BLAW 441 exam 1

Principal's Liability for Intentional Torts of Agents

1. is a principal liable for an agent's intentional torts that are committed outside of the scope of business? no 2. is a principal liable for an agent's intentional torts that are committed within the agent's scope and course of employment? yes, principal is liable 3. how do we determine if an agent's intentional torts were committed within scope of employment? work-related time is during work hours, work-related space is the place of business or principal's area of control

Williams v. Pike -Pike: principal -Henderson- agent -Williams- third party

-Williams bought a car at Henderson's auto repair -Henderson negotiated and made the sale for the car's owner Pike -3 days later the car caught on fire and was soon stolen -Williams filed suits against both Pike and Henderson -Pike had permit to sell the car -car was displayed at Henderson's business and he sold it -this made Pike the Principal and Henderson his agent -agency relationship was not made clear to Williams, so Pike was an undisclosed principal -Williams could hold both accountable for the car

case example: employee sees pipe sticking out of the ground, doesn't fix it or tell employer

-a 3rd party trips and falls on pipe -they are able to recover due to imputed knowledge -agent should have told principal

Corporations

-a business where the shareholders at as a single entity -shareholders hold no personal liability -Most dominant form of business organization in the U.S.

fully disclosed principal

-a fully disclosed agency results if the 3rd party entering into the contract knows: 1. that the agent is acting for a principal; AND 2. the actual identity of the principal -the fully disclosed principal is liable on the contract -agent is not liable because during negotiations the third party knows that they are dealing with the reputation and integrity of the principal

agent

-a party who agrees to act on behalf of another subject to his or her control -the agent has the authority to conduct business with a third party -an agent can be found liable under tort law for not respecting the fiduciary relationship

fiduciary

-a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking -relationship founded on trust and confidence

Agency by ratification

-a person who is in fact not an agent may make a contract on behalf of another -if the principal affirms that contract by word or action, an agency relationship is created by ratification- principal must be aware of all material facts occurs when: 1. a person misrepresents himself or herself as another's agent when s/he is not; AND 2. the "so-called principal" ratifies (accepts) the unauthorized act -principal has right to accept or reject the contract negotiated by the "agent"

ex of employer-employee relationship

-a salesperson in a department store is an agent of the stores owner (the principal) and acts on the owner's behalf -any sale of goods made by the salesperson to a customer is binding on the principal

employee's departure from the employer's business

-a substantial departure (frolic) occurs when -an employee does something during the "course of his employment" - to further his or her personal interests rather than the employer's interests -Are employees personally liable to 3rd parties for their own tortious conduct in this situation? yes

Termination of Agency relationships

-agency relationships are terminated in two ways: 1. by an act of the parties; or 2. by operation of law -once the relationship has ended does the agent still have actual authority to bind the principal? no, bc principal gives someone actual authority -what about apparent authority? agent may still have apparent authority if others are unaware relationship ended

substantial/major departure example

-agent conducts an act that is to the point of abandoning the business of the principal; no longer on the clock -employee is on the job and something happens that totally throws the employee off and they abandon the principal's work -deemed a substantial departure -principal is not liable & agent is personally liable to third party

indemnification scenario

-agent enters into an authorized contract with a third-party -principal fails to perform the contract -third party sues agent and wins $100 in damages -agent can recover $100 from the principal because he did lawful work that he was given the right to do (compensatory damages)

agent's duty of accounting

-agent has the duty to keep and make available to the principal an account of all property and funds received and paid out on behalf of the principal 1. agent must keep an account of all property and funds received and paid out on the principal's behalf 2. if a customer gives an agent a gift, h/she cannot keep it. 3. agent is not allowed to co-mingle the principal's money with his own personal money, even if the agent intends to pay it back

minor departure

-agent is conducting his/her own personal business, but it does not take time or effort away from the principal's interest -ex. lunch break, running short errands -ex. Delivery guy makes quick stop at CVS to pic up prescription and gets into fender bender in parking lot. -principal is liable for negligence during minor departures

intentional misrepresentation

-agent makes an untrue statement that he or she knows is not true -also known as fraud or deceit -trying to take advantage of someone who has less access to facts ex. salesman tells customer that one section of the store is brand new appliacnes

innocent misrepresentation

-agent makes an untrue statement that he or she reasonably believes is true -problem for the principal because parties are believing they are getting one thing

examples of agents:

-an actual person needed to operate a legal entity (natural person)- the person represents the business -electronic agent- computers used to run legal entities (Ebay)

intentional torts

-an intentional tort is a wrongful act knowingly committed against: -another person or his or her character; or -another person's property -what are examples of intentional torts related to business activities? things like assault, battery, false imprisonment,

employee status and "works for hire"

-any copyrighted work created by an employee within the scope of her employment at the request of the employer is a "work for hire" and the employer owns copyright to the work -when an employer hires an independent contractor they own the copyright

independent contractor

-one who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer -an independent contractor is not an employee but may be an agent -not employees because those who hire them have no control over the details of their physical performance

termination by act of the parties

-parties may termination through one of the following methods: (notice to third parties is required when an agency is terminated by act of the parties) 1. lapse of time 2. purpose achieved 3. occurrence of a specific event 4. mutual agreement 5. termination by one party- either party can terminate

disputes involving employment law

-workers may benefit from having employee status- for tax purposes and to be protected under certain employment laws -federal statutes governing employment discrimination apply only when an employer-employee relationship exists -protection under anti discrimination statutes provides an incentive for workers to claim that they are employees rather than IC's

wrongful termination

-wrongful termination is defined as the principal's termination of the agency relationship in violation of the agency agreement -How does the power to discharge the agent differ from the absolute right to terminate the agency? -power to discharge- ex. agency steals, and still has a year left to work, but they can be fired -absoluter right- parties agreed through contract law that the principal has right to violate

negligence ex.

