Agency Law
Employment laws don't apply to independent contractors. True or False?
True. Independent contractors are NOT employees, so these laws don't apply to them.
if the principal violates an exclusive agency he or she violates the exclusive agency but is not is exposed to liability for the agent's lost profits. True or False?
False
The question that the IRS focuses on to determine whether an individual is an independent contractor or an employee is...
How much control does the employer exercise over the details of the work?
Authorized Acts
If an agent acts within the scope of her or his authority, normally the principal is obligated to perform the contract regardless of whether the principal was disclosed, partially disclosed, or undisclosed.
Compensation (principal duty)
In general, when a principal requests certain services from an agent, the agent reasonably expects payment.
equal dignity rule
In most states this requires that if the contract being executed is or must be in writing, then the agent's authority must also be in writing.
Gratuitous Agents
In some situations, an agent acts gratuitously—that is, without payment.
Accounting (Agent Duty)
Unless the agent and principal agree otherwise, the agent must keep and make available to the principal an account of all property and funds received and paid out on the principal's behalf. This includes gifts from third parties in connection with the agency.
Because the unratified contract is an unaccepted offer, the third party can revoke it at any time, without liability, before the principal ratifies the contract. The agent may be liable to the third party for misrepresenting her or his authority. True or False?
True
Generally, the law assumes that the principal is aware of any information acquired by the agent that is relevant to the agency—regardless of whether the agent actually passes on this information to the principal. True or False?
True
If an agent contracts outside the scope of his or her authority, the principal may still become liable by ratifying the contract. True or False?
True
Independent contractors aren't always agents. True or False?
True
It is a basic tenet of agency law that notice to the agent is notice to the principal. True or false?
True
It is a breach of loyalty to disclose information [acquired through the agency relationship] either during the agency relationship or after its termination. True or False?
True
Normally, the [agency] agreement need not be in writing, and consideration is not required. True or False?
True
Once a gratuitous agent has begun to act in an agency capacity, he or she has the duty to continue to perform in that capacity. True or False?
True
Ordinarily, a power of attorney terminates on the incapacity or death of the person giving the power. True or False?
True
The Internal Revenue Service (IRS) has established its own criteria for determining whether a worker is an independent contractor or an employee. True or False?
True
The agent's loyalty must be undivided. The agent's actions must be strictly for the benefit of the principal and must not result in any secret profit for the agent. True or False?
True
Unless the agency relationship is gratuitous and the agent does not act in exchange for payment, the principal must pay the agreed-on value for the agent's services. If no amount has been expressly agreed on, then the principal owes the agent the _____________ for such services.
customary compensation
The principal must also _________ the agent for the value of benefits that the agent confers on the principal. This rule applies to acts by gratuitous agents.
indemnify
when an employer hires an independent contractor—such as a freelance artist or computer programmer—the ___________ normally owns the copyright.
independent contractor
Employers are required to pay certain taxes for employees but not for __________________.
independent contractors
The power of attorney is a written document and is usually _________.
notarized
When the agent is an employee, the employer's liability is frequently covered by _____________ insurance.
state workers' compensation
An agent can withhold further performance and demand that the principal give an accounting. True or False?
True
An exception is made if the parties (within a employer- independent contractor relationship) agree in writing that the work is a "work for hire" and the work falls into one of nine specific categories. True or False?
True
Agency relationships cannot exist between employers and independent contractors. True or False?
False
If an agent has represented herself or himself as possessing _________, the agent is expected to exercise the degree of skill claimed. Failure to do so constitutes a breach of the agent's duty.
special skills
disclosed principal
a principal whose identity is known by the third party at the time the contract is made by the agent.
partially disclosed principal
a principal whose identity is not known by the third party. Nevertheless, the third party knows that the agent is or may be acting for a principal at the time the contract is made.
undisclosed principal
a principal whose identity is totally unknown by the third party. In addition, the third party has no knowledge that the agent is acting in an agency capacity at the time the contract is made.
Agency
"the fiduciary relation [that] results from the manifestation of consent by one person to another that the other shall act in his [or her] behalf and subject to his [or her] control, and consent by the other so to act."
Under the Copyright Act, any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is a _________.
