ACCT 324 Chapter 34

To establish employer liability, the third party must show that the wrongful act occurred within the scope of the employment. The consider consider the following in determine this:

1. Did the employer authorize the employee's act? 2. Did the act occur within the time and space limits of employment? 3. Was the act performed, at least in part, on behalf of the employer? 4. To what extend were the employer's interests advanced by the act? 5. To what extent were the private interests of the employee involved? 6. Did the employer provide the means (tools) by which the act occurred? 7. Did the employee use force not expected by the employer? 8. Did the employer know that the act would include the commission of a serious crime?

Partially disclosed principal (unidentified principal)

A principal whose identity is not known by a third party, although the third party is aware that the agent is making an agreement on behalf of a principal; agent an principal are both considered parties to the contract an each may be liable separately from the other

General power of attorney

Allows the agent to conduct all business for the principal

Tort Liability and the Agency Relationship

An agent who commits a tort that injures a third party is personally liable for his or her actions, regardless of both the classification and the liability of the principal

Principal's Liability and the Independent Contractor

An individual who hires an independent contractor cannot be held liable for the independent contractor's tortious actions under the doctrine of respondent superior. Certain activities are held strictly liable and therefore the principal will be held liable (usually hazardous activities such as blasting operations for the principal). Employers cannot escape liability for an independent contractor's tort if the employer directs them to commit the tort

Special power of attorney

Grants the agent express authority over specifically outlined acts

Principal's Tortious Conduct

1. A principal who directs the agent to commit a tort is liable for any damages caused by the tort. The principal who ratifies an agent's tortious act knowing the agent acted illegally is liable even if they don't condone the agent's conduct. 2. If the principal fails to provide proper tools or gives inadequate instructions to the agent, the law holds the principal liable fro a third party for negligent hiring of an agent. If an agent commits tort against a customer, the customer argues that the principal is liable because they should have taken more care in hiring the agent

Respondeat Superior

Letin for "let the superior speak"; the principal/employer holds vicarious liability (liability assigned without fault for any harm the agent/employee causes while working for the principal)

Actual notice

Notice of agency termination that is given directly by informing third parties, either orally or in writing; if agent's authority was granted in writing, actual notice must also be given in writing

Constructive notice

Notice of agency termination that is usually given by publishing an announcement in a newspaper

Termination by operation of law

1. Death (even if one party is aware of the other party's death the relationship no longer exists) 2. Insanity (in some states agency contract still exists unless the person has been adjudicated insane) 3. Bankruptcy (principal or agent files a bankruptcy petition) 4. Changed circumstances (change in circumstances leads the agent to believe the principal's instructions do not apply) 5. Change in law (making existing agreement illegal) 6. Impossibility (job cannot be done) 7. Disloyalty of agent (agency agreement is terminated whenever the agent, unknown to the principal, acquires interest against the principal's interest or breaches the duty of loyalty they have to the principal 8. War (agent is in war with country U.S. goes to war with - no way to enforce rights of parties)

Termination by acts of parties

1. Lapse of time (agency agreement specifies that the relationship will exist for a certain amount of time) 2. Fulfillment of purpose (completion of job) 3. Occurrence of specific event (ex. once sale is final) 4. Mutual agreement by the parties 5. Revocation of authority (principal can revoke agent's authority at any time but it may constitute a breach of contract leaving principal liable for damages) 6. Renunciation by the agent (agent can renounce the authority given to them but they can be held for breach of contract if the agreement states) 7. Agency coupled with an interest (agency relationship that is created for the benefit of the agent, not the principal; the principal may not terminate this relationship aka power given as security; relationship is terminated when an event occurs that discharges the principal's obligation

Situations when the agent is the only party liable for the contract:

1. The contract expressly excludes the principal from the contract. 2. The agent enters into a contract that is a negotiable instrument. 3. The third party enters into a contract with the agent such that the agent's performance is required and the third party may reject the performance of the principal. 4. The principal or agent knows a third party would not enter into a contract with the principal if the principal's identity were disclosed but the agent does so anyway

Undisclosed principal

A principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for a principal at the time the agent and the third person form a contract.

Authorized acts

Disclosed/partially disclosed principal: agent acting within the scope of their authority is not liable for the acts of the principal. Principal is liable only if the agent has authority to act on their behalf. Undisclosed principal: agent acting within the scope of their authority will likely be held liable for the agreement. In the eyes of the third party, the agent is the only person who could be liable. However, if the agent is liable to the third party then the undisclosed principal is liable to the agent except in certain situations.

Durable power of attorney

Document which specifies that an agent's authority is intended to continue beyond the principal's incapacitation

Power of attorney

Express authority that grants an agent specific powers. Two types: special power of attorney and general power of attorney

Crime and Agency Relationships

If an agent commits a crime they are liable. If the agent commits the crime in the scope of employment for a principal without the principal's authorization, the principal is not liable. If the principal has authorized the criminal act, they are liable too.

Agent misrepresentation

If an agent has misrepresented themself, the third party has two options: 1. Cancel the contract with the principal and be compensated for any money lost 2. Affirm the contract and sue the principal to recover damages.

Unauthorized acts

If an agent has no authority to act on behalf of a principal but still enters into a contract with a third party, the principal is not bound to the contract unless they ratify the agreement; when the agent exceeds their authority to act on behalf of the principal, the agent will likely be personally liable to the third party; when the third party is aware that the agent does not represent the principal, the agent is not liable; agents who go beyond their authority when the principal is disclosed or partially disclosed are liable for a breach of implied warranty but are not liable for breach of contract because they were never an intended party

misrepresentation liability

If the principal authorizes the agent to engage in an act and the agent misrepresents themselves (intentionally or unintentionally) the principal is always liable in tort to someone who relied on the agent's misrepresentations

Termination of Agency Relationship

Parties can choose to terminate relationships or they may terminate automatically by lapse of time, fulfillment of purpose, or operation of law. If the relationship ends, the agent no longer has authority to make agreements on behalf of the principal but the agent's apparent authority continues until the principal notifies third parties that the relationship has ended

Disclosed principal

Principal whose identity is known to a third party. The third party is aware that the agent is making an agreement on behalf of the principal

Intentional Torts and Respondeat Superior

The agent is liable for any torts they commit; the principal is responsible for the negligent acts of the employee under the doctrine of respondeat superior, the principal may also be liable for any intentional torts of the employee; an employer may be responsible for tortious acts of the employee if the employer knew or should have known that the employee had a tendency to commit such acts