1. P is typically liable for the A's negligent acts that harm a third party 2. focus here is on the fact that the liability is not because of the P's personal fault -vicarious liability: 1. P controls the A, 2. right/duty and must control adequately

Agency

1. a person (principle) hires someone (an agent) to do something for him -it can be a natural or legal person -ex. Coca-Cola is the principle; CEO is Coca-Cola agent 2. principle may be held liable for actions of unauthorized agent if negligent with private info

direct notice

-0 days

Partnership

-2 or more people who carry on as co-owners of a business for profit -Limited partnership: 2 types of partners (general and limited)

Proprietorship

-A business where the owner is actually the business -simplest legal form of business -owner assumes full liability, even with respect to personal finance -Can operate under owner's name or trade name

criminal liability example question (ABC and Amy)

-ABC employs Amy as an agent. Without ABC's knowledge, but otherwise acting within the scope of employment, Amy steals and sells customers' credit card numbers. The state can successfully prosecute: 1. ABC only 2. ABC and Amy 3. Amy only -Amy only- because it is NOT strict liability -if ABC got some benefit from the theft and Amy let it slip that she will steal again, then both ABC and Amy would be liable because in this case the principal is aware, not stopping it, and benefitting from it (conspiracy)

Apparent authority with pattern of conduct or repeated acts through acceptance:

1. acceptance: -beyond express authority (unauthorized agent) -principal knows it's beyond express authority -principal does not correct/discipline the agent -principal does not communicate with the 3rd party -a period of time occurs

types of agencies

1. agency by agreement 2. agency by ratification 3. agency by estoppel 4. agency by operation of law

agency of operation of law

1. agency created by courts in the absence of a formal agreement or based upon a social duty 2. the agency is created when the agent is unable to contact the principal 1. necessaries (social duty) social policy imposes duties of care that are owed by and to parties within certain relationships (parent/child) 2. emergency situations- agent's failure to act outside the scope of his/her authority would cause the principal substantial losses *end of agency relationships*

agent's duty of loyalty

1. agent as the duty to act solely for the benefit of the principal -there can be no self-dealing or acting of self interest -there can be no secret profit for the agent or third party 2. loyalty is the most fundamental duty on a fiduciary relationship- no conflict of interest

Volkswagen pollution scandal ex.

-Volkswagen (principal) is liable for torts, misrepresentation, fraud, and criminal liability -supervising engineers who ordered or directed the creation of software are liable for torts, not misrepresentation, liable for fraud, and liable for criminal liability (if the statue or regulations allow personal criminal liability) -actual engineers who worked on software are liable for torts, misrepresentation, fraud, and criminal liability

implied authority

1. is normally associated with the agent's position, OR 2. is reasonably necessary for the agent to perform his or her job 3. it is what the agent reasonably thinks the principal means -not spelled out in a written or oral agreement -it is what would be reasonably necessary within the context of the job and industry custom ex. Professor Greaves has implied authority to look up new case law and charge it to Penn State because it is necessary as a BLAW teacher, but doesn't explicitly say that she can do this in her contract.

principal's liability for negligent acts of employees during departure from business

1. liability depends on whether the employee's activity was a minor (detour) or substantial (frolic) departure from the employer's business 2. what is a departure from the employer's business? -occurs when an agent does something during the course of his employment to further his or her personal interests rather than the principal's interest -agents are liable to 3rd parties for their own tortious conduct 3. minor departure 4. substantial departure

Agent's duty of notification

1. notification to principal- agent is required to inform the principal of any and all news s/he hears about the principal's business 2. imputed knowledge- any info received by the agent is assumed by law to have been received by the principal as well (implied knowledge)

an agent owes 5 duties to the principal:

1. performance: 2. notification: 3. loyalty: 4. obedience: 5. accounting:

scope of agent's authority

1. principal is liable for contracts entered into by agent when she gives agent either actual or apparent authority -actual: express or implied -apparent: ratification, estoppel, and operation of law (emergency and necessaries)

ex of principal's tortious conduct

1. principal liable for giving improper instructions 2. principal liable for authorizing the use of improper material 3. principal liable for establishing rules that resulted in the agent committing a tort

principal's duty of cooperation

1. principal must cooperate with and assist the agent in the performance of the agent's duties 2. when the principal does not cooperate with the agent, she may be responsible for any damages that occurred because of this failure, and the agent has the right to walk away from the agreement ex. if a principal hires an agent to sell their house, they need to allow the agent access to everywhere in the house and inform them of hidden defects. *end duties of agents and principals*

principal's duty of indemnification

1. principal must protect the agent from losses the agent suffered during the agency because of principal's misconduct -principal must pay for the value of benefits that the agent confers on (transfers to) the principal

example- red lobster case

1. receipt with a racial slur and no tip 2. Barnes (customer) denied writing the slur on the receipt to his African American waitress 3. Barnes is suing Red Lobster for defamation -his name was on the receipt posted online 4. principal (Red Lobster) takes responsibility for the agent (waitress) -it was a violation of company policy to post online

to be successful we use the FIRAC method to analyze problems

1. the FACTS of the case 2. the legal ISSUES of the case 3. that applicable RULE of law 4. the process used to APPLY the rule to the facts 5. the CONCLUSION of the case

