Creation - Next Generation Bar Exam
- A man asks his neighbor, without pay and without any writing, to sell his car for him, and the neighbor agrees. What relationship has been created?
- An agency, with the man as principal and the neighbor as agent. Consent and control suffice; neither compensation nor a writing is required.
- Under the equal dignities rule followed in some states, what authority must an agent have to sign a contract that must be in writing?
- Written authority. The rule extends the statute of frauds to the grant of authority itself.
- What is the status of an agency in which the agent receives no compensation?
- It is a valid gratuitous agency, carrying the same fiduciary duties. Compensation is not an element of agency.
- A creditor of a grain company exercises veto power over the company's finances and operations and directs its daily business. What relationship may the court find?
- An agency, with the creditor as principal. Pervasive control by the creditor can make it a principal liable for the debtor's obligations.
- What capacity must an agent have?
- Only the capacity to perform the act; a minor may serve as an agent. The legal effect of the act falls on the principal, not the agent.
- What element distinguishes agency from other relationships in which one person acts for another?
- The principal's right to control the agent's conduct of the undertaking. The principal need not actually exercise control; the right to control suffices.
- What formalities are required to create an agency?
- Ordinarily none; neither a writing nor consideration is required. Some states require written authority for an agent to sign contracts that must themselves be in writing.
- What weight does a label in the parties' agreement, such as 'not an agent,' carry in deciding whether an agency exists?
- It is not controlling; the facts of the relationship determine whether an agency exists. Courts look to the substance of the relationship, not to what the parties call it.
- When may an agent appoint a subagent?
- When the agent has actual or apparent authority from the principal to do so. A subagent acts for both the appointing agent and, through it, the principal.
- What capacity must a principal have to create an agency?
- Capacity to take the action personally that the agent is authorized to take. A principal cannot enlarge its own powers by acting through an agent.
- How is an agency relationship created?
- By the principal's manifestation that the agent shall act on its behalf and subject to its control, and the agent's consent. Agency is a consensual, fiduciary relationship.