"work for hire"
Actual authority
(express or implied) arises from what the principal makes clear to the agent.
Agency by Estoppel
A principal may cause a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on that belief.
Exceptions to Equal Dignity Rule
1. An executive officer of a corporation normally can conduct ordinary business transactions without obtaining written authority from the corporation 2. When the agent acts in the presence of the principal, the rule does not apply 3. When the agent's act of signing is merely a formality, then the agent does not need written authority to sign
In deciding whether a worker is categorized as an employee or an independent contractor, courts often consider the following questions:
1. How much control does the employer exercise over the details of the work? 2. Is the worker engaged in an occupation or business distinct from that of the employer? 3. Is the work usually done under the employer's direction or by a specialist without supervision? 4. Does the employer supply the tools at the place of work? If so, this indicates employee status. 5. For how long is the person employed? 6. What is the method of payment—by time period or at the completion of the job? 7. What degree of skill is required of the worker?
The requirements for ratification can be summarized as follows:
1. The agent must have acted on behalf of an identified principal who subsequently ratifies the action. 2. The principal must know all the material facts involved in the transaction. 3. The principal must affirm the agent's act in its entirety. 4. The principal must have the legal capacity to authorize the transaction at the time the agent engages in the act and at the time the principal ratifies. 5. The principal's affirmation (ratification) must occur before the third party withdraws from the transaction. 6. The principal must observe the same formalities when ratifying the act as would have been required to authorize it initially.
Cooperation (principal duty)
A principal has a duty to cooperate with the agent and to assist the agent in performing his or her duties. The principal must do nothing to prevent that performance.
Express Authority (Actual Authority)
Authority declared in clear, direct, and definite terms, orally or in writing.
Implied Authority
An agent has the implied authority to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency.
duty of notification/the duty to inform
An agent is required to notify the principal of all matters that come to her or his attention concerning the subject matter of the agency.
A gratuitous agent doesn't have to perform in an acceptable manner and is subject to the same standards of care and duty to perform as other agents. True or False?
False
Ratification
Occurs when the principal affirms, or accepts responsibility for, an agent's unauthorized act.
Loyalty
The agent has the duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party.
Safe Working Conditions (principal duty)
The common law requires the principal to provide safe working premises, equipment, and conditions for all agents and employees. The principal has a duty to inspect working areas and to warn agents and employees about any unsafe situations.
Standard of Care (performance)
The degree of skill or care required of an agent is usually that expected of a reasonable person under similar circumstances.
Reimbursement and Indemnification (principal duty)
Whenever an agent disburses funds at the request of the principal, the principal has a duty to reimburse the agent. The principal must also reimburse the agent (even a gratuitous agent) for any necessary expenses incurred during the reasonable perfor-mance of her or his agency duties.
Independent Contractor
a person who contracts with another to do something for him [or her] but who is not controlled by the other nor subject to the other's right to control with respect to his [or her] physical conduct in the performance of the undertaking.
Agency by Ratification
a person who is in fact not an agent (or who is an agent acting outside the scope of her or his authority) makes a contract on behalf of another (a principal).
Fiduciary
a person who undertakes to act on behalf of—and primarily for the benefit of—another.
Whenever instructions are not clearly stated, the agent can fulfill the duty of obedience by ____________ and in a manner reasonable under the circumstances.
acting in good faith
Normally, ______________ who deal with third parties are deemed to be agents.
all employees
Obedience (agency obligations)
an agent has a duty to follow all lawful and clearly stated instructions of the principal. Any deviation from such instructions is a violation of this duty.
Any breach of a ___________ by an agent may also justify the principal's termination of the agency.
fiduciary duty
The nine copyright categories include
audiovisual works, collective works, motion pictures, textbooks, tests, and translations
Agency by Agreement
based on an express or implied agreement that the agent will act for the principal and that the principal agrees to have the agent so act.
an agent cannot represent two principals in the same transaction unless...
both know of the dual capacity and consent to it
Once the principal-agent relationship has been created, _________ have duties that govern their conduct.
both parties
remedies for breach of agency contract include:
monetary damages, termination of the agency relationship, an injunction, and required accountings
If an agent _______________ and failure to act would cause the principal substantial loss, the agent may take steps beyond the scope of her or his authority.
cannot contact the principal
Any person can be an agent regardless of whether he or she has the _________ (including minors).
capacity to contract
Agency law is based on the _______________, whereas most employment law is statutory law.
common law
Principal's Duties to the Agent
compensation, reimbursement and indemnification, cooperation, and safe working conditions.