-principal is liable if:

1. the agent had actual authority or apparent authority to make representations; AND 2. the representations were made within the scope of the agent's authority 3. intentional misrepresentation 4. innocent misrepresentation 5. principal is liable for the agent under both categories of misrepresentation

agent's duty of performance

1. the agent's agreement to perform the principal's lawful work; AND 2. must use reasonable care, skill, and diligence in performing work 3. if agent fails to perform, he or she is responsible for damages suffered by principal

characteristics of an employee

1. the employer has a large degree of control over the details of the work 2. the work is typically done under the employers supervision 3. the employer provides that tools necessary to complete the job known as "instrumentalities of trade" 4. the employee has worked for an extended period of time 5. the worker is paid according to hourly wage

The employer-employee relationship

1. the employer hires an employee to perform some physical service 2. the employer (principal) controls the employee's work 3. an employee is an agent only if given the authority to represent the employer -agency law and employment law overlap

consensual agreement

1. the principal cannot force someone to be their agent 2. the relationship must be agreed upon 3. consent can be implied based on the way the agency does business

the principal's duty of compensation

1. the principal must pay the agent for services rendered according to the initial agreement in a timely manner. 2. if compensation was not recorded or decided upon initially, the agent should be paid according to the prevailing wage, or industry standard, in the community/industry

personal liability for torts

1. the principal, agent, and independent contractor are each personally liable for their own tortious conduct 2. the remedy is usually compensation (money damages) for: compensatory damages, medical expenses, psychological or emotional distress, pain and suffering, punitive damages

apparent authority occurs when:

1. the principal, by either words or conduct, causes a third party to reasonably believe that the agent has the authority to act for the principal 2. estoppel- if the third party reasonably believes that the agent has the principal's authority and contracts with the agent, the principal is prevented from denying that the agent has no authority to act for the principal -estoppel is a remedy that protects third parties from suffering losses when the principal is responsible for causing the loss

liability: unauthorized acts

1. these are acts outside of the agent's express, implied or apparent authority 2. if the agent has no authority, then the principal is not liable, unless they ratify 3. does not make a difference whether the principal is disclosed, partially disclosed or undisclosed. 4. agent is liable to third party because of a breach of implied warranty of authority

ratification

1. this occurs when the principal affirms (accepts) an agent's unauthorized contracts 2. the agent may be liable to the third party if the principal avoids (does not accept/ratify) the unauthorized contract or acts 3. if the principal decides to accept, or ratify, the liability shifts back to the principal

the principal need contractual capacity

1. when a principal has an agent do work from him/her the principal needs to have the right and authority to enter into contracts within a 3rd party -ex. a minor in the entertainment industry has an agent, who is an adult, who has contractual capacity to sign on their behalf

characteristics of an IC:

1. worker is engaged in a distinct occupation or an independently established business from the employer 2. the worker is paid a flat fee based on the job performed 3. there is a great deal of skill required for the work

apparent authority through emergency powers (agency by operation of law)

2. agent has emergency power to act when: -agent is unable to communicate with principal, AND -urgent situation requires agent's immediate action to protect principal's property or rights -agent must act appropriately for the situation using reasonable means and what is necessary by industry standards to complete the job-no more, no less

principal's liability for negligence of agents

A legal doctrine, most commonly used in tort, that holds an employer or principal legally responsible for the wrongful acts of an employee or agent, if such acts occur within the scope of the employment or agency because of the agency relationship

Disputes involving tort liability case example Asphalt & concrete serv., inc. v. Perry

Principal: ACS Agent: Johnson 3rd party: Perry Johnson hit Perry and injured him with a dump truck on the job. Perry filed a law suit against ACS. Perry alleged Johnson was one of ACS's employees. ACS claimed Johnson was an IC. Jury agreed with Perry and he was awarded $529,000 in damages.

Benefit of agency relationship

principal forms agency contract-->agent creates contract with third party on behalf of principal-->third party -principals obligation to perform the contract

principal's duty of reimbursement

principal must repay agent for expenses if they were: 1. authorized by the principal; AND 2. within the scope of the agency; AND 3. necessary to carry out the principal's work -agents are not entitled to reimbursement if the expenses are due to negligence or misconduct ex. of reimbursable expenses: travel, entertaining clients, supplies, etc.

estoppel

this basically stops the principal from denying that someone is his/her agent once they have already caused a third party to believe it

disputes involving employment law case example: Alberty-Velez v. Corporacion de Puerto Rico para la Difusion Publica

-Albert-Velez was a TV host -Corporacion de Puerto Rico was the TV network she worked for -Albert was allowed to free lance in between required events by Corporacion to provide her own wardrobe and make-up and her skills from her education -Albert's contract was not renewed once she became pregnant. Her contract was on a per episode basis. She filed a lawsuit for discrimination under title VII. -Discrimination under Title vII is allowed only for employees not IC -They used the common law agency test, Albert was considered an IC.

