Bostick Business Law 3305 Exam 4 - Chapters 28, 29

Who is the Principal?

Owner; Employer

Duty of Good Conduct/Diligence

act reasonably, with care, competence and diligence

What is the "Right to Control the Manner and Means"?

"What" the worker does AND "How" the worker is to do their job

How does the Court decide whether the Independent worker is an Independent Contractor or Employee?

(weighing certain) Factors: 1. Right to Control***(MOST IMPORTANT): Y --> E 2. Worker Exclusive to Principal: Y --> E 3. Principal provides Equipment: Y --> E 4. High Skill Required/Distinct Occupation: Y --> IC 5. Method of Payment: By Time/Salary --> E, By Job --> IC 6. When is Worker Paid: Weekly --> E, end of Job --> IC 7. Permanency of Job: Continuous --> E, Limited --> IC 8. Is Job integral part of Principal's Business? Y --> E 9. If Worker has independent opportunity for profit or loss related to job? Y --> IC

Duty of Indemnification

- "make whole" - compensate agent for loss incurred by Agent within Agency Relationship Examples: getting hurt on job, getting sued on job while doing as told by principal

Duty to Account to Principal

- Account to Principal for Money or property received or paid by Agent on behalf of Principal. - Cannot co-mingle Principal's Assets with Agent's Assets

Termination: When Agency Relationship is IRREVOCABLE

- IRREVOCABLE means Principal cannot terminate the Agency without the consent of Agent - "Agency Coupled with an Interest" - Durable Power of Attorney

Termination: Acts or Agreements of Principal & Agent

- Lapse of time - Fulfillment of Purpose - Mutual Agreement - Termination by One Party (Revocation of Authority = agent fired, Renunciation by Agent = agent quits)

What Rules govern the relationship between Principal & Agent?

- What comprises the Agency Agreement (Contract) - Duties of Agent to Principal - Duties of Principal to Agent

Termination by Operation of Law

- When event happens Agency may automatically terminate without P or A doing anything further - Agent knowledge of Death or Incapacity of Principal --> immediate termination - Agent does not know of Death or Incapacity of Principal --> terminates after the earlier of reasonable time or Agent knowledge - Death or Incapacity of Agent --> immediate termination - Change in Circumstance: Loss/Destruction of subject matter

Duty of Obedience

- agent must act ONLY as ACTUALLY AUTHORIZED - obey all "lawful instructions and directions of Principal

Duty to Inform/Notify Principal

- inform principal of relevant information - inform principal of conflict of interest - think: "What would Principal want or need to know?" Rule: Notice to Agent is Notice to Principal (if agent knows, principal is "deemed" to know)

Fiduciary (Loyalty) Duty

- no conflicts of interest (unless Agent FULLY discloses and Principal gives informed consent.) - Duty Not to Compete (during employment period -- includes if they recruit people from company to start new company) - Keep Confidential Information confidential - Account for financial benefits received by Agent (woman at First City getting tickets for favor -- okay if got consent)

Examples of Agency Agreement

- terms of job (given by HR) - agreed to policies and procedures - training instructions and rules (Oral) (any action done against these is a breach of contract)

When does "Apparent Authority" exist?

1. After Agency Agreement is Terminated and Agent Still Acts for Principal. - 3rd Party does not know of termination. Exception: No apparent authority if termination was due to death or incapacity of Principal. 2. During Agency Agreement, Agent exceeds their Actual Authority.

Subject Matter of Agency Agreements

1. Agent's job responsibilities and title. 2. How Agent should do that work. 3. Amount paid. 4. How long Agency lasts (time). 5. What "authority" does Agent have to bind the Principal?

