BLaw Ch 29
Case 29.3: Bosse v. Brinker Restaurant Corporation, d.b.a. Chili's Grill and Bar
-2005 Mass. Super. Lexis 372 (2005) -Superior Court of Massachusetts •Issue -Is the restaurant patron who engaged in the highspeed car chase an agent of Chili's? Teenagers don't pay at Chilis. Patron follows them and incites high speed chase. Teens crash and are injured. Teens claim patron was an agent of Chilis. -Decision: The superior court held that the restaurant patron who engaged in the high-speed chase in which the plaintiffs were injured was not the agent of Chili's restaurant. The superior court granted summary judgment to Chili's. The appeals court of Massachusetts affirmed the decision. Chilis was NOT liable for the patrons' injuries
Case 29.2: Eco-Clean v Brown
-749 S.E.2d 4, 2013 Ga. App. Lexis 913 (2013) -Court of Appeals of Georgia •Issue -Was the driver of the car an agent of Georgia Tech University? Mascot spirit club members drives mascot car as agents of the University. Eco-Clean installed wooden handles on the door. Student fell off car bc of those handles and was injured. -Decision: The court of appeals held that the student driver was an agent of the University and upheld the trial court's award of damages to Brown. University lost appeal, University and Eco-Clean are partially liable for student's injuries (student is also partially liable)
Case 29.1: Smith v. Delta Tau Delta, Inc.
-9 N.E.3d 154 (2014) -Supreme Court of Indiana •Issue -Is there an agency relationship between the local fraternity and its members and the national fraternity? Kid died from underage drinking at his frat. Parents sued national fraternity saying school (local) fraternity were agents of the national fraternity -Decision: The Supreme Court of Indiana concluded that an agency relationship did not exist between the national fraternity and the local fraternity and its members. The national fraternity was NOT liable for negligence damages
Agency by Ratification
-Acts of the agent are committed outside the scope of his or her authority. -Principal and third party are not bound to the contract unless the principal ratifies the contract. -By ratification: occurs when (1) a person misrepresents him- or herself as another's agent when in fact he or she is not and (2) the purported principal ratifies (accepts) the unauthorized act. In such cases, the principal is bound to perform, and the agent is relieved of any liability for misrepresentation. -Principal is NOT obligated to ratify the agent's act. The the agent is probably liable to the 3rd party -Example Bill Levine sees a house for sale and thinks his friend Sherry Maxwell would want to buy it. Bill enters into a contract to purchase the house from the seller and signs the contract "Bill Levine, agent for Sherry Maxwell." Because Bill is not Sherry Maxwell's agent, she is not bound to the contract. If Sherry agrees to purchase the house, however, there is an agency by ratification. On ratification of the contract, Sherry Maxwell is obligated to purchase the house.
Apparent Agency (Agency by Estoppel)
-Authority is created when the principal leads a third party to believe that the agent has authority. -Principal and third party are bound to the contract. -arises when a principal creates the appearance of an agency that in actuality does not exist. Where an apparent agency is established, the principal is estopped (stopped) from denying the agency relationship and is bound to contracts entered into by the apparent agent while acting within the scope of the apparent agency. Note that the principal's actions—not the agent's—create an apparent agency. -Result of carelessness by the principle. Don't say someone has responsibility that they don't have -Example Georgia Pacific, Inc., interviews Albert Iorio for a sales representative position. Iorio, accompanied by Jane Franklin, the national sales manager, visits retail stores located in the open sales territory. While visiting one store, Franklin tells the store manager, "I wish I had more sales reps like Albert." Nevertheless, Iorio is not hired. If Iorio later enters into contracts with the store on behalf of Georgia Pacific and Franklin has not controverted the impression of Iorio that she left with the store manager, the company will be bound to the contract.
Implied Agency
-Authority is implied from the conduct of the parties, custom and usage of trade, or act incidental to carrying out the agent's duties. -Principal and third party are bound to the contract. -The extent of the agent's authority is determined from the facts and circumstances of the situation. -Example A homeowner employs a real estate broker to sell his house. A water pipe breaks and begins to leak water into the house. If the homeowner cannot be contacted, the real estate broker has implied authority to hire a plumber to repair the pipe to stop the water leak. The homeowner is responsible for paying for the repairs.
Agent's Duties
-Duty to account -Duty to notify -Duty to perform
Principal's Duties
-Duty to compensate -Duty to reimburse -Duty to indemnify -Duty to cooperate -Duty to warn
Kinds of Employment Relationships
-Employer-employee -Principal-agent (type of employer-employee relationship)
Agency/Principal-Agent relationship
-Fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other to act §Fiduciary relationship: relationship with high level of trust -Entire point of relationship is agent enters into contract on principal's behalf -Definition of agency is from the Restatement (Second) of Agency -Source of rules for agency law -google doc pic 1
Exclusive agency contract
-If a principal and agent have one of these, principal cannot employ any agent other than the exclusive agent §If the principal does so, the exclusive agent can recover damages from the principal. -If an agency is not an exclusive agency, the principal can employ more than one agent to try to accomplish a stated purpose.
