Ch. 16 Agency

Agency by Agreement

most common way of forming an agency. Takes form of a written contract or an oral agreement.

APPARENT authority

not real authority, is granted when the principal, by either words or actions, causes a third party reasonably to believe that an agent has authority to act, even though he/she has no express or implied authority.

Notice of Termination

it is the principal's duty to inform any third parties who know of the existence of the agency about its termination. An agent's 'apparent authority' continues until the 3rd party receives the notice. *If the principal knows that the 3rd party dealt with an agent, he is responsible for notifying them DIRECTLY; for 3rd parties who have heard about the agency but haven't yet dealt with the agent, 'constructive notice' is enough.

Liability for Agent's Intentional Torts

Under the doctrine of respondeat superior, an employer can be liable for any intentional torts committed by an employee within the course and scope of employment. *An employer may also be liable for intentional torts an employee commits outside of employment scope if he is aware that this employee is inclined to commit such b/c he/she has done it in the past before getting hired. *An employer may be liable for letting the employee engage in reckless behavior that can injure others (e.g. smoking next to a gasoline truck).

Determining Employee Status

Criteria used by the COURTS: 1. How much controls can the employer exercise over the details of the work? (considerable control = employee status) 2. Is the worker engaged in an occupation or business distinct from that of the employer? (= if yes, then ind. contractor) 3. Is the work usually done under employer's direction or by a specialist w/o supervision? (employer's direction = employee) 4. Does the employer supply tools at the place of work? (=> if yes = employee) 5. For how long is the person employed? (long time = employee) 6. What is the method of payment? (pmt by time period, every 2 wks or 1x/mth = employee) 7. What degree of skill is required by the worker? (little skill = employee).

Agent's authority

agent's authority to act can be ACTUAL (express or implied) or APPARENT.

Liability for Agent's Negligence: Determining the Scope of Employment

to determine whether the principal may be liable for the torts of an agent under the doctrine of 'respondeat superior', we need to know whether the torts are committed within the scope of the agency of employment. Consider following factors: 1. whether the employee's act was authorized by the employer 2. the time/place/purpose of the act 3. whether the act was one commonly performed by employees on behalf of their employers 4. the extent to which employer's interest was advanced by the act 5. the extent to which the private interests of the employee were involved. 6. whether the employer furnished the means or instrumentality (e.g. a truck/machine) by which the injury was inflicted 7. whether the employer has reason to know that the employee would do the act in question and whether the employee had ever done it before. 8. whether the act involved the commission of a serious crime

Agent's duties to the Principal

(5): performance, notification, loyalty, obedience, and accounting.

Termination of Agency by Operation of Law

-no need to notify 3rd parties. Reasons for termination include: *Death or insanity of either the agent or the principal *Impossibility> when the specific subject matter of an agency is destroyed or lost, the agency terminates. *Changed circumstances *Bankruptcy *War

ACTUAL authority

1) Express authority is authority declared in clear, direct, and definite terms. Can be given orally or in writing. If the contract is in writing then the agent's authority must also be in writing (=equal dignity rule). vs. 2) Implied authority - an agent has an implied authority to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency.

Requirements for ratification

1. Agent must have acted on behalf of an identified principal who subsequently ratifies the action 2. The principal must know of all material facts involved in the transaction. 3. The principal must affirm the agent's act in its entirety 4. The principal must have the legal capacity to authorize the transaction at the time the agent engages in the act and at the time the principal ratifies. The 3rd party must also have the legal capacity to engage in the transaction. 5. The principal's affirmation must occur before the 3rd party withdraws from the transaction 6. The principal must observe the same formalities when approving the act done by the agent as would have been required to authorize it initially.

Classification of the principal

1. disclosed = the principal's identity is known by the third party at the time the contract is made by the agent. 2. partially disclosed = principal's identity is not known by the 3rd party but 3rd party knows that the agent is or may be acting for a principal at the time the contract is made. 3. undisclosed = principal's identity is not known by the 3rd party and the 3rd party has no knowledge of the agency relationship between agent and principal.