3 Requirements for Agency to Exist

1. Assent - Principal AND Worker agree to form relationship 2. Agree Principal has some right of control over actions of Worker 3. Principal intends that the Worker will act on behalf of the Principal

Why we care if worker is an Employee or Independent Contractor

1. Benefits (employees ONLY - ie. maternity leave, PTO) 2. Employer pays 1/2 of SS & Medicare (employees ONLY) 3. Employer liable for Certain Torts (employees ONLY) 4. Protected under Employment Laws (employees = Age Discrimination Act/Civil Rights Act of 1964)(IC = OSHA) - OVERALL: employees cost more, so not as ideal for employer

Termination Agency Agreement (how P/A relationship ends)

1. By acts or agreements of the Principal & Agent 2. Termination by Operation of Law 3. When Agency Relationship is IRREVOCABLE

3 Areas of Liability of Principal and Agent

1. Contract Liability 2. Tort Liability 3. Criminal Liability

Why we care if a worker is an IC, Employee, and/or Agent?

1. Contract Liability 2. Tort and Criminal Liability

Contract Liability when Agent has No Actual OR Apparent Authority

1. Disclosed - A is liable 2. Unidentified - A is Bound 3. Undisclosed - A is Bound

Examples of 3 Types of Principals

1. Disclosed - Bostick works for Baylor 2. Unidentified - Buying land through an Agent while TP doesn't know who P is 3. Undisclosed - Disney buys land through A while TP doesn't know A is just an Agent and not a Principal.

Contract Liability when Agent has No Actual OR Apparent Authority but K is Ratified by P

1. Disclosed - P is Bound 2. Unidentified - P is Bound 3. Undisclosed - P is Bound

Contract Liability when Agent has Actual Authority

1. Disclosed - P is Bound to TP 2. Unidentified - P AND A are Bound to TP, but A can sue P for reimbursement 3. Undisclosed - P AND A are Bound to TP, but A can sue P for reimbursement (same as Unidentified)

Contract Liability when Agent has Apparent Authority but No Actual Authority

1. Disclosed - P is Bound to TP, but A has liability to pay P 2. Unidentified - P AND A are Bound to TP, but A has liability to pay P 3. Undisclosed - IMPOSSIBLE because 1st requirement of Apparent Authority is Principal Conduct which doesn't exist if TP doesn't even know there's a P.

3 Types of Principals

1. Disclosed Principal (public knowledge) 2. Unidentified (Partially Disclosed) Principal 3. Undisclosed Principal

Duties of Agent to Principal

1. Duties Imposed by Agency Agreement 2. Duties Imposed by Law 3. Duty of Obedience 4. Duty of Good Conduct/Diligence 5. Duty to Inform/Notify Principal 6. Duty to Account to Principal 7. Fiduciary (Loyalty) Duty IF any duty breached, Agent is Liable to Principal for damages caused by breach.

Duties Imposed by Law (employer to employee)

1. Duty of Compensation (salary) 2. Duty of Reimbursement (for "authorized" payments made by Agent on behalf of Principal) Example: booking a hotel as authorized, paying for a company meal as authorized

What are the three types of agents?

1. Employees 2. Agents appointed in a Power of Attorney 3. SOME Independent Contractors

Two Types of Actual Authority

1. Express Authority (words) - Oral or Written 2. Implied Authority - Non-verbal; Implied from Express Authority or P's actions (what is "necessary" to do what is expressed)

Components of a Proper Signature Block

1. Full Legal Name of Entity (with Entity Indicator) 2. By: Your Name and Title (indicates representative capacity)

Requirements of Ratification

1. Principal must ratify the ENTIRE contract. 2. Must ratify BEFORE the Third Party withdraws from Contract. 3. Once P ratifies, they CANNOT REVOKE ratification.* Example: Agent enters into K without Authority and P is NOT Bound. TP withdraws from K, so after that the P can no longer ratify K.

E v. IC Factors applied to Uber Drivers

1. Right to Control? Driver --> IC 2. Worker Exclusive to Principal? No -- IC 3. Principal provides Equipment? No -- IC 4. High Skill Required/Distinct Occ? No -- IC 5. Method of Payment? By job -- IC 6. When Paid? End of Job -- IC 7. Permanency of Job? not set -- E 8. Integral part of P's Business? Y -- E 9. Worker opportunity for P/L? Y -- IC Result: Uber Drivers = IC

Who can challenge the status of a worker? Why?

