BLaw Ch 30

Implied Warranty of Authority EX

Example Henry hires April, a real estate broker, to find him a house in a specified area for $1 million or less. Henry specifies that the house must be at least 4,000 square feet and must be a two-story house, with 4 bedrooms and 4 bathrooms. Henry, the principal, gives April, the agent, authority to sign a contract on his behalf to purchase such a home. April finds a house she thinks Henry would want to own that is 6,000 square feet and costs $1.5 million. April signs a contract with the seller as the disclosed agent of Henry. Here, April has exceeded her authority, and Henry is not bound to purchase the house. April, on the other hand, is bound to the contract to purchase the house. If, however, Henry likes the $1.5 million house, he can ratify the contract with the seller. If Henry does so, he is bound to the contract with the seller.

Undisclosed Agency EX

Example The Walt Disney Company wants to open a new theme park in Chicago but first needs to acquire land for the park. Disney employs Saul Green as an agent to work on its behalf to acquire the needed property, with an express agreement that the agent will not disclose the existence of the agency to a third-party seller. If a seller agrees to sell the needed land and the agent signs his name "Saul Green," it is an undisclosed agency. Disney is liable on the contract with the third-party seller and so is the agent.

Negligence

Liability for negligence is based on respondeat superior

Tort Liability of Principals and Agents to Third Parties

•A principal and an agent are each personally liable for their own tortious conduct (wrongdoing) •Principal is liable for tortious conduct of agent acting within the scope of authority given by the principal •Agent is liable for tortious conduct of principal only if agent directly or indirectly, aids and abets the principal's conduct •Sources of tort liability for principals and agents -Negligence -Intentional torts -Misrepresentation -Where liability is found, tort remedies are available to the injured party. These remedies include recovery for medical expenses, lost wages, pain and suffering, emotional distress, and, in some cases, punitive damages.

Case 30.1: Matthews v Food Lion, LLC

-695 S.E.2d 828, 2010 N.C. App. Lexis 1151 (2010) -North Carolina Court of Appeals •Issue -Was Hall acting within the scope of her employment at the time of the accident? After Hall clocked out of work, she went to the bathroom and hit Matthews with the door accidentally -Decision: The court of appeals held that Hall was not acting within the scope of her employment at the time of the accident. The court of appeals affirmed the trial court's grant of summary judgment for Food Lion. Hall was not an agent of Food Lion at the time of the incident. This was a cash grab attempt

Case 30.2: Burlarley v Wal-Mart Stores, Inc.

-904 N.Y.S.2d 826, 2010 N.Y.App. Div. Lexis 6278 (2010) -Appellate Division of the Supreme Court of New York •Issue -Is Wal-Mart vicariously liable for the personally motivated acts of its cashier? Cashier throws a bag with shoes and shampoo at customer's face as a "joke" -Decision: Applying the motivation test, the appellate court held that Wal-Mart was not vicariously liable for the intentional tort of its cashier. The appellate court affirmed the trial court's grant of summary judgment in favor of Wal-Mart.

Intentional Misrepresentation

-Agent makes statements that he or she knows are untrue §Fraud, deceit -Example Assume that a car salesperson is employed to sell the principal's car and the principal tells the agent that the car was repaired after it was involved in a major accident. If the agent intentionally tells the buyer that the car was never involved in an accident, the agent has made an intentional misrepresentation. Both the principal and the agent are liable for this misrepresentation.

Work-related tests

-Determines whether an agent committed an intentional tort within a work-related time or space (or a work event) -Under this test, if an agent commits an intentional tort within a work-related time or space—for example, during working hours or on the principal's premises—the principal is liable for any injuries caused by the agent's intentional torts. Under this test, the agent's motivation is immaterial. -Example Under the work-related test, an employer—the principal—is liable if an employee, who was motivated by jealousy, injures someone on the work premises and during work hours who dated her boyfriend. In this example, the motivation of the employee is not relevant. What is relevant is that the intentional tort was committed on work premises and during the employee's work hours.

Motivation test

-Determines whether an agent's motivation in committing an intentional tort is to promote the principal's business -if the agent's motivation for committing an intentional tort is to promote the principal's business, the principal is liable for any injury caused by the tort. If an agent's motivation for committing the intentional tort is personal, however, the principal is not liable, even if the tort takes place during business hours or on business premises. -Example Under the motivation test, an employer—the principal—is not liable if an employee, who is motivated by jealousy, injures someone on the job who dated her boyfriend. In this example, the motivation of the employee was personal and not work related.

Respondeat superior

-Employer is liable for an agent's tortious conduct, if: §The agent is an employee §The employee was acting within the scope of employment -Respondeat superior is a type of vicarious liability: Principal is liable for an agent's tortious conduct because of the employment contract between the principal and agent, not because the principal was personally at fault. -Respondent superior: "let the master answer" -Vicarious liability: liability w/o fault -Example Business Unlimited Corporation employs Harriet as its marketing manager. Harriet is driving her automobile to attend a meeting with a client on behalf of her employer. On her way to the meeting, Harriet is involved in an automobile accident that is caused by her negligence and several people are seriously injured. In this example, Harriet is personally liable to the injured parties. In addition, Business Unlimited Corporation is liable as the principal because Harriet was acting within the scope of her employment when she caused the accident.

Ratification of a contract

-Situation in which a principal accepts an agent's unauthorized contract

Misuse of confidential information

-a duty of agents not to disclose or misuse confidential information (ex-trade secrets, formulas, customer lists) of the principal either during or after the course of the agency -The agent is under a legal duty not to disclose or misuse confidential information either during or after the course of the agency. If the agent violates this duty, the principal can recover damages, lost profits, and any remuneration the agent received from another party to obtain the confidential information. The principal can also obtain an injunction ordering a third party to return the confidential information and to not use such information. There is no prohibition against using general information, knowledge, or experience acquired during an agency in later employment. -Example An agent works for a principal who owns and operates a bank that specializes in serving wealthy clients. Over many years, the bank has carefully developed a unique and selective list of wealthy individuals that it serves or is courting to serve. The agent quits his job at the bank and is hired by another bank. The agent takes the list of wealthy clients developed by his previous employer and discloses the list to his new employer. This is a violation of the agent's duty of loyalty.

Dual agency

-a situation where an agent acts for 2(+) principals in the same transaction. Generally prohibited unless all the parties involved in the transaction agree to it -If an agent acts as an undisclosed dual agent, he or she must forfeit all compensation received in the transaction. Some agents, such as middlemen and finders, are not considered dual agents. This is because they only bring interested parties together; they do not take part in any negotiations. -An agent cannot meet a duty of loyalty to two parties with conflicting interests. -Example A real estate broker is hired by a homeowner to sell the owner's house. The real estate broker is approached by a person interested in purchasing the house. The broker agrees to accept compensation from the proposed purchaser if the broker can get the seller to agree to a lower price than the asking price. The real estate broker accomplishes this and recovers a fee from both the seller and buyer of the house. The agent has violated her duty of loyalty by acting as a double agent.

Competing with the principal

-a situation where an agent engages in undisclosed and unauthorized competition with their principal -Agents are prohibited from competing with the principal during the course of an agency unless the principal agrees. The reason for this rule is that an agent cannot meet the duty of loyalty when personal interests conflict with the principal's interests. The principal may recover the profits made by the agent as well as damages caused by the agent's conduct, such as lost sales. An agent is free to compete with the principal when the agency has ended unless the parties have entered into an enforceable covenant-not-to-compete. -Example An agent works as a salesperson for a principal who owns an automotive parts business. The agent's job is to sell the principal's automotive parts to auto repair shops and other purchasers. While doing so, the agent also works as a salesperson for a competing seller of automotive parts. This example demonstrates a conflict of interest, and the agent has violated the duty of loyalty.

Self-Dealing

-a situation where the agent engages in undisclosed self-dealing with the principal, such as undisclosed purchasing, selling, or leasing of property with their principal -An agent who engages in undisclosed self-dealing with the principal has violated the duty of loyalty to the principal. If there has been undisclosed dealing by an agent, the principal can rescind the purchase and recover the money paid to the agent. As an alternative, the principal can ratify the purchase. -Example A real estate agent who is employed to purchase real estate for a principal cannot secretly sell his or her own property to the principal. However, the deal is lawful if the principal agrees to buy the property after the agent discloses ownership of the property.

Usurping an opportunity

-a situation where the agent personally takes (usurps) an opportunity that belongs to their principal -A third-party offer to an agent must be conveyed to the principal. The agent cannot appropriate the opportunity for him- or herself unless the principal rejects it after due consideration. If the agent does so, the principal can recover the opportunity from the agent. -Example An agent works for a principal that is in the business of real estate development. The principal is looking for vacant land to purchase to develop. A third party who owns and wants to sell his vacant land tells an agent of the principal of the availability of the land. The agent, without informing the principal, purchases the land for personal use. This is a violation of the agent's duty of loyalty.

Undisclosed Agency

•Agency in which a contracting third party does not know either the existence of the agency or the principal's identity •Both the undisclosed principal and agent are liable to the third party if the principal fails to perform the contract -because the agent, by not divulging agency status, becomes a principal to the contract. The third party relies on the reputation and credit of the agent in entering into the contract. If the principal fails to perform the contract, the third party can recover against the principal or the agent. If the agent is made to pay the contract, he or she can recover indemnification from the principal. An undisclosed agency can be created either expressly or by mistake. -Undisclosed agencies are lawful. They are often used when the principal feels that the terms of the contract would be changed if the principal's identity were known. -For example, a wealthy party may use an undisclosed agency to purchase property if she thinks that the seller would raise the price of the property if her identity were revealed.

Innocent Misrepresentation

Agent negligently makes misrepresentation to a third party

Partially Disclosed Agency

•Agency in which a contracting third party knows that the agent is acting for a principal but does not know the identity of the principal (not disclosed by the agent or a 3rd party) -The nondisclosure may be because the principal instructs the agent not to disclose his or her identity to the third party or the agent forgets to tell the third party the principal's identity •Both the partially disclosed principal and agent are liable to the third party if principal fails to perform the contract •This is because the third party must rely on the agent's reputation, integrity, and credit because the principal is unidentified. If the agent is made to pay the contract, the agent can sue the principal for indemnification. The third party and the agent can agree to relieve the agent's liability. -Example A principal, Nigel Jones, and an agent, Marcia McKee, agree that the agent will represent the principal to purchase a business and that the agent will disclose the existence of the agency and identity of the principal to third parties. The agent finds a suitable business and contracts to purchase the business on behalf of the principal, but the agent mistakenly signs the contract "Marcia McKee, agent," omitting the principal's name. This is a partially disclosed agency. The principal is liable on the contract with the third party, and the agent is also liable.

Fully Disclosed Agency

•Agency in which a contracting third party knows: -Agent is acting for a principal -Identity of the principal §Fully Disclosed Principal is liable on the contract •The agent is not liable on the contract, however, because the third party relied on the principal's credit and reputation when the contract was made. -The third party has the requisite knowledge if the principal's identity is disclosed to the third party by either the agent or some other source. -In a fully disclosed agency, the contract is between the principal and the third party. -Example Poran Kawamara decides to sell her house and hires Mark Robbins, a real estate broker, to list and sell the house for a price of $1 million. They agree that Mark will disclose the existence of the agency and the identity of the principal to interested third parties. Mark shows the house to Heather, a prospective buyer, and discloses to Heather that he is acting as an agent for Poran. Heather agrees to buy the house, and Mark signs the contract on behalf of Poran. Poran, the principal, is liable on the contract, but Mark, the agent, is not.

Contract Liability of Principals and Agents to Third Parties

•Agency law imposes contract liability on principals and agents depending on the circumstances •Principal who authorizes agent to enter into a contract with third party is liable on the contract •Third party can enforce the contract against the principal and recover damages from principal if they fail to perform it •Agent can also be held liable in certain circumstances -Imposition of such liability depends on whether the agency is classified as fully disclosed, partially disclosed, or undisclosed.

Implied Warranty of Authority

•Agent who enters into a contract on behalf of another party warrants that he or she has the authority to do so -If the agent exceeds the scope of his or her authority, the principal is not liable on the contract. •Agent is liable for breaching the implied warranty of authority •Principal is liable, only if he or she ratifies -To recover, the third party must show (1) reliance on the agent's representation and (2) ignorance of the agent's lack of status.

Agent's Duty of Loyalty

•Fiduciary duty owed by an agent, not to act adversely to the interests of the principal -agency relationship is based on trust and confidence - If this duty is breached, the agent is liable to the principal •Common types of breaches of loyalty: -Self-dealing -Usurping an opportunity -Competing with principal -Misuse of confidential information -Dual agency

Liability for Intentional Torts

•Includes assault, battery, false imprisonment, and other intentional conduct that causes injury to another person •Principal not liable for intentional torts of agents and employees that are committed outside the principal's scope of business •Example If an employee attends a sporting event after working hours and gets into a fight with another spectator at the event, the employer is not liable. This is because the fight was a personal affair and outside the employee's business responsibilities. •However, a principal is liable under the doctrine of vicarious liability for intentional torts of agents and employees committed within the agent's scope of employment •Tests to determine whether an agent's intentional torts were committed within the scope of employment: -Motivation Test -Work-related test

Independent Contractor

•Person who contracts with another to do something for him who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking •Principal is not liable for the torts of its independent contractors •Example Jamie is a lawyer who has her own law firm and specializes in real estate law. Raymond, a real estate developer, hires Jamie to represent him in the purchase of land. Raymond is the principal, and Jamie is the independent contractor. -Google doc pic 1

Liability for Independent Contractor's Contracts

•Principal can authorize an independent contractor to enter into contracts -Principals are bound by the authorized contracts of their independent contractors. •Principal is not liable on the contract, if the independent contractor enters a contract without the principal's authority •Example Suppose a client hires a lawyer as an independent contractor to represent her in a civil lawsuit against a defendant to recover monetary damages. If the client authorizes the lawyer to settle a case within a certain dollar amount and the lawyer does so, the settlement agreement is binding.

Coming and going rule (going and coming rule)

•Principal is generally not liable for injuries caused by its agents and employees while they are on their way to or from work -applies even if the principal supplies the agent's automobile or other transportation or pays for gasoline, repairs, and other automobile operating expenses. This rule is quite logical: Because principals do not control where their agents and employees live, they should not be held liable for tortious conduct of agents on their way to and from work. -Example Sarah works as a professor at a university. Her home is 20 miles from the campus. One morning Sarah is driving to work when her negligence causes an automobile accident in which several pedestrians are injured. In this example, Sarah is personally liable for her negligence, but the university is not liable because of the coming and going rule.

Misrepresentation

•Principal is liable for any (intentional or innocent) misrepresentations made by agent within scope of employment -The third party can either (1) rescind the contract with the principal and recover any consideration paid or (2) affirm the contract and recover damages.

Liability for an Independent Contractor's Torts

•Principal is not liable for the torts of its independent contractors •Independent contractors are personally liable for their own torts •The rationale behind this rule is that principals do not control the means of how the results are accomplished. •Principals cannot avoid liability for inherently dangerous activities that they assign to independent contractors -For example, the use of explosives, clearing of land by fire, crop dusting, and other inherently dangerous activities involve special risks. In these cases, a principal is liable for the negligence of the independent contractor the principal hired to perform the dangerous task. -Example Qixia hires Harold, a lawyer and an independent contractor, to represent her in a court case. While driving to the courthouse to represent Qixia at trial, Harold negligently causes an automobile accident in which Mildred is severely injured. Harold is liable to Mildred because he caused the accident. Qixia is not liable to Mildred because Harold was an independent contractor when he caused the accident.

Introduction

•Principals and agents owe certain duties to each other and are liable to each other for breaching these duties •When acting for the principal, an agent often enters into contracts and otherwise deals with third parties. Agency law has established certain rules that make principals, agents, and independent contractors liable to third persons for certain contracts. In addition, agents and independent contractors sometimes engage in negligent or other tortious conduct when acting on behalf of principals. •Agency law establishes the liability of principals, agents, and independent contractors for such conduct

Frolic and Detour

•Situation in which an agent does something during the course of his or her employment to further his or her own interests rather than the principal's -Negligence actions stemming from frolic and detour are examined on a case-by-case basis. Agents are always personally liable for their tortious conduct in such situations. Principals are generally relieved of liability if the agent's frolic and detour is substantial. If the deviation is minor, however, the principal is liable for the injuries caused by the agent's tortious conduct. -Example A salesperson stops at home for lunch while on an assignment for his principal. After lunch and while leaving his home in his car, the agent hits and injures a pedestrian. The principal would be liable if the agent's home were not too far out of the way from the agent's assignment. The principal would not be liable, however, if an agent who is on an assignment for his employer in Cleveland, Ohio, deviates from his assignment and drives to a nearby city to meet a friend and is involved in an accident. The facts and circumstances of each case determine its outcome.

Dual-purpose mission

•Situation that occurs when a principal requests an employee or agent to run an errand or do another act for the principal while the agent is on his or her own personal business -That is, the agent is acting partly for him- or herself and partly for the principal. Most jurisdictions hold both the principal and the agent liable if the agent injures someone while on such a mission. -Example Suppose a principal asks an employee to drop off a package at a client's office on the employee's way home. If the employee negligently injures a pedestrian while on this dual-purpose mission, the principal is liable to the pedestrian.

Factors for Determining Independent Contractor Status

•The crucial factor in determining whether someone is an independent contractor or an employee is the degree of control that the principal has over that party. Critical factors in determining independent contractor status include the following: •Whether the worker is engaged in a distinct occupation or an independently established business •Length of time the agent has been employed by the principal •Amount of time that the agent works for the principal •Whether the principal supplies the tools and equipment used in the work •Method of payment, whether by time or by the job •Degree of skill necessary to complete the task •Whether the worker hires employees to assist him or her •Whether the employer has the right to control the manner and means of accomplishing the desired result •If an examination of these factors shows that the principal asserts little control, the person is an independent contractor. Substantial control indicates an employer-employee relationship. Labeling someone an independent contractor is only one factor in determining whether independent contractor status exists.

Agent's Signature

•must indicate that he or she is acting as an agent for a specifically identified principal -The agent's signature on a contract entered into on the principal's behalf is important. It can establish the agent's status and therefore his or her liability. -Examples Proper agent's signatures include "Catherine Adams, agent for Juan Perez" and "Juan Perez, by Catherine Adams, agent."