Authorized vs Unauthorized acts of the agent

AUTHORIZED: If an agent acts within the scope of her/his authority, normally the principal is obligated to perform the contract regardless of the principal's classification. Whether the agent may also be held liable under the contract DOES depend on the classification of the principal. - Under disclosed status, the agent is not liable - Partially disclosed status of the principal holds the agent liable for contractual nonperformance in most states - Undisclosed status holds the agent liable as a party to the contract UNAUTHORIZED: if an agent has no authority but nevertheless acts with a third party, the principal cannot be held liable on the contract no matter the classification status of the principal, but the agent however IS liable.

Agency Termination by Act of the Parties

An agency may be terminated by act of the parties in several ways: -lapse of time -purpose achieved -occurrence of a specific event -mutual agreement -termination by one party: both the agent and the principal have the power to terminate the agency relationship but may not possess the right. It's called "Revocation" if done by the principal and "Renunciation" if terminated by the agent. -

Liability for TORTS and CRIMES

Any person and/or agent is liable for his/her own torts and crimes. Whether a principal can also be held liable for an agent's torts and crimes depends on: -Principal's Tortious Conduct (negligence or recklessness), -Principal's Authorization of Agent's Tortious Conduct, -Liability for Agent's Misrepresentation, -Liability for Agent's Negligence - a principle is liable for agent's negligence caused to the 3rd party under the doctrine of 'respondeat superior' ('let the master respond'); the doctrine imposes vicarious liability (indirect liability) on the employer.

Liability for Agent's Negligence CONT'D...

II. The distinction between a "DETOUR" and a "FROLIC" III. EMPLOYEE TRAVEL TIME - going to and from work/to and from meals is outside the scope of employment. If travel is a part of a person's position, then travel time (duration of the trip + return trip home) is within the scope of employment. IV. NOTICE OF DANGEROUS CONDITIONS: the employer is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation, whether the employee informs him or not.

Employer-Independent Contractor Relationships

Ind. contractor is not an employee, but a person who contracts with another to do something for him/her who is not controlled by the other nor subject to the other's right to control with respect to his/her physical conduct in the performance of the undertaking. He/she may or may not be an agent.

LIABILITY IN AGENCY RELATIONSHIPS

Liability for Contracts vs. Liability for Torts and Crimes

Fiduciary

NOUN. A person having a duty created by her or his undertaking to act primarily for another's benefit in matters connected with the undertaking. ADJ. as in "fiduciary relationship", means that the relationship involves trust and confidence. *Agency relationship may exist between an employer and his employees or employer and independent contractors who are hired to perform special tasks/services.

Agency by Estoppel

When a principal causes a third person to believe that another person is his/her agent, and the third person deals with the supposed agent, the principal is "estopped to deny" the agency relationship. The principal's actions create the appearance of an agency that does not in fact exist. The third person must prove that he/she reasonably believed that an agency relationship existed. Facts and circumstances must show that an ordinary, prudent person familiar with the business practice and custom would have been justified in concluding that the agent had authority.

Agency

a relationship between 2 parties in which one party (the agent) agrees to represent or act for the other (the principal).

power of attorney

a written document, usually notarized by a notary public, confers express authority; can be special or general.

Liability for Independent Contractor's Torts

an employer is not liable for negligent acts of an independent contractor except in certain situations such as when unusually hazardous activities are involved (e.g. blasting operations, the transportation of highly volatile chemicals, or the use of poisonous gases).

AGENCY RELATIONSHIP

comes about by voluntary consent and agreement between 2 parties; need not be in writing, and consideration is not required. A person must have contractual capacity to be a principal but any person can be an agent whether or not he/she has the capacity to enter a contract. An agency is formed in 4 ways: by agreement of the parties, by ratification, by estoppel, and by operation of law.

Principal's duties to the Agent

compensation, reimbursement and indemnification ('compensation'), cooperation, and safe working conditions.

Liability for CONTRACTS

depends on how the principal is classified (disclosed, partially disclosed, or undisclosed) and on whether the actions of the agent were authorized or unauthorized.

Employer-Employee Relationships

employer = the principal, and employee = is the agent. Agency law is base on the common law. Employment laws (state and federal) apply only to employer-employee relationships. So do statutes governing Social Security, withholding taxes, workers' compensation, unemployment compensation, workplace safety, employment discrimination,etc.

Agency by Operation of Law

the courts may find an agency relationship in the absence of a formal agreement in situations such as family relationships or emergency situations.

Agency by Ratification

the principal either by act or by agreement ratifies (confirms) the conduct of a person who is not in fact an agent.