Agency and Employment Relationships Overview

General agent

A person authorized to execute all regular transactions connected with a business.

Gratuitous agent

A person who volunteers to act as an agent with no expectation of being paid for the services.

Undisclosed principal

A principal unknown to third parties to contracts entered into with the agent.

Disclosed principal

A principal whose identity is known to third parties to contracts entered into with the agent.

Duty of reasonable care

An accountant who fails to take advantage of a legitimate tax deduction would violate this duty.

Termination by operation of law

An agency can end without any action by the principal or the agent through termination by operation of law.

Agency termination by third party

An agency may not be ended by decision of a third party opposed to the agency.

Special agent

An agent with authority to represent the principal only for a specific transaction, usually for a limited time.

Auctioneer

An example of an agent and independent contractor.

Realtor

An example of an agent.

UPS package sorter

An example of an employee.

Trade customs

Can determine the scope of authority given to an agent.

Express authority

Consists of the agent's written or oral instructions from a principal to agent.

Agency coupled with an interest

Created by an agent who is paid for the right to exercise authority with regard to a business.

Scope of an agent's authority

Determined from oral or written expressions of the principal or the principal's conduct.

Principal's duty to reimburse

Does not cover expenses incurred due to the agent's misconduct or negligence.

Agency through operation of law

Established when an emergency exists, and the agent's actions are in the public interest.

Negligence in hiring

If a person could be expected to possibly cause problems and an employer hires the person anyway, the employer could be held liable for negligence in hiring if the employee commits a tort against a customer.

Agent competing with principal

If an agent competes with the agent's principal without the principal's consent, the agent is violating the duty of loyalty.

Express contract

If an employer and an employee agree on employment of a certain time, or that job security will be provided, then there is likely an express contract.

Employee whistleblowing

If the employee is fired, the employee is unlikely to have a case against the company.

Employee handbooks

Legally, handbooks can create binding contractual employment obligations.

Agent's liability with undisclosed principal

Liable to the third party for the principal's nonperformance of the contract.

Common problem with employee handbooks

Making promises about discipline procedures that are not followed consistently.

At-will employee

May be dismissed at any time without reason or cause.

Employer liability for employee torts

May be liable for the torts committed by employees in the course of employment.

Agency by estoppel

Means actions by the principal lead a person to believe that the presumed agent has authority to act on the principal's behalf.

Principal's duty to compensate

Means that principal must pay the agent for the reasonable value of the services provided.

Express ratification

Occurs when the principal shows a clear intent to be bound by unauthorized acts of the agent.

Subagents

Persons appointed by an agent delegated some authority.

Disclaimer in handbooks

Putting a bold disclaimer at the front of the handbook is an attempt by businesses to protect themselves from being found to create an implied contract.

Duty to account

Relates to keeping track of the funds and property of the principal that have been entrusted to the agent.

Implied ratification

Takes place when the principal behaves as if the principal has the intent of ratifying an unauthorized agreement.

Guz v. Bechtel National

The California high court held that Guz had no suit against his employer.

Anderson v. hotel

The Nevada high court disagreed because the hotel knew that the employee had threatened a supervisor, and he was not supervised when he carried a pass key.

Fryed Audio case

The Wisconsin supreme court held that Fryed was an agent of the Lions Club so could not be sued.

Unauthorized tort liability

The agent or employee is liable to the third party for damages incurred and the principal or employer is not.

Termination of agency

The agent's authority to act for the principal ends.

Cove Management v. AFLAC

The appeals court held that AFLAC was not obligated to the lease because Galgano did not have apparent authority to sign a lease that would bind AFLAC.

Actual authority

The authority given by the principal to an agent, conferring on the agent the power and right to change the principal's legal status.

Duty not to mix funds

The duty of an agent not to mix personal funds with the funds of a principal.

Duty to inform

The duty of an agent to let the principal know of facts relevant to the agency purpose.

Wrongful termination

The employee may have a suit for wrongful termination most likely based on the theory of breach of implied contract.

Breach of implied contract

The employee probably has a good suit for breach of an implied contract after being dismissed.

Independent contractor distinction

The extent of control the employer retains over work performance.

Duties of the agent

The law of agency places its primary emphasis on the duties the agent owes to the principal.

Principal

The party for whom an agent acts.

Authority

The power to change the principal's legal obligations is an agent's.

Implied authority

The power to do whatever is reasonable and customary to carry out the agency's purpose.

Duty to cooperate

The principal has this type of duty with an agent by performing responsibilities defined in the agreement forming the agency.

Principal's liability for agent's torts

The principal is possibly liable for the torts of the agent if the agent's tort was authorized by the principal or an unauthorized intentional tort within the scope of the agent's employment.

Duty to indemnify

The principal is under this type of duty for damages to cover the agent's losses suffered while undertaking authorized transactions for the principal.

Establishing an agency relationship

The principal must show a desire for the agent to act on her behalf, and the agent must consent.

Principal's ratification

The principal's acceptance of responsibility of an agent's activities.

Difference between agent and servant

The servant was generally not employed to represent a principal in business dealings.

General power of attorney

To carry out their duties, universal agents are typically granted.

Ratification knowledge

To ratify an agreement a principal must know the important facts of the agreement.

Apparent authority

When a principal creates an impression of authority in an agent that leads a third party to conclude that the agent has authority to act for the principal.

Vicarious liability

When a principal is held responsible for the unauthorized torts of an agent.

Power of control

Which of the four general factors that bear upon whether a master-servant relationship exists is determinative.