Agency and Partnership(all solved)

I. FORMATION OF THE AGENCY RELATIONSHIP correct answers A. DEFINITION: Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.The person who is acting for another is the agent; the person for whom the agent is acting is the principal. 1. CONSENT: Consent of both the principal and the agent is necessary to form an agency relationship. Consent may be established expressly (written or oral statements), or by implication from the parties' conduct. 2. ON BEHALF OF: This requirement is generally understood to mean that the agent must be acting primarily for the benefit of the principal, rather than for the benefit of the agent or some other party. 3. CONTROL: The agent must act subject to the principal's control, but the degree of control exercised by the principal does not have to be significant. The requisite level of control may be found simply by the fact that the principal has specified the task that the agent should perform, even if the principal has not prescribed the specifics of how the task should be accomplished. B. CAPACITY: A principal must have contractual capacity (because the contract is between the principal and a third party), but the agent does not (because the agent is just an intermediary). C. WRITING: Agency law requires no writing, but the statute of frauds may. This is called the "equal dignities" rule—agency agreements must be in writing when the agent is to enter into certain contracts within the statute of frauds (or when the agency agreement itself would fall within the statute of frauds). D. CONSIDERATION: Consideration is not required for the creation of an agency relationship. II. LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED INTO BY AGENTS correct answers A. TYPES OF AUTHORITY 1. ACTUAL AUTHORITY: Actual authority is authority that the agent reasonably thinks she possesses based on the principal's dealings with her. Put differently, if the principal's words or conduct would lead a reasonable person in the agent's position to believe that the agent has authority to act on the principal's behalf, the agent has actual authority to bind the principal. Actual authority may be express or implied. a. EXPRESS ACTUAL AUTHORITY: Authority conveyed by the principal in words (oral or written).