Employee status and "works for hire" case example SHL Imaging, Inc. v. Artisan House, Inc.

-Artisan House hired professional photographer Steven H Lindner, owner of SHL imaging to take pics of the products -Lindner controlled his own work -Artisan published his work without his permission -SHL filed a lawsuit for copyright infringement -Artisan claimed these were works for hire, but the court held that SHL was an IC and owned the copyrights -Artisan was liable for copyright infringement

Agency by estoppel case example Azur v. Chase Bank, USA, N.A.

-Azur was president and CEO of ATM corp. of America -Vanek was Azur's personal assistant -she reviewed his credit-card statements and took unauthorized cash advances from his credit-card account with Chase Bank and those charges appeared on at least 65 monthly statements -he filed a suit against Chase Bank, arguing that the bank should not have allowed Vanek to take cash advances -the court concluded that Azur (principal) gave the bank reason to believe that Vanek (agent) had authority -Azur was estopped (prevented) from denying Vanek's authority

agency by agreement case example Laurel Creek Health Care Center v. Bishop

-Bishop was admitted to Laurel Creek Health Care Center suffering from physical ailments -Bishop couldn't use his hands during an examination -Bishops sister, Rachel, signed the admissions forms, but it was policy to have the spouse sign -Bishop asked Rachel to get his wife Anna to sign -Anna signed them which contained permission for mandatory arbitration -Later Bishop sued the hospital for negligence, but the court concluded that an agency relationship between Bishop and his wife had been formed by the contract

The law of agency

-Body of law that is a mixture of *contract and tort law* -Agency is a type of employment relationship that allows business to operate

FIRAC method example: -jane is a surgeon who slipped and fell on a wet floor at a supermarket -there were no warning signs posted -Jane broke her arm and lost 6 months salary ($500,000) in income -Jane sued the supermarket for lost wages and medical costs

-F: who are the parties? defendant= Jane; plaintiff= supermarket and agents. what is the dispute? injury to person. what are the reasons for the lawsuit? jane is blaming supermarket for injury. is there a lower court decision? not applicable -I: what injuries (person) did the plaintiff suffer? is the defendant responsible in any way for his/her injuries? -R: is this a tort or contract dispute? which rules/principles apply to this dispute? -A: which facts support rule of law? are there exceptions or defenses to the rule of law? what is each side's argument about the application of rules? -C: which party has the best facts? *end of intro*

Doctrine of Respondent Superior (vicarious liability)

-Jones v. Hart (1689) 1. common law doctrine- "let the master answer"- liability without fault -master's servant engaged in tortious activity 2. principal (employer) is liable for wrongful acts (torts or negligence) committed by agents (employees) while acting within: a. scope of their agency; or b. the course of employment 3. principal is responsible not because of an act but because of the agency relationship

Lopez v. El Palmar Taxi Inc.

-Lopez is the name of a family injured in a car accident by a Palmar Taxi driver -Taxi driver is leased to Palmar Taxi and caused the accident -driver is an IC -Lopez (3rd party) sued Palmar Taxi for injury to self and family -was the driver an agent of Palmar Taxi causing Palmar Taxi to be liable? -Driver was an IC because he has complete control over time, manner, and method of work -Lopez cannot sue Palmar Taxi

warner v. southwest desert images, LLC (case ex. 23.22)

-P: southwest desert images provide landscaping services to aegis communications -A: southwest desert images sent its employee david hoggatt to spray herbicide outside aegis's building -3rd: aegis employee Catherine warner suffered heart attack from fumes -Outcome: Warner can recover damages from SDI and employee

examples of employer-IC relationsihp

-Real estate agent is an IC who can accept/place bids on a property on the buyer/sellers behalf -taxi drivers, plumbers, house painters, contractor

example of ratification issue: (nightclub)

-Renaldo operates a nightclub -Patron Ginn becomes drunk and was asked by manager and other patrons to leave -a patron slammed door on Ginn's hand -is the patron who injured Ginn an agent? -no evidence that the manager gave permission or encouraged this second act. Therefore, the nightclub is not responsible.

Principal: Queen Farms Agent: Sam Salesman 3rd Party: Giant grocery

-Sam (agent) has express authority to solicit orders to Giant (third party) for Queen Farms (principal) -he has no authority to deliver goods or to accept payment from Giant -Queens Farms accepts from Sam, the 3 payments made by Giant. Does Sam have authority to accept future payments on behalf of Queens Farms? YES -Queen Farms accepts from Sam, the Jan and April payments made by Giant. Same then takes the July payment but spends it on a trip to Italy. Can Queen farms demand Giant Grocery pay the $1000 owed for July? NO -Queen Farms accepts Jan payment from Sam. It sends a letter to Giant asking that it send payment directly to Queen Farms' accounting office. Does Sam have the authority to accept the April and July payment? NO.

ex. Paula hires her brother Adam to work as a manger in the family business. He orders supplies for the company and many vendors speak to him directly -the siblings have a falling out, and Paula fires Adam. Adam has the company credit card number, and orders supplies for himself from the usual vendor, that he has delivered to the office. He gets it there when Paula is not around. -Paula refuses to pay for the bill. The vendor sues her. Who wins?

