Chapter 10: Law of Agency

Zoey is a sales representative for Bexaronius Bikes, a bicycle parts manufacturer in San Antonio. Her job is to go out and sell bike parts to bicycle stores and repair shops. She is authorized to enter into contracts on behalf of Bexaronius Bikes up to $100,000 without prior authorization.On April 15th, Zoey signs a contract with Alamo Mount, Inc. to sell $10,000 worth of bike parts to Alamo Mount, Inc. with delivery to occur no later than June 15th.The parts are delivered in a timely manner. However, the parts are not what Alamo Mount ordered, and Alamo Mount rejects the delivery under the perfect tender rule. If Alamo Mount ends up filing a lawsuit for breach of contract, who is the proper defendant?

Bexaronius Bikes

On May 1st, Eleanor signs a straight-forward, ordinary, authorized contract on behalf of Elliot at a monthly business meeting. One year later, the other party to the contract files a lawsuit over the contract. Choose the correct defendant or defendants.

Elliot

Employee vs. Independent Contractor

Employee: same business as employer, employer supplies tools/equipment, long employment, paid by time period Contractor: business distinct from employer. worker bring own tools . shorter employment, paid when job done Factual situation (how treated) determines classification

Overseas Autos, a company that sells U.S. manufactured cars in other countries, hires Kendra to serve as its resident agent in Brazil. As part of her duties, Kendra enters into a contract to sell cars to the government of Brazil and personally guarantees performance of the contract, which is required by Brazilian law. Unfortunately the cars delivered to Brazil are defective. The government of Brazil sues Kendra under the contract and wins a judgment against her for $83,000, which means Kendra now owes the government of Brazil $83,000. What, if any, requirement will Overseas Auto have in this situation?

Kendra has incurred a liability while in the performance of her duties as Overseas Auto's agent. Since Overseas Auto is the principal, and it hired Kendra to be its agent, Overseas Auto is going to be responsible for reimbursing Kendra under the principal's duty of indemnification to its agent.

You are the manager of Bexar Beef 'n' Beer, a local dining establishment. You tell Donny, one your employees, to take his 15 minute break. While on his break, Donny wanders out into the parking lot and starts breaking into customers' cars, looking for money and candy. What kind civil liability is your employer, Bexar Beef 'n' Beer, going to have for its employee's actions?

No civil liability for Bexar Beef n Beer... Donny was not acting within scope Business did not know he would be likely to damage property (if did, they could be held liable for negligence)

Vicki is an employee of Salado Importers, a Texas business. Without any authority to do so, Vicki enters into a contract for the business to purchase a $1,500 state-of-the-art gaming system for the company breakroom, using the company credit card to make the purchase. When the gaming system is installed, the business owners start using it throughout the day. In fact, the president of the company ends up staying late several nights playing the system. After a couple of weeks, however, the company decides that the system is too distracting and decides to return it, claiming that Vicki didn't have any authority to purchase the system in the first place. Will Salado Importers be able to reject the unauthorized purchase?

No. By using the gaming system for two weeks, Salado Importers has ratified the purchase.

Contractual Liability

Principal always liable if agent had AUTHORITY to enter contract Fully disclosed: agent not liable (unless exceed authority), principal liable Partially disclosed: agent and principal liable are joint and severally liable (no double damages) Undisclosed: principal or agent, if authority exceeded or personal services = only agent liable

Tort Liability for Independent Contractors

Principal not liable for torts Exceptions: 1. work inherently dangerous 2. Work illegal or negligent in hiring or supervising ex...knew they had bad reputation

Tort Liability for Agents

Respondeat superior: Employer may be liable If employee was acting within the scope of employment Principal liable if: -Direct agents to commit or knew consequences of actions would bring harm -Doesn't correct actions of employee behavior (blind eye)

Agency fundatmental

The Principal authorizes the Agent to do things for the Principal When the Agent does these things, they're done in the Principal's name It's as if the Principal has done them

Billie is the manager at Bexar Beef 'n' Beer restaurant. Billie tells Maribel, one of her employees, to empty the fryer oil out back in the designated used oil container. Unfortunately Maribel accidentally drops the bucket of oil, spilling 35 gallons of oil on the parking lot. As a result, numerous customers slip and fall, injuring themselves. Is Bexar Beef 'n Beer going to be liable for Maribel's accident? Why or why not?

The employee, Maribel, was acting in the scope of her employment when she accidentally spilled the oil. Therefore, her employer, Bexar Beef 'n' Beer, is going to be liable for the results.

Alberta's in the market for a new house, but she's afraid that if the seller knows that Alberta is the person buying the house, the seller won't go through with the sale because Alberta has a terrible reputation in the local community. So, Alberta hires Gilberto as her agent. Gilberto will buy the house on behalf of Alberta, but Gilberto's going to keep Alberta's name out of the contract so the seller will think she's selling the house to Gilberto. Gilberto and the seller complete a sales contract on the house which calls for the purchase price to be deposited in an escrow account within 10 days of the finalization of the contract. However, when the 10 days are up, the money is not deposited. According to the terms of the contract, this constitutes a material breach of the contract. If the seller were to sue for breach, who is the appropriate party to sue?

The seller can sue both Alberta and Gilberto if she wants because Gilberto's acts are within his authority as an agent (which makes Alberta liable) and Alberta is an undisclosed principal (which makes Gilberto liable).

Independent contractor

a party who contracts with another party to do something for that other party but who isn't controlled by the other party nor subject to the other party's right to control how the independent contractor will perform

Fidicuary Relationship

a relationship in which one person is under a duty to act for the benefit of the other on matters within the scope of the relationship

Apparent authority

authority that a third party reasonably believes an agent has, based on the third party's dealings with the principal Elements: -The principal's words or actions lead others to believe the agent has authority; -A third party reasonably relies on the principal's words or actions; and -The third party is injured

Ratification:

occurs when a principal adopts or confirms a contract entered into on its behalf by an agent who did not have authority to act. Can not partially accept or change terms....can not undo ratification

Actual authority

occurs when a principal intentionally confers authority on an agent Express: authority given by an express agreement, either orally or in writing Implied: authority granted to the agent as a result of the principal's conduct

Agency

the legal relationship of an agent who is authorized to act on behalf of another party (principal). power expressed or implied authority of principal

Authority

the right or permission to act legally on another's behalf

Duties of Agents to principal

-Account: proper records of money and property given to agent -Care: act reasonably, good faith, avoid negligence -Inform: notify principal of materiel facts which impact their interest -Loyalty: no dealing which compete or interfere -Obedience: obey within scope, unless illegal or unethical -Confidentiality

Principal's Duties to Agent

-Compensation: pay for work performed -Honesty: no deceive agent of nature or scope of work they perform -Indemnification: keep agents free from legal liability for actions taken on principal behalf -Loyalty: no dealing which prevent agent from performing agency tasks -Reimbursement: if agent expended of behalf of principal

Types of Principals

-Disclosed: principal existence and identity known -Partially disclosed: principal existence known, identity is not -Undisclosed: principal existence is secret

Employee vs. Independent Contractor....why it matters

-Employee protections don't apply to IC -Tax laws different for IC - self employment tax -May be penalized for classifying wrong -Employer liability employees greater than for IC

Types of Agents

-General: have the authority to transact all the principal's business of a particular kind or in a particular place -Special: only have the authority to conduct a particular transaction or to perform a specific act

Forming Agency Relationship

-parties agree to relationship -person or entity agrees to perform a task for, under direction of, another individual or entity Other: 1. conduct implies relationship 2. principal does something to make others believe other is an agent 3. Principal ratifies acts of person w no authority fidicuary ex. employees

Termination of Agency

1. Mutual Agreement 2. Purpose for agency achieved 3. Lapse time 4. One party terminate or 5. Events: -Death of one -Mental incapacity -Bankruptcy (if affect subject matter) -Illegality or destruction of subject matter Apparent authority continues until PRINCIPAL notifies agency no longer exists - may be held liable if no notifies

Remedies if agent breaches:

1. Recover damages 2. May receive profit agent received as result of breach of duty of loyalty 3. May rescind a transaction when duty of loyalty is violated

Remedies if principal breaches

1. Recover damages for breach and 2. Terminate agency relationship

Acme Industries, Inc. hires the ShipShape Company to make some repairs to the exterior of its headquarters building in downtown Balcones Heights. During the course of the work, a ShipShape Company employee negligently shears off part of the building's siding, causing it to fall 30 feet to the ground and destroy a Suburu Outback owned by Henry Boomer. Based on these circumstances, identify which of the following statements are true. There may be more than one true statement.

Acme not liable because independent contractor was used ShipShape (independent contractor) liable because the person who used negligence was their employee

Tort Liability

Agents, employees, and independent contractors are personally liable for their own torts.