1. Worker - Wants Benefits, etc. 2. IRS or Gov - Wants Worker to have Benefits, etc. 3. Third Party - Wants Employee's Employer to be Liable for tort.

Apparent Authority

2 Requirements: 1. Principal's conduct related to Agent (hiring agent to deal with 3rd party; something happening in the past; title of manager) 2. Third Party "reasonably believes" Agent has Actual Authority (Objective standard - Focus on 3rd Party; Subjective Standard - 3rd Party cannot know Agent has no authority)

What is the Law of Agency?

3 Categories: 1. What Rules govern the relationship between Principal & Agent? 2. What Authority does the Agent have to act on behalf of Principal? 3. When is the Principal Liable for the actions of the Agent?

What is a Power of Attorney?

A written legal document where the principal gives authority to an agent to take care of some type of business on behalf of the principal.

What is the difference between an Agent and an Employee?

ALL Employees are Agents but NOT ALL Agents are Employees.

Two Types of Authority

Actual Authority and Apparent Authority

Agency Triangle (Agency Relationship)

Agency Agreement is between Principal and Agent

What Authority does the Agent have to act on behalf of Principal?

Agents have different levels of "Authority": - Broad: CEO, President - Middle: Chef - Narrow: Waiter

Duties Imposed by Agency Agreement

Agreement includes specific duties.

Ratification

An agreement that occurs when P agrees to be bound to a Contract for which an Agent acts on P's behalf with neither Actual nor Apparent Authority

Can a Principal be an Individual, Entity, or Both?

Both

Can an Independent Contractors be an Individual, Entity, or Both?

Both

Can an Agent appointed by a Power of Attorney be an Individual, Entity, or Both?

Both (can be either)

Durable Power of Attorney

Cannot be revoked by principal without agent's consent Example: Husbands/Wives make this Contract when one is incapacitated, so the other continues making decisions for them.

If Employee is on "Frolic", who is liable for the tort committed then?

Employee Liable.

"Frolic"

Employee is accomplishing Employee's, NOT Employer's, purpose; NOT Within Scope of Employment

Two Types of Ratification

Express: Principal orally or in writing agrees to contract. Implied: Based on Principal's Conduct -- if Principal accepts the benefits of the Contract. (ie. Accepts goods bought by Agent without Authority, Ships good sold by Agent without Authority)

Ratification Timeline

If Ratified, Principal is liable from beginning of Contract. Example: Agent enters into K without Authority on 11/1/20, so P is NOT Bound to K. P ratifies K on 11/15/20, so P is NOW Bound to K. The Payment is now due on 12/1/20, 30 days after the beginning of the Contract.

Example of "Right to Control the Manner & Means"

If a CPA works for an Accounting Firm, the Firm has control over "what" the CPA does and "how" the CPA does the tax return, so the CPA is an Employee. If the CPA is hired by a Client, the Client has control over "what" the CPA does but NOT "how" the CPA does the tax return, so the CPA is an Independent Contractor.

Duties Imposed by Law (employee to employer)

If not disclaimed in Agency Agreement, duty automatically exists.

How do you cut off an Agent's Apparent Authority after they have been terminated?

If termination is due to death/incapacity of Principal, Apparent Authority is automatically terminated and Actual Authority is terminated on the earlier of: when Agent has notice of death/incapacity of Principal OR a reasonable time has passed.

What is the difference between an Independent Contractor that is NOT an Agent and one that is?

Independent Contractors that are NOT Agents have no authority to act on behalf of the Principal. (They only perform a service for the Principal.)

Rule about Intentional Torts

Intentional Tort is less likely to be within scope of employment because it's not foreseeable unlike negligence (mistakes) by Employees.

What is required for an unauthorized Intentional Tort to be "Under the Scope of Employment"?

It must be "reasonably connected" with employment OR "foreseeable" that the situation would come up related to employment (ie. security guard hurts someone; reasonably connected and foreseeable)

Duties as an Employer

Look at Duty imposed on the Principal by Tort Law Example: Safe workplace, hiring, etc.