-Vendor had no way of knowing they had a falling out -Adam still has apparent authority in the vendor's eyes -Adam is now responsible to Paula and the business -Vendor gets remedies from the principal

Apparent authority through a pattern of conduct or repeated acts (agency by estoppel)

-apparent authority through a pattern of conduct occurs when: 1. principal's acceptance of acts beyond agent's express authority over a period of time, leads a third party to believe that the agent is able to perform those acts beyond the agent's express authority -if principal approves of repeated conduct that was initially unauthorized, the third party is led to believe that conduct is typical of how the principal does business -repeated action approved by principal results in an amended contract between principal and agent -if the principal tells the agent that they cannot perform that after repeated conduct, they must notify the third party of the change

Stonhard, Inc. v. Blue Ridge Farms, LLC

-blue ridge= principal -Sussman= agent -Stonhard= 3rd party -Sussman does not indicate he made a contract on behalf of Blue Ridge (partially disclosed) -Sussman tries to get out when Stonhard sues for non-payment -Court: they understood they were working with the agency, but they did not know the principal; Blue Ridge Farms and Sussman were responsible -Joint and several liability- if agent incurs losses- the reward is indemnification

Ex. buying a house where a murder was committed a year ago

-buyer is suing for fraud -the 3rd party sued both the principal and the agent -she is unable to show there is a remedy -so she filed a petition in supreme court and it was not successful -she wanted the supreme court to expand the types of effects home owners and their salespeople can disclose -there is no duty to disclose about the murder

express authority

-can be actual or apparent authority -embodied in what a principal engages the agent to do -takes the form of clear, direct instructions (oral or written) from the principal to the agent (phone call, email, text) -if an agent contracts outside of the scope of his or her authority, the principal may still become liable by ratifying the contract

contract vs. tort law

-contract: a form of law that makes promises legally enforceable -tort: a form of law that governs civil relationships between people (most tort cases deal with negligence issues/a civil wrong)

express agency

-created by oral or written contract. -most common -contract that can't be performed in a year or less must be written

disputes involving status of worker

-disputes involving employment law -disputes involving tort liability -criteria used by IRS -employee status and "works for hire"

ex. Liability During the Employee's travel Time

-employee filling out paper works and smoking in bed and falls asleep and catches the hotel on fire -employer argued they weren't liable because it wasn't during work time and space -hotel argued it was because it was client related paperwork -the hotel was able to recover from the employer

notice of dangerous conditions

-employer is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation -imputed by virtue of the employment relationship -principal is still liable, even if agent does not report unsafe condition

problems with these relationships arise mostly in:

-formation issues -failing to act properly on behalf of principal

construction notice

-given to everyone in the world, and it becomes effective when you do it in a way that the law says it's okay -ends at the 90 day mark because that's what the statutes say

ex. Venus and Serena

-hired professional manager to replace their dad as their manager -their dad still said they would go to a tournament in Florida -the sisters decided they did not want to go and refused to pay -the tennis tournament sued dad and sisters -sisters got out of it because nowhere did it say that their dad had the right to speak on behalf of them (he was not their agent)

good faith

-how an ordinary person of ordinary intelligence acts -some characteristics associated with good faith include: reasonableness, honesty, disclosure -both agent and principal have the duty to act with good faith-

ex. of an agent: insurance agent or real-estate agent

-if a person is seeking insurance: -principal= buyer (person seeking) -agent= insurance agent (trying to find the buyer the best company) -third party- Allstate insurance

for any legal purpose

-if an illegal purpose, the agency relationship will not be enforced

injunction

-legal remedy that prevents you from doing something in order to avoid harm or losses

liability for contracts depends on 2 things

-liability for contracts formed by agent depends on: 1. how the principal is classified; AND 2. on whether the actions of the agent were authorized or unauthorized

Summary of Liability

-misrepresentation: agent liable, principal liable if within scope of authority -negligence: agent liable, principal liable if within scope of authority -intentional torts: agent liable, principal not liable unless within scope of employment -crimes: agent liable, principal not liable unless part of conspiracy or imposed by law *end jan 25*

Reasonable care, skill and diligence: Bell v. O'Leary

-mobile home owners (Bell and Boni) asked insurance broker (O'Leary) to obtain flood insurance on their mobile homes -homes were located in an unincorporated area of the county and were ineligible for the national flood insurance -O'Leary didn't check to see if they were eligible, the mobile homes flooded, and the insurance claims were denied -homeowners filed a lawsuit against the broker alleging negligence (breach of duty of care) -the agent argued that the homeowners could have known their homes were ineligible themselves -Court ruled it was not homeowners' responsibility because they were paying the broker and the broker was negligent and he bears personal responsibility for the loss -agent responsible for paying the damages

criteria used by IRS

-most important factor is the degree of control the business exercises over the worker

implied agency

-no oral or written contract -extent of agency inferred by parties' conduct (person is appearing to be an agent through conduct) -industry custom: actions within an industry that form an agreement (customer starts filling gas, they are promising to pay) -prior dealings between parties: normal actions repeated overtime -acts necessary to carry out agent's duties:

Paul owns a fleet of charter fishing boats in Florida. He is presently deployed in Iraq. His sister Sarah is running his business. A hurricane is about to make landfall in Paul's town. Sarah can't get in touch with Paul because he is in Baghdad. Paul is responsible for:

-paying the company that Sarah hires to take the boats inland -paying for the plywood that Sarah bought for the windows of the office -NOT paying the therapist that treats Sarah because she is stressed out about Paul's deployment -the new 1-year leas that Sarah negotiated at the marina where the boats docked IF it was needed to dock the boats at the time or if it is essential to perform her job as decided upon actual authority

steps in an estoppel

-principal causes misrepresentation -detriment: the third-party takes a step forward in response to the transaction that puts them out in time for money -the court must also determine if a reasonable person would believe that the person is the agent

example: school bus driver

-principal is liable anytime the bus driver is driving the bus including before first stop of the day and after last stop

safe working conditions

-principal is required to provide safe working premises, equipment, and conditions for all agents and employees -principal has duty to inspect working conditions and warn agents and employees about hazards

Agency by estoppel

-principals actions create the appearance of an agency that does not in fact exist occurs when: 1. Principal causes a third person to believe that another person is the principals agent; AND 2. The third person acts to her detriment because s/he reasonably believes that the other person is principals agent

Agency by agreement reached by:

-reached 2 ways: 1. express agency: 2. implied agency

false imprisonment example

-reasonable cause to believe an invitee is stealing from the employee -you can detain a shoplifter if you have reasonable cause to believe -

Importance of the status of a worker (5)

-status of worker affects the liability and these ownership rights of the employer in these areas: 1. employment discrimination 2. employment tax liability 3. worker's compensation 4. contract liability 5. tort liability

partially disclosed principal

-the 3rd party entering into the contract: 1. knows the agent is acting for a principal; and 2. does not know the actual identity of the principal -the agent and the partially disclosed principal are liable on the contract -agent is also liable because the third party does not have a way to double check with the principal that agent is authorized -principal is also liable because of agency law; agent entered into contract on behalf of principal -if principal would not follow through with their portion of the contract and the third party sues agent, the agent can go to principal for indemnification, reimbursement, contribution

termination by operation of law

-the agency relationship is deemed terminated if the following events occur: 1. death or insanity 2. impossibility 3. changed circumstances 4. bankruptcy 5. war -there is no duty to notify third persons *end jan 30* -------------------------

agent contracts with third party on behalf of principal

-the agent has been given authority from the principal -the contract can be formal or informal

principal is obligated to perform contract made between agent and third party

-the agent is NOT responsible for filling the contract -if the contract is against public policy then it is void and not enforceable

Agency (principal-agent relationship)

-the fiduciary relationship between principal and agent; this relationship is founded on a high degree of trust and confidence

example- Oregon man dies outside ER

-the man crashed his car in a hospital parking lo -police called to the scene. One gave man CPR while one went into the ER to get help -policeman was told that it was against ER protocol to treat someone outside their facilities, and they needed to call an ambulance -a man who crashed died of a heart attack -this is an extreme example of an employer having control over their employees. the employees were expected to follow a standard of care and they were trained to handle things in a certain way.

principal

-the party who hires or employs another to act on his/her behalf -drives the agency relationship

notice of termination

-the principal bears the responsibility to notify third parties who knew of the existence of the agency when the agency relationship has been terminated -why does the principal bear this responsibility? -when is direct notification required? email, mail, hand deliver directly to the 3rd party -when is constructive notice effective? file a public documentation

why is the principal bound to contracts entered into by an apparent agent?

-the principal led the third party to believe that the person was actually an agent -this type of agency holds principals responsible for their misrepresentation -principal is always the person to go to for approval of agency establishment/occureence

Duties of agents and principals

-the principal-agent relationship is one of trust and confidence (fiduciary relationship) -each party owes the other the duty to act with utmost good faith -remedies for violations of duties include monetary damages, termination of the agency relationship, injunctions and accountings

principal is liable for the agent's tortious conduct only if the agent is acting within the scope of his/her authority or scope of employment

-this is because the principal controls that agent and may give them improper instructions, authorize the sue of improper instrumentality, or establish improper rules which resulted in the tort everything the agent does in under the principals direction, so under the Fairness Doctrine the principal is liable

Agent is liable for the principal's tortious conduct if he or she participates in or aids and abets in the principal's tortious conduct

-this is where the agent knows what they are doing is wrong -the principal is directing the wrongfulness but the agent is also responsible

agency coupled with an interest

1. agent has some legal right (an interest) in the property that is the subject of the agency -*agency was created for the benefit of the agent* 2. agent's position may not be terminated until after the agent's interests ends 3. agent who obtains profit or commissions from sale of subject matter is not sufficient to create an agency coupled with an interest Agency coupled with an interest is when an agent has possession or control of the property of his principal and possesses a legal rights against interference by third parties. It is an agency relationship in which the agent is given an estate or interest in the property that is the subject of the agency.

