Chapter One
Agency
Review
Questions 1-5
1. What is the difference between a general agent
and a special agent?
A general agent is a person who is given broad
latitude in the dealings for and on behalf of the principal he represents. An example of this is type of agency is one
who handles the affairs of someone who has Alzheimer’s and has planned for the
inevitable.
A special agent is a person who is given a narrow
scope of control over a particular affair of the principal. For example, the principal is going on an
extended deployment for the armed services and has engaged his accountant to
collect and pay all the bills that are due with regard to his personal and business
affairs as defined in the letter of agreement.
2. Suppose you give your friend some cash and ask
her to pick up a video for you at the video rental store. Has an agency
relationship been created? Discuss each of the elements of an agency
relationship as they relate to this situation.
A. Consent of the parties has occurred when the friend
took the cash along with the instructions.
B. We would have to assume that the parties are both of a
majority age and that they are not legally incompetent.
C. This was a verbal agreement based on acceptance of the
instructions given by the principal.
D. No consideration was exchanged, (i.e. a payment for
services) however a constructive trust has now formed; as the principal has
entrusted the cash to the agent.
E. Proper Purpose has been fulfilled as there is no sign
of illegality regarding the request to act by the principal of the agent.
3. Can an agency relationship be created without
a written agreement? What if the agent is asked to sell a parcel of land for
the principal?
An oral agreement is typical for most agency
activity. However, the sale of real
property by an agent must be in writing to satisfy the Statute of Frauds; thus
voidable
4. Can an agency relationship be created if the
principal does not pay the agent to act on his or her behalf?
Yes; the agency can be either “Express” or “Implied”. Neither requires some form of consideration.
5. Suppose that before a horse race, the owner of
one of the horses, along with the trainer and a racehorse investor, are all
having a conversation. The trainer offers to sell the racehorse to the investor
for $10,000 (in the owner's presence, and without her objection). The investor
agrees and gives the owner a $500 check to show his good faith. He also makes a
deal to sell one of his other investments to raise the additional $9,500. When
the horse in question wins the next race the owner refuses to sell, stating
that the trainer was not acting on her behalf and had no authority to sell the
horse. Is the owner correct? What type of authority, if any, does the trainer
have? Does the investor have any right to purchase the horse?
Once the owner accepted the $500 check the following
occurred; there was an acceptance of an offer to purchase and acceptance to
sell the race horse for $10,000; a meeting of the minds has taken place. This has occurred due to the purchasing owner
being present at the time of the negotiation and did not object or reject the
offer; and allowed the investor to accept the $500 of consideration. Thus a verbal contract has been created. As for the investor acting as an agent under
an implied authority; all the parties have consented to the deal, all the
parties have the capacity to act, no written agreement is required for the
investor at act, a proper purpose exists, and no consideration was needed to be
remitted to the investor. This could
really be considered Apparent Authority.
The issue of selling another piece of personal
property to complete the payment is a condition of the agreement and not an
agency issue.
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