know, or should know would reasonably affect the principal's judgment unless the principal has manifested that such facts are already known by the principal or that the principal does not wish to know them, and (c) otherwise to deal fairly with each principal. (2) Ratification a. Appropriate ratifier A ratifier is appropriate if it could legally do the ratified act: I. Ratifier must exist at time of the act and must have legal capacity & authority to do the act at time of ratification [Rest. 4.04] II. A must have acted or purported to act as Ps agent [Rest. 4.03] b. Act is ratifiable: Ratification is not unfair to the third party I. Complete: ratification must encompass the entirety of an act, contract or other single transaction [Rest. 4.07] II. Timely [Rest. 4.05] Ratification ineffective if circumstances that would cause the ratification to have adverse and inequitable effects on the rights of [T] occurred. III. Fairly applied [Rest. 4.02(2)] Ratification is ineffective (a) In favor of a person who causes it by misrepresentation or other conduct that would make a contract voidable (b) In favor of A against P, when P ratifies to avoid a loss (c) To diminish pre-ratification rights of persons not parties to the transaction c. Ratification is unambiguous

Rest. 4.01(2) P ratifies an act by: I. Manifesting assent that the act shall affect Ps legal relations; or II. Conduct that justifies a reasonable assumption that P consents Ratification requires objective or externally observable indication that P consents to As act, but consent need not be communicated to T or to A. d. Ratification is informed Ratification is valid only with knowledge of all material facts involved in the original act[Rest. 4.06] Material facts: Facts that a reasonable person would consider relevant to the decision whether to ratify

Principals duties to Agent

Analysis Framework

1. Contractual duties Ps duties to A are contractual in nature (Rest. 8.13, 8.14(1)) Rest. 8.13 Duty created by contract A principal has a duty to act in accordance with the express and implied terms of any contract between the principal and the agent. Rest.8.14(1) Duty to indemnify A principal has a duty to indemnify an agent (1) in accordance with the terms of any contract between them; 2. In addition to express terms of the agreement between P and A, P is liable to A for: (1) Implied terms (Rest.8.13) Terms that a reasonable person would infer from the express language of the agreement. (2) Breach of duty to deal in good faith (Rest.8.15) Duty to deal fairly and in good faith: Protects agreed common purpose & As justified expectations. Common application: a. Frustrating As actions P must avoid unreasonable conduct that harms A, when: I. Contract lacks specific language governing the issue; II. Conduct frustrates purposes reflected in contracts express language b. Duty to warn

P breaches duty if P fails to provide A with info about unreasonable risks involved in the agency, if risk is foreseeable to P & A is unlikely to become aware of risk on his own Risks include physical harm, pecuniary loss, and possibly also harm to business reputation & reasonable self-respect (3) Duty to indemnify Indemnifying agents default rule (Rest.8.14(2)) a. When the agent makes a payment I. within the scope of the agent's actual authority, or II. that is beneficial to the principal, unless the agent acts officiously in making the payment Officious (voluntary) payments are ones in which the agent has a reasonable opportunity to receive Ps authorization, but makes a payment without seeking authorization b. When the agent suffers a loss that fairly should be borne by the principal in light of their relationship While this is vague, a duty to indemnify typically arises when As loss is: I. In connection with the agency relationship; and II. Not a result of A's own negligence, illegal acts, or other wrongful conduct