3 steps that must occur to have emergency power to act:

1. agent has tried to communicate with the principal and failed 2. agent has to act fast to protect the principal's rights and property 3. the agent acted appropriately for the situation AND the situation has to be true emergency

What are the steps for ratification

1. agent must act on behalf of principal 2. principal must know all of the material facts involved in the transaction 3. principal must affirm entire deal 4. principal and 3rd party must have legal capacity to contract when agent made the deal 5. principal must affirm before 3rd party withdraws from transaction 6. principal must observe the same formalities when approving act done by agent as would be required initially

agent's duty of obedience

1. agent must follow all of the principal's lawful and clearly stated instructions -any deviation from instructions is a violation of this duty 2. if the instructions are not clearly stated, then the agent should do what is reasonably necessary in the situation and act in good faith by keeping the best interests of the principal in mind 3. if it is an emergency and the principal cannot be consulted, the agent should act in a reasonable manner to protect the interests of the principal. In this situation, agents are allowed to deviate from the instructions in order to protect the principals' interest.

there are 4 ways to form an agent relationship, but only one is needed to confirm that the agent is employed on behalf of the principal:

1. agreement 2. estoppel 3. ratification 4. operation of law

activity, transaction, wrongdoing - red lobster

1. always ask if the wrongdoer had the authority to engage in the transaction in this order a. activity (RL waitress had authority since hired as waitress) b. transaction (yes, task is named for waitress; no if she wrote slur) c. wrongdoing (defamation) 2. consider torts and contracts also a. authority to engage in a transaction should only be in the best interest of the principal

the employer-independent contractor relationship

1. an independent contractor (IC) is a person or business (not an employee) who is hired to do something for the employer (principal) 2. the employer does not control the IC's performance of the job 3. an IC is an agent only if authorized to enter into contracts on behalf of employer (principal)

principals duties to the agent (5)

1. compensation 2. reimbursement 3. indemnification 4. cooperation 5. safe working conditions

Elements of an agency relationship (4)

1. consensual agreement 2. no consideration required 3. principal needs contractual capacity, agent does not 4. for any legal purpose

factors for determining if Agent's conduct occurred within scope of employment

1. did the principal specifically request or authorize the act? 2. was it the kind of act that an agent is usually employed to perform? 3. did the act happen during the authorized time period of employment? 4. did the act happen within the authorized location of employment? 5. did the act advance the agent's personal/private interests or the principals interests? 6. did the principal furnish the means or instrumentality that caused the injury? 7. did the principal have reason to know the agent would do the act or had the agent done the act before? 8. did the act involve a serious crime?

principals are classified as: (3 kinds)

1. disclosed: identity known to 3rd party 2. partially disclosed; 3rd party knows he is dealing with agent, but doesn't know principal's identity 3. undisclosed: 3rd party does not know he is dealing with an agent, and principals identity is totally unknown

no consideration is necessarily required

1. do NOT need to pay someone for their agreement to work

enterprise criminal liability

1. egg company that processes eggs lied about sell by dates -people died -huge recall of eggs and egg products triggered 2. food industry problem is strict liability 0the father and son (fam business) directed others to take part in their fraud -inspector also pled guilty and served jail time since he let this slide

Negligence

1. failing to do something that a responsible person would do; or 2. doing something that a responsible person would not do -negligence involves a duty of care: the obligation we all owe each other not to cause any reasonable risk of harm 3. principal is liable for the agent's negligence because of the doctrine of respondent superior

principal agent relationship

1. five responsibilities are owed to one another -failure to do so results in a breech 2. business cannot operate without an agent 3. american law protects a third party -unless third party participates in wrongdoing -agent and principal must work it out -if principal tells agent to do something wrongful, principle is held responsible

Principal's Liability for Crimes of an Agent

1. for a civil suit- need to conduct a preponderance of evidence 2. criminal suit- to convict evidence must be beyond a reasonable doubt 3. is agent liable for her own crimes? yes 4. principal is not ordinarily liable for the agent's crimes unless: the principal participated in the agents crimes by conspiracy, by law, the principal is strictly liable for agent's violation of gov't regulations during course and scope of employment

following functions of a business:

1. formation 2. operation 3. dissolution

what is the principal's liability for an agent's acts?

1. if agent acts within his authority, the principal is obligated to perform the contract 2. an agent may also be PERSONALLY liable if, at the time the agent entered into the contract the principal was: partially disclosed or undisclosed

example question: Lynn may hire employees to work on the farm that she manages, despite the fact that her employment agreement with the farm's owner says nothing in her contract about her being able to hire employees:

Implied authority- it is necessary for her to do her job and it is part of industry custom

non-existent (unauthorized agency): principal liable, agent liable?

No (unless ratification), Yes (breach of implied warranty of authority) *end jan 23*

travel time responsibility/liability

Travel time is when an employee goes to and from work, or to and from meals. 1. Is the employee liable for injuries to a 3rd party for ordinary travel time? yes 2. Is an principal liable for injuries to a 3rd party for ordinary travel time? depends 3. When is the employer liable for injuries to a 3rd party during all of the employee's travel time? if it is within the course and scope of employment and integral to doing the principal's business

ratification definition

a party's act of accepting or giving legal force to a contract or other obligation entered into on his or her behalf by another that previously was not enforceable

notary public

a public official authorized to attest to the authenticity of signatures

equal dignity rule.

a rule requiring that an agent's authority be in writing if the contract to be made on behalf of the principal must be in writing

power of attorney

authorization for another to act as one's agent or attorney either in specified circumstances (special) or in all situations (general)

undisclosed principal

if 3rd party entering into the contract: 1. does not know that there is an agent acting for a principal; and 2. does not know the actual identify of the principal -the agent and the undisclosed principal are liable on the contract

vicarious liability

liability without fault

Respondent superior (vicarious liability) determining the scope of employment

courts use the following factors to determine the principal's liability for the agent's conduct: 1. did the principal specifically request or authorize the act? 2 was the act one that is commonly performed by the agent on behalf of the principal? 3. what was the time, place, and purpose of the act? 4. did the act advance the principal's interests? 5. did the act involve the agent's private interests? 6. did the principal furnish the means or instrumentality that caused the injury? 7. did the principal have reason to know that the agent would do the act, or had the agent done the act before? 8. did the act involve the commission of a serious crime?

employer and labor relations

employees are protected through contracts with employer and actions exercised within statutory rights -ex. if false financial statements are created within a company, employee cannot be fired for reporting to SEC because of the Sarbanes-Oxley act

notice question: the principal is require to provide direct notification to third parties if: A. The principal authorized the agent to deal with third parties in general B. the principal is aware that the agent has dealt directly with the third party C. the agent communicated with a potential client at an industry conference

first: B second: A third: C

employer's liability for negligent acts of employees during departure from business example

work place-->time and space-->minor/major -negligent acts: -P liable- vicarious liability = P responsible suspense/control -A liable- she did the harmful act

fully disclosed (authorized agency) : principal liable, agent liable?

yes & no

undisclosed (authorized agency): principal liable, agent liable?

yes & yes

partially disclosed (authorized agency) : principal liable, agent liable?

yes & yes unless 3rd party releases A from liability

Liability for intentional tort example

• Cory is a waiter, whose boss is aware that he threatens people who don't tip him. A couple leave him a penny, and he follows them to the parking lot and threatens them. The couple quickly drive off the lot without looking and ends up in an accident. The car crash victim and the couple wants to hold the restaurant and Cory accountable. • Who is successful against Cory? the couple because Cory caused accident Who is successful against the restaurant? couple can tie the action back to restaurant because boss was aware of Cory's temper -both car crash victim and couple won against Cory -only couple won against restaurant *end of*

Is the Employer responsible for the Truck driver's accident?

• Donald Roger, truck driver and ee of Newspaper Agency Corp. (NAC), killed child while making deliveries. • Donald had license revoked in another state for DUI conviction. • Before reporting for work, Donald drank 7 drinks; had .18 blood alcohol level after incident. • Alcohol and marijuana use widespread at NAC; trucks returned of with beer cans on floor. • NAC supervisor saw drivers smoking MJ and told them to "do it on the road." • Is NAC liable for the deaths? Donald is guilty because he was negligent in operating the truck, and the employer is responsible for Donald. Thus the employer is responsible for Donald's negligence.

Duty of notification (inputed knowledge) example Iota management Corp.

• Iota Management Corp. (Buyer) entered contract to buy Bel Air West Motor Hotel (Seller). • Warranty: Seller has no actual notice of any substantial defects in the structure of Hotel or in any of its plumbing, heating, air-conditioning, electrical, or utility systems. • Buyer performed inspection. No leaks in pipes visible. • Buyer removed walls during remodeling. Found evidence of prior repairs to leaking pipes and water-catching devices (milk cartons, cookie sheets, buckets). • Seller's maintenance supervisor had actual knowledge of water problem for four years before sale, and had performed some of the repairs. • Buyer sued to rescind contract. • Is Seller liable?

Principal's Liability for Torts of Independent Contractors

• Is an independent contractor liable to the 3rd party for his or her own torts? yes • Is a principal liable to the 3rd party for the tortious acts of an I.C.? no because of the limited control over the IC unless: • Exceptions to rule: 1. Law imposes strict liability on principals for hazardous activities. 2. principal has substantial control over the I.C.

Duty of loyalty example: Shields & Ford Motor Co.

• Peter Shields, President and Board member of Production Finishing Corp., which provided steel polishing services. • Shields discussed with Ford Motor Co. the possibility of PFC doing Ford's work (Ford had its own in-house division). • Shields learnt that Ford discontinued its operations. He incorporated Flat Rock Metal and submitted a confidential proposal to buy Ford's equipment, and provide polishing services. • Shields informed Board of PFC of Ford purchase deal with Flat Rock when he submitted his resignation. • PFC sued Shields. Why? • What is the outcome?

Independent Contractor Liability: Derrell Pusey v. Bator

• Plant supervisor of steel drum manufacturer hired YSP security company (independent contractor) to guard plant. • Supervisor knew that guards were armed. • Guard (Bator) not certified as an armed guard, but took gun to work. • While at plant, killed Derrell Pusey. • Mother filed wrongful death action against drum manufacturer and guard company. • Will drum manufacturer avoid liability? no because: it was an ultra-dangerous activity, it was reasonably foreseeable that someone could be injured if hiring armed guards to work on the premises, the drum manufacture will be held liable.