The duty of loyalty also means that any information or knowledge acquired through the agency relationship is ________.
confidential
Agency by Operation of Law
courts may find an agency relationship in the absence of a formal agreement
During __________ when the principal cannot be consulted, the agent may deviate from the instructions without violating his or her duty.
emergency situations
All ___________ who deal with third parties are usually deemed to be agents.
employees
Employment laws (state and federal) apply only to the....
employer-employee relationship.
Agency relationships commonly exist between _______________.
employers and employees
Because employees who deal with third parties generally are deemed to be agents of their employers, agency law and ________________ overlap considerably.
employment law
when a principal grants an agent an exclusive territory, the principal creates an ___________, in which the principal cannot compete with the agent or appoint or allow another agent to compete.
exclusive agency
Giving an agent a power of attorney confers _________
express authority
Ratification can be either _________.
express or implied
The principal-agent relationship is ______—based on trust—and in a fiduciary relationship, each party owes the other the duty to act with the utmost good faith.
fiduciary
Power of Attorney
grants power to a representative of your choosing to legally act and make decisions on your behalf.
A _______ cannot be liable for breach of contract because there is no contract. He or she is subject only to tort liability.
gratuitous agent
When an accountant or an attorney is asked to act as an agent, an agreement to compensate the agent for this service is _______.
implied
The amount of ___________ usually is specified in the agency contract. If it is not, the courts will look to the nature of the business and the type of loss to determine the amount.
indemnification
A person must have contractual capacity to be a principal. The idea is that those who cannot legally enter into contracts directly should not be allowed to do so _______________.
indirectly through an agent
Authority can be implied by custom or
inferred from the position the agent occupies.
If a ___________ (such as an attorney) violates this [accounting] duty, he or she may be subject to disciplinary action by the licensing authority (such as the state bar association) in addition to being liable to the principal.
licensed professional
If the IRS decides that an employee is __________, the employer will be responsible for paying any applicable Social Security, withholding, and unemployment taxes due for that employee.
misclassified
The principal has tort remedies if the agent engages in
misrepresentation, negligence, deceit, libel, slander, or trespass
Generally, the agent owes the principal five duties:
performance, notification, loyalty, obedience, and accounting.
A _____________ can be special (permitting the agent to perform specified acts only), or it can be general (permitting the agent to transact all business for the principal).
power of attorney
The acts or declarations of a purported agent in and of themselves do not create an agency by estoppel. Rather, it is the deeds or statements of the ________ that create an agency by estoppel.
principal
What are the 4 ways an agency relationship can be created?
ratification, by estoppel, and by operation of law.
The third person must prove that he or she ___________ believed that an agency relationship existed.
reasonably
The agent has a duty to maintain a ___________ for the principal's funds and must not intermingle these funds with the agent's personal funds.
separate account
Performance (agent duty)
the agent's agreement to use reasonable diligence and skill in performing the work. When an agent fails to perform his or her duties, liability for breach of contract may result.
Agents cannot recover for expenses incurred from _____________.
their own misconduct or negligence
The liability of a principal to _______ with whom an agent contracts depends on whether the agent had the authority to enter into legally binding contracts on the principal's behalf. An agent's authority can be either actual (express or implied) or apparent.
third parties
If the principal does not ratify the contract, the principal is not bound, and the third party's agreement with the agent is viewed as merely an _______ offer.
unaccepted
An agency relationship created for a purpose that is illegal or contrary to public policy is _______.
unenforceable
Failure to comply with the equal dignity rule can make a contract _________ at the option of the principal
voidable
Agency relationships normally come about by _____________ between the parties.
voluntary consent and agreement
Apparent Authority
when the principal, by either word or action, causes a third party reasonably to believe that the agent has authority to act, even though the agent has no express or implied authority.
Ordinarily, a person who creates a copyrighted work is the owner of it—unless it is a "_______________"
work for hire