LS Ch 10

3 Types of Agent Authority

1. Actual authority: parties expressly agree to create an agency relationship or the authority is implied based on custom or the course of past dealings 2. Apparent authority: Arises from the actions of a principal that lead a third party to believe that an agent has the authority to act on the principal's behalf (appearance rather than expressed) 3. Ratification: occurs when the principal affirms a previously unauthorized act by either: a. Expressly ratifying the transaction or b. Not repudiating the act

IRS 3 Prong Test to Determine Agent Status

1. Behavioral aspects of the agency 2. The financial arrangements between principal and agent 3. The type of working relationship the parties have in terms of benefits and promises of continuing employment

3 categories of agents

1. Employee agents: perform services for a principal who can control what will be done and how 2. Independent Contractor Agents: performs services for a principal who has the right to control/direct the result of the work, but not the means and methods of accomplishing the result 3. Gratuitous agents: acts on behalf of a principal without receiving any compensation (Favor)

The principal does not have a duty to reimburse or indemnify the agent if the payments made or expenses incurred were

1. Outside the agent's actual authority 2. From losses resulting from the agent's negligence 3. Or from losses resulting from the agent's intentional tort or an illegal act

Basic Steps of creating agency relationship

1. The Principal Manifests some offer to form an agency (agency relationship is created expressly by the parties with the duties of the agent being set out by the principal) 2. The parties perform their respective duties in accordance with their agreement and agency law 3. An agency transaction is ended by the termination of the agency by the parties Note: Conduct alone can be the sufficient basis for the formation of the agency relationship

Courts are Inclined to hold their employers liable under negligent hiring doctrine in cases where

1. The employees are required to have a high level of public contact 2. Or the employees are entrusted with caring for the sick, elderly, or other particularly vulnerable populations

Liability for Unauthorized acts of agents

A principal is responsible for the acts of an authorized agent even if particular acts were unauthorized

Liability for each Category of Agents

A. Employee Agents Liability: Principals are liable for the actions or omissions of employee agents B. Independent Contract Agent Liability: Principal has no liability for the actions and omissions

Duties and Obligations of the Principal to the Agent

A. The principal has a duty to reimburse and indemnify its agents when they incur expenses, make payments, suffer an injury, or cause damages to third parties B. Cooroporation CSafe Work Environment

Liability for Agents Crimes (+Exeption)

Agent is liable for her own crimes, Prinicipal is not liable even if the crime was committed within the scope of employment Exception: Principal participated in the crime and In some states prinicipals may be liable for agent's violation of regulations

Principal Liability for Independent Contractors Torts

Employer is not liable for acts of independent contractors because employer has no right to control them, exception is principal is strictly liable for unusually hazardous activities like transportation of highly volatile chemical or use of poisonous gases

Agents Duties to the Principal

Fiduciary Duties: 1. Loyalty: Agent is obliged to advance the principal's interest over her own interests 2. Obedience: Agent has the duty to obey lawful instructions from the prinicpal and cannot substitute her own judgement for the judgement of the principal Care 3. Care: Agent has the duty to act with due care when conducting business on behalf of the priinicpal 4. Disclosure: Agents have an ongoing duty to keep the principal informed and disclose any and all relevant facts to the prinicpal 5. Accounting: Agent must keep appropriate written records for any money that the agent spends or receives in the course of the agent's representation

Scope of Employment Requirement

For the principal to be liable, the agent's tortious conduct must have: 1. Been related to her duties as an employee of the principal 2. Occurred substantially within the reasonable time and space limits 3. Been motivated, in part, by a purpose to serve the principal

Principals are generally not liable for negligent acts of agents that are...

Independent Contractors Exception: when the prinicpal has been negligent in hiring, and it is based on the peculiar risk doctrine that is rooted in the restatements also liable when scrict liability for unusually dangerous activity.

Liability Regarding Intentional Torts

Intentional torts by an agent are thought to be outside the scope of employment, and, therefore, employers are not liable for such conduct unless the assault has a close connection to serving the principal

Revocation vs Renunciation

Revocation: termination by the principal Renunciation: termination by the agent

When in employer is liable for employee torts

The employer is liable for employee's actions which employer knew or should have known the employee has the propensity to commit

Partially Disclosed Agency

The third party knows that the agent is representing a principal but does not know the actual identity of the principal Liability: Both the principal and the agent may be liable for the obligations under the contract, liability on the agent in the event that the principal does not perform her contractual obligations

Undisclosed Agency

The third-party is completely unaware that an agency relationship exists and believes that the agent is acting on her own behalf in entering a contract Liability: Agent is fully liable to perform the contract, Liability on the agent in the event that the prinicpal does not perform the contractual obligations

Disgorgement

a court may order the agent to return any funds earned as a result of the breaching conduct

Codified

a legislative body adopting principles from a court decision by incorporation into their statutory code

Restatement (third) of Agency

a set of principles intended to clarify how the law of agency stands; issued by the American Law Insitute

ABC test (+Steps)

a statutory standard used by many states to determine agency status Steps: agent is an employee unless: A.free from direction and control B. customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed C. service is performed outside the usual course of business of the employer

An Agency Relationship is Terminated either through

a. An express acts of the parties b. operation of law Note: once agency is terminated agent has no actual authority to bind to principal but may have apparent authority

An agent's liability to third parties in a contract hinges on whether the agency relationship is....

a. fully disclosed b. partially disclosed c. undisclosed

The principal may be liable for agent's torts if they result from:

a. principals tortious conduct (did the co have anything to do with conduct) b. principals authorization of Agents tortious conduct (did company authorize conduct) c. Doctrine of Respondent Superior (was a person acting within the scope of employment)

Operation of Law Termination of Agency Relationship

agency relationship is terminated as provided for in a statute or through certain common law doctrines covering the destruction of essential subject matter, death, bankrupcy, or lack of requisite mental capacity

Equal Dignity Rule (regarding formality)

agent action requires same formality as principal's - if purpose of agency has to be in writing (due to statute of frauds) the agency relationship would have to be in writing

Agents Remedies for Breach

agent generally has the right to recover damages in court, If the principal doesn't reimburse or indemnify the agent they can sue to collect money owed them then and for out of pocket and incidental costs

substance-over-form analysis (how courts classify agents)

agent is classified based on the amount of direction and control that the principal has over them

Principal

an agent's master; the person from whom an agent has received instruction and authorization and to whose benefit the agent is expected to perform and make decisions pursuant to an agency relationship

Frolic

an exception to the respondeat superior doctrine that occurs when an agent, during a normal workday, does something purely for her own reasons that are unrelated to her employment, - principal is not liable for agent's negligence while on frolic

Manifest

apparent and evident to the senses, courts apply an objective standard to determine whether the principal intended that an agency be created

Doctrine of Respondeat Superior

common law doctrine under which a principal is liable for the tortious action of the agent when that act resulted in physical harm or injury and occurred within the agent's scope of employment

Detour

conduct classified as a small-scale deviation that is normally expected in the workday and, therefore, is within the ambit of respondeat superior, Principals are liable for negligence during detours

Going and Coming Rule

employers are generally not liable for tortious acts committed by employees while on their way to and from work Exception: Required Vehicle Exception

Courts objective standard to determine manifestations and consent (of agents agreement)

given the parties' outward expressions, actions, and words, would a reasonable person believe that the principal intended that an agency be created and that the agent did in fact consent to the agency relationship (objective not subjective)

Agency Law

governs the relationships created when one party hires another party to act on their behalf - Overlaps with tort and contract law

Duty of Care for Gratuitous Agents

held to a lower duty of care than is a paid agent

Agency

legal relationship in which the parties agree that one party will act as an agent for the other party called the principal, subject to the control of the principal

Vicarious Liability

liability that a supervisory party (employer) bears for the actionable conduct of a subordinate or associate (employee)

Liability for Misclassification

most states impose civil penalties, some impose criminal liability

Agent

one who consents/ is authorized to act on behalf of another, the principle, to legally bind the principal in particular business transactions with third parties pursuant to an agency relationship

Remedy if the agent breaches the duty of loyalty

principal can rescind any transaction between the principal and the agent

Perculiar Risk Doctrine

requires a principal to take reasonable steps to determine the fitness of an independent contractor agent to perform an inherently dangerous task

Due Care

requires agent to act in the same careful manner when conducting the principal's affairs as a reasonable person would in conducting her own personal affairs

Indemnification

right of reimbursemnet for a loss suffered due to a third party's act or default

Express Acts

simple communication of the desire to terminate the relationship, the expiration of a fixed term, or satisfaction of purpose

Source of law for agency

state statutory level; based on the restatement (third) of agency

If the Employees misconduct causes physical harm to a 3rd party's person or property...

the employer is liable for both the injury and any related economic losses

Fiduciary Relationship

the notion that two parties may agree that one will act for the other party's benefit with a high level of integrity and good faith in carrying out the best interests of the represented party

Remedy if Agents breach of duty to the principal causes damages to the principal

the principal may recover those damages by suing the agent for the breach

Fully Disclosed Agency

the third party entering into the contract is aware of the identity of the principal and knows that the agent is acting on behalf of the principal in the transaction Liability: Only the principal is contractually obligated to the third party

Negligent Hiring Doctrine

tort based theory of liability for employers for negligent/intentional torts of employees when the employer had reason to know that the employee may cause harm within his scope of employment

Required Vehicle Exeption

when the employee's use of her own care gives some incidental benefit to the employer, if the use of a personally owned vehicle is either an express or an implied condition of employment