Formalities of the Agency Agreement (form)

May be: 1. Oral 2. Written 3. Inferred from Conduct 4. A combination of above

Constructive Notice

Newspaper or Journal Ad (Required for all other Third Parties ie. Current Customers who haven't worked with Agent; Non-customers)

If termination is due to death or incapacity of Principal, must the Principal give "notice" to third parties?

No

If Torts authorized by Principal is committed by Agent, who is liable?

Principal AND Agent, but Agent has right of Indemnification.

If Torts committed by Agent is unauthorized, who is liable?

Principal can be held liable under two theories: 1. Respondeat Superior 2.

Actual Notice

Principal must affirmatively contact Third Party to notify them that Agent no longer has "Authority"; this notice may be oral or in writing but must be CLEAR (Required if Third Party has dealt with Agent before to Contract with Principal)

What does "Within Scope of Employment" mean?

The employee committed the tort while performing work assigned by the employer OR engaging in a course of conduct subject to the employer's control (things we do while working BUT that are NOT part of our job)

Who is the Agent?

The person who acts on behalf of the Principal.

Can an Agent have Actual Authority and Apparent Authority at the same time?

Yes Example: Allen has actual authority to buy up to $100k of inventory, but purchases $125k. Sellers are reasonably unaware of limitation because Allen has Actual Authority for the first $100k and Apparent Authority for the next $25k. Result: Company bound by Contract.

If termination is due to acts of Principal or Agent, must the Principal give "notice" to third parties?

Yes (Absolutely)

If an Agent commits a tort, is the Agent liable?

Yes, the Actor who commits the Tort is ALWAYS liable to the TP.

Duty of Good Fatih

honesty of purpose without any intention to mislead or to take unfair advantage of another

Respondeat Superior (Vicarious Liability)

means "Let the superior respond". Principal will be liable for unauthorized tort if: 1. Agent is an employee (Not IC) AND 2. Employee was "in Scope of Employment" when committing tort

Tort and Criminal Liability - Can Principal be held liable for the Torts and Criminal Acts of: (1) Employee/Agent (2) Independent Contractor/Agent (3) Independent Contractor ?

yes, no, no

If Agent acted within Apparent Authority and entered into a Contract on behalf of Principal: Is the (1) Principal Bound to Contract (1) Agent Bound to Contract (3) Agent liable to Principal?

yes, no, yes for breach of Duty of Obedience

Contract Liability - Can Principal be held liable under a Contract entered into on their behalf by a: (1) Employee/Agent (2) Independent Contractor/Agent (3) Independent Contractor ?

yes, yes, no

What are two examples of IC's that are NOT Agents?

- Cleaning Company - Graphic Designer

When is the Principal liable for the actions of the Agent?

- Contract (liable when there's breach of contract) - Tort (liable when employee acts within scope of employment, but employee themself is also liable for own tort)

Why does Agency Exist?

- One person can only do so much - Entities can ONLY act through agents.

Types of Notice

1. Actual Notice 2. Constructive Notice

Duties of Principal to Agent

1. Agency Agreement Duties 2. Duties Imposed by Law 3. Duty of Indemnification ("make whole") 4. Duty of Good Faith 5. Duties as an Employer

Agency Coupled with an Interest

An agency relationship in which the agent is given an estate or interest in the subject of the agency (the property). - usually associated with lending transaction where Principal pledges collateral to secure payment on loan. - lender = agent; borrower = principal - Agency cannot be terminated until loan is fully paid off.

Can an Individual be an Individual, Entity, or Both?

Individual

When is the Principal "bound" under a Contract entered into by the Agent on behalf of the Principal?

When the Agent has "Authority"

When is an IC not an Agent?

When the Principal does not intend for the IC to enter into Contracts on behalf of the Principal. When the IC is merely providing a service TO the Principal, NOT acting FOR the Principal.

When is an Independent Contractor also an Agent?

When the Worker acts on behalf of the Principal (3rd Requirement of Agency) when the Principal intends for the IC to enter into Contracts on behalf of the Principal.