BLAW Ch 27 Summary
Implied
Authority can be implied by custom or inferred from the position the agent occupies. An agent has implied authority to do what is reasonably necessary to carry out the duties you had the express authority to complete and to accomplish the objectives of the agency.
DETERMINING EMPLOYEE STATUS
Criteria Used by the Courts in question form: 1. How much control can the employer exercise over the details of the work? 2. Is the worker engaged in an occupation or business distinct from that of the employer? 3. Is the work usually done under the employer's direction or by a specialist without supervision? 4. Does the employer supply the tools at the place of work? 5. For how long is the person employed? 6. What is the method of payment—by time period or at the completion of the job? 7. What degree of skill is required of the worker?
Authorized Acts
Disclosed - agent has NO contractual liability Partially Disclosed Principal - Depends on state law, but the third party can hold the agent liable for contractual nonperformance. Undisclosed Principal - Both the principal and the agent are both bound and liable to the third party
It is important to distinguish between employees and independent contractors:
Employees usually cannot sue their employers for on-the-job injuries, whereas independent contractors can sue the person with whom they made the contract. An employer is responsible for an employee's torts committed within the scope of employment; the person who engages an independent contractor, on the other hand, is generally not responsible for the independent contractor's torts.
An employee (agent) must:
Performance Notification Loyalty Obedience Accounting
Unauthorized Acts
- If an agent has NO authority but still contracts with a 3rd party, the principal cannot be held liable on the contract.
RATIFICATION
1. Agent must have acted on behalf of identified principal who subsequently ratifies action 2. Principal must know all material facts involved in transaction. If principal ratifies contract without knowing all facts, principal can rescind (cancel ) contract 3. Principal must affirm agent's act in its entirety 4. Principal must have legal capacity to authorize transaction at time agent engages in act and at time principal ratifies; third party must also have legal capacity to engage in transaction 5. Principal's affirmation must occur before third party withdraw from transaction. 6. Principal must observe same formalities when approving act done by agent as would have been required to authorize initially. * If you (as the agent) exceed your authority and enter into a K that your employer (the principal) does not ratify, YOU may be liable to the third party on the ground of misrepresentation!
Independent contractor
A person or firm that performs services for another. Independent contractors are not under the direct control of the person who engages them. Examples: Freelance writers, photographers, private-duty nurses, painters, and plumbers.
Liability for torts and crimes
A principal conducting an activity through an agent may be liable for harm resulting from the principal's own negligence or recklessness. Under the doctrine of respondeat superior, the principal is liable for any harm caused to another through the agent's torts if the agent was acting within the scope of her or his employment at the time the harmful act occurred. Liability for agent's intentional torts—Usually, employers are not liable for the intentional torts that their agents commit, unless the acts are committed within the scope of employment, the employer knows or should know that the employee has a propensity for committing tortious acts, or the employer allowed the employee to engage in reckless acts that caused injury to another. Liability for independent contractor's torts—A principal is not liable for harm caused by an independent contractor's negligence, unless unusually hazardous activities are involved. Liability for agent's crimes—An agent is responsible for his or her own crimes, even if the crimes were committed while the agent was acting within the scope of authority or employment. A principal will be liable for an agent's crime only if the principal participated by conspiracy or other action or (in some jurisdictions) if the agent violated certain government regulations in the course of employment.
Employer-independent contractor relationships
An independent contractor is not an employee because the employer has no control over the details of the independent contractor's physical performance. An independent contractor may or may not be an agent.
Implied authority
Authority deemed necessary for the agent to carry out expressly authorized tasks or customarily associated with the agent's position.
Express authority
Can be given orally or in writing. Authorization must be in writing if the agent is to execute a contract that must be in writing.
Resondeat Superior
Coming from a legal doctrine, a Latin term meaning "let the master answer."
Duties of the principal
Compensation—Except in a gratuitous agency relationship, the principal must pay the agreed-on value (or reasonable value) for the agent's services. Reimbursement and indemnification—The principal must reimburse the agent for all funds disbursed at the request of the principal, as well as for funds disbursed for necessary expenses in the reasonable performance of agency duties. Cooperation—A principal must cooperate with and assist an agent in performing her or his duties. Safe working conditions—A principal must provide safe working conditions for agents and employees.
Termination of an Agency By operation of law
Death or insanity. Impossibility. Changed circumstances. Bankruptcy. War.
EMPLOYEE OR INDEPENDENT CONTRACTOR
Employment status is important because treated differently for purposes of: • Taxes • Wages • Worker's compensation benefits • Unemployment benefits • Social security payments • Ability to sue under employment laws • Liability for negligence (Respondeat Superior)
Apparent authority
Exists when the principal, by word or action, causes a third party to reasonably believe that an agent has authority to act, even though the agent has no express or implied authority.
Determining employee status
How much control can the employer exercise over the details of the work? Is the worker engaged in an occupation or business distinct from that of the employer? Is the work usually done under the employer's direction or by a specialist without supervision? Does the employer supply the tools at the place of work? For how long is the person employed? What is the method of payment—by time period or at the completion of the job? What degree of skill is required of the worker?
RIGHT OF CONTROL TEST
How much control the employer has over the individual and the details of the work to be performed
Liability for contracts
If the principal's identity is disclosed or partially disclosed at the time the agent forms a contract with a third party, the principal is liable to the third party under the contract if the agent acted within the scope of his or her authority. If the principal's identity is undisclosed at the time of contract formation, the agent is personally liable to the third party, but if the agent acted within the scope of his or her authority, the principal is also bound by the contract.
principal-agent relationship
In a principal-agent relationship, an agent acts on behalf of and instead of the principal in dealing with third parties.
FACTORS THAT HELP MEASURE THE RIGHT OF CONTROL
Independent nature of worker's business 2. Worker's obligation to furnish tools, supplies, and materials 3. Worker's right to control progress of the work 4. Amount of time worker is employed 5. Method of payment
Termination of an Agency By act of the parties
Lapse of time. Purpose achieved. Occurrence of a specific event. Mutual agreement. At the option of one party.
DUTIES OF EMPLOYER AND EMPLOYEE TO EACH OTHER
One of the most important legal relationships is that of employer to employee (an agency relationship).
An employer must:
Pay an employee the agreed-upon wage, subject to company policy, union contracts, and government mandates, for his or her services. Provide safe working conditions, for agents and employees. The principal should cooperate with and assist an agent in performing their duties, but must make sure there is no discrimination. Reimburse the agent
Duties of the agent
Performance—In performing her or his duties, the agent must use reasonable diligence and skill or use the special skills that the agent has claimed to possess. Notification—The agent is required to notify the principal of all matters that come to his or her attention concerning the subject matter of the agency. Loyalty—The agent has a duty to act solely for the benefit of the principal and not in the interest of the agent or a third party. Obedience—The agent must follow all lawful and clearly stated instructions of the principal. Accounting—The agent has a duty to make available to the principal records of all property and funds received and paid out on behalf of the principal.
Express:
Power of Attorney - Authorization for another to act as one's agent or attorney either in specified circumstances (special) or in all situations (general). 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.
INTERNAL REVENUE SERVICE TES
The Internal Revenue Service publishes a kind of test that is used to aid individuals in determining whether a worker fits the status of an employee or an independent contractor. Key here is also control
LANDMARK IN THE LAW: THE DOCTRINE OF RESPONDEAT SUPERIOR
The acts of an employee committed while performing duties are considered the acts of the employer. • The employer is liable to third parties for injuries caused by an employee, whether the acts are willful or negligent, so long as the acts were committed by the employee within the Ordinary Course of employemnt • Detour v. Frolic - know the difference • Know that an agent is NOT excused from responsibility for tortious conduct just because you are working for someone else.
Ratification
The affirmation by the principal of an agent's unauthorized action or promise. For the ratification to be effective, the principal must be aware of all material facts.
Operation of law
The agency relationship is based on social policy (as in family relationships) or formed in an emergency situation when the agent is unable to contact the principal and failure to act outside the scope of the agent's authority would cause the principal substantial loss.
Agreement
The agency relationship is formed through express consent (oral or written) or implied by conduct.
Estoppel
The principal causes a third person to believe that another person is the principal's agent, and the third person deals with the supposed agent in the reasonable belief that an agency exists.
Ratification
The principal either by act or by agreement ratifies the conduct of a person who is not in fact an agent.
IRS TEST
This Internal Revenue Service test aids businesses and individuals in distinguishing employees from independent contractors. Understanding this distinction affects how an individual pays federal income taxes, Social Security taxes, and Medicare taxes. It also determines whether the individual receives a W-2, a tax form provided to employees, or a 1099, a tax form provided to independent contractors.
rtificationn
affirmed after the fact by word or action of the principal
Employer-employee relationships
an employee who deals with third parties is normally an agent of the employer.
Estoppel
appearance of an agency (reasonableness standard)
Apparent authority:
authority that is only apparent, not real. An agent's apparent authority arises when the principal causes a third party to believe that the agent has authority, even though she or he does not.
If the IRS discovers that a company has misclassified
employees as independent contractors, it may impose substantial penalties on the company. In a case of deliberate misclassification, The IRS can impose fines that can amount to millions of dollars for large employers
agreement
express or implied
Theory of vicarious (or indirect)
liability has practical implications in all situations in which a principal-agent relationship exists
Operation in law
usually in a family or emergency type situation