Agent
-Party who agrees to act on behalf of another
Principal
-Party who employs another person to act on his or her behalf
Contingency Fee
-fee agreement where the principal owes a duty to pay the agent an agreed-on contingency fee only if the agency is completed. Real estate brokers, finders, lawyers, and salespersons often work on a contingency-fee basis. -Example Sarah, who is driving her automobile, is injured when another driver negligently causes an automobile accident. Sarah hires a lawyer to represent her on a 35 percent contingency-fee basis. If the lawyer wins the case for Sarah or settles the case with Sarah's approval, he will earn 35 percent of whatever is collected from the defendant. If the lawyer does not win or settle the lawsuit, he gets paid nothing.
Mutual assent of the parties
Example A principal hires a lawyer to represent her in a lawsuit until the lawsuit is resolved. If the principal and the lawyer voluntarily agree to terminate the relationship prior to the resolution of the case by trial or settlement, the agency is terminated.
If a specified purpose is achieved
Example If a homeowner hires a real estate broker to sell the owner's house within 6 months and the house sells after 3 months, the agency terminates on the sale of the house.
Occurrence of a stated event
Example If a principal employs an agent to take care of her dog until she returns from a trip, the agency terminates when the principal returns from the trip.
If a stated time has lapsed
Example If an agency agreement states, "This agency agreement will terminate on August 1, 2028," the agency terminates when that date arrives.
Durable power of attorney
a power of attorney that remains effective even though the principal becomes incapacitated
Principal's Duty to Warn
principle has the duty to warn the agent if the principle knows of any dangerous or hazardous conditions or circumstances that might exist or might affect the agent in carrying out their duties
Attorney-in-fact
the agent named in a power of attorney. This agent does not have to be a lawyer
Direct Notice
§Express notice of the termination of an agency that needs to be given to all persons with whom the agent dealt (3rd parties) -The notice may be oral or written unless required to be in writing.
Constructive Notice
§Notice given by publishing the information in a newspaper of general circulation §Notice of termination to any third party who has knowledge of the agency but with whom the agent has not dealt. -Generally, a principal is not obliged to give notice of termination to strangers who have no knowledge of the agency. Constructive notice is valid against strangers who assert claims of apparent agency. -Example Notice of the termination of an agency that is printed in a newspaper that serves the vicinity of the parties is constructive notice.
Termination by Operation of Law
•Agency contract is terminated in the following circumstances -Death of either the principal or agent -Insanity of either the principal or the agent -Bankruptcy of the principal -Outbreak of a war between the principal's country and the agent's country •No duty to notify third parties about the termination
Termination by Impossibility of Performance
•Agency terminates because a situation arises that makes the fulfillment of the agency impossible -Loss or destruction of the subject matter of the agency §Example A principal employs an agent to sell his horse, but the horse dies before it is sold. The agency relationship terminates at the moment the horse dies. -Loss of a required qualification §Example A principal employs a licensed real estate agent to sell her house but the real estate agent's license is revoked before he can sell the principal's house. The agency relationship terminates when the real estate agent's license is revoked. -Change in the law §Example A principal employs an agent to trap alligators. If a law is passed that makes trapping alligators illegal, the agency contract terminates when the law becomes effective.
Principal-agent (type of employer-employee relationship)
•Agent has authority to act on behalf of the principal, as authorized expressly by the principal and implied from the circumstances of the agency •Employee is often the agent of his employer •Has authority to enter to into contracts -Examples The president of a corporation usually has the authority to enter into major contracts on the corporation's behalf, and a supervisor on the corporation's assembly line may have the authority only to purchase the supplies necessary to keep the line running.
Agent's Duty to Notify
•Agent owes a duty to notify the principal of important information concerning the agency -The agent is liable to the principal for any injuries resulting from a breach of this duty.
Agent's Duty to Account/Of Accountability
•Agent owes to maintain an accurate accounting of all transactions undertaken on the principal's behalf •Requires the agent to: -Maintain a separate account for the principal -Use the principal's property in an authorized manner -includes keeping records of all property and money received and expended during the course of the agency. A principal has a right to demand an accounting from the agent at any time, and the agent owes a legal duty to make the accounting. -Any property, money, or other benefit received by the agent in the course of an agency belongs to the principal. If an agent breaches the agency contract, the principal can sue the agent to recover damages caused by breach.
Agent's Duty to Perform
•Agent's duty to a principal that includes: -Performing the lawful duties expressed in the contract -Meeting the standards of reasonable care, skill, and diligence implicit in all contracts -Normally, an agent is required to render the same standard of care, skill, and diligence that a fictitious reasonable agent in the same occupation would render in the same locality and under the same circumstances. -An agent who does not perform his or her express duties or fails to use the standard degree of care, skill, or diligence is liable to the principal for damages. -Examples A general medical practitioner in a rural area would be held to the standard of a reasonable general practitioner in rural areas. A brain surgeon would be held to the standard of a reasonable brain surgeon.
Use of Agents
•Allows one person to act on behalf of another •Some agents are: -Independent contractors - Outside contractors who are employed by a principal to conduct limited activities for the principal -Examples of agency relationships include a salesperson who sells goods for a store, an executive who works for a corporation, and a partner who acts on behalf of a partnership. -Examples of independent contractors would be an attorney who is hired to represent a client and a real estate broker who is employed by an owner to sell the owner's house.
Persons Who Can Initiate an Agency Relationship
•Any person who has the capacity to contract can appoint an agent to act on his or her behalf -Persons who lack contractual capacity cannot appoint an agent §IE: insane people, minors, etc •An agency can be created only to accomplish a lawful purpose •Agency contracts that are created for illegal purposes or are against public policy are void and unenforceable -Example A principal cannot hire an agent to kill another person -However, the court can appoint legal guardians or other representatives to handle the affairs of insane persons, minors, and others who lack capacity to contract. With court approval, these representatives can enter into enforceable contracts on behalf of the persons they represent. -Some agency relationships are prohibited by law. -Example Unlicensed agents cannot be hired to perform the duties of certain licensed professionals (e.g., doctors, lawyers).
Principal's Duty to Compensate
•Duty that a principal owes to pay an agreed-upon amount to the agent •Agency contract (written or oral) specifies the compensation to be paid •The principal must pay this amount either on the completion of the agency or at some other mutually agreeable time. •No agreement as to the amount of compensation -principal will pay the agent the customary fee paid in the industry -If the compensation cannot be established by custom, the principal owes a duty to pay the reasonable value of the agent's services.
Employer-employee
•Employee is hired to perform a task or service •Employee does not have agency authority to enter into contracts • the principal is still liable for tortious conduct of its employees committed while acting within the scope of their employment. -Example A welder on General Motors Corporation's automobile assembly line is employed to perform a physical task but is not given authority to enter contracts.
Power of Attorney
•Express agency agreement that is often used to give an agent the power to sign legal documents on behalf of the principal -one of the most formal types of express agency agreements. Powers of attorney must be written. Usually, they must also be notarized.
Imputed knowledge
•Information that is learned by an agent that is attributed to the principal (the principle is assumed to know what the agent knows-comes during the course of an agency) -This is so even if the agent does not tell the principal certain relevant information. -Example Sonia, who owns a piece of vacant real estate, hires Matthew, a licensed real estate broker, to list the property for sale. Leonard, an adjacent property owner to Sonia's property, tells Matthew that a chemical plant has polluted his property and probably Sonia's property. Sonia does not know this fact, and Matthew does not tell Sonia this information. Sonia sells the property to Macy. It is later discovered that the property Macy bought from Sonia is polluted. In this example, the information that Matthew was told about the possible pollution of the property is imputed to Sonia. Sonia will be held liable to Macy.
Agency Law
•Large body of common law that governs agency -Mixture of contract law and tort law
Express Agency
•Occurs when a principal and an agent expressly agree to enter into an agency agreement with each other -Can be either oral or written unless the Statute of Frauds stipulates that they must be written -the most common form of agency, the agent has the authority to contract or otherwise act on the principal's behalf, as expressly stated in the agency agreement. -Example In most states, a real estate broker's contract to sell real estate must be in writing. -Authority is expressly given to the agent by the principal. -Principal and third party are bound to the contract.
General power of attorney
•Principal confers broad powers on the agent to act in any matters on the principal's behalf -Bad idea -Example A person who is going on a long trip gives a general power of attorney to his brother to make all decisions on his behalf while he is gone. This general power of attorney includes the power to purchase or sell stocks or real estate, pursue or defend lawsuits, and to make all other relevant decisions.
Special/Limited power of attorney
•Principal confers powers on an agent to act in specified matters on the principal's behalf -The agent is restricted to perform those powers enumerated by the agreement. -Example A person who has her house listed for sale but who is going on a trip gives her sister a special power of attorney to make decisions regarding the selling of her house while she is gone, including accepting offers to sell the house and signing documents and deeds necessary to sell the house.
Principal's Duty to Cooperate
•Principal owes a duty to cooperate with and assist the agent in the performance of the agent's