REG agency-law coverage for formation, authority, duties, liability, and termination.
This chapter covers how agency relationships are formed and how they bind principals, agents, and third parties. Agency questions are often resolved by identifying who had authority, what representation was made, and whether the relationship had ended.
Agency questions should begin with the source of authority. Liability often depends less on the agent’s job title and more on what the principal actually authorized, appeared to authorize, later accepted, or properly terminated.
| Agency issue | First question | Exam risk |
|---|---|---|
| Formation | Did the parties create an agency relationship by agreement, conduct, or law? | Looking for formal contract language when agency can arise from behavior. |
| Authority | Was the agent’s power actual, apparent, or later ratified? | Treating apparent authority as if it comes from the agent’s own statements. |
| Duties and liability | Which party owed the duty, breached it, or became bound to the third party? | Mixing the agent-principal relationship with the principal-third party relationship. |
| Termination | Was authority ended, and was required notice given to affected third parties? | Assuming termination between principal and agent automatically defeats apparent authority. |
| Step | REG question to ask | Legal effect |
|---|---|---|
| 1. Establish agency relationship | Did agency arise by agreement, conduct, law, or later ratification? | Liability analysis starts with whether an agency relationship exists. |
| 2. Identify source of authority | Was authority actual, apparent, implied, or ratified after the act? | Authority determines whether the principal is bound. |
| 3. Assess third-party reliance | What did the principal communicate or allow the third party to believe? | Apparent authority comes from the principal’s manifestations, not the agent’s claims alone. |
| 4. Evaluate duties and breach | Did the agent or principal breach loyalty, care, obedience, notice, or contractual duties? | Agency questions can test internal duties as well as external liability. |
| 5. Check termination and notice | Was authority ended, and was notice sufficient for prior or new third parties? | Termination may not defeat apparent authority without proper notice. |
| Checkpoint | Ask before assigning liability | Legal effect |
|---|---|---|
| Relationship creation | Did agency arise by agreement, conduct, law, or later ratification? | Agency can exist without formal contract language. |
| Authority source | Was authority actual, implied, apparent, or ratified after the act? | The source of authority determines whether the principal is bound. |
| Principal manifestation | What did the principal communicate or allow the third party to believe? | Apparent authority depends on the principal’s conduct, not the agent’s statements alone. |
| Duty breached | Did the agent or principal breach loyalty, care, obedience, notice, or contract duties? | Agency questions can test internal duties separately from third-party liability. |
| Termination notice | Was notice sufficient for prior third parties and new third parties? | Apparent authority may survive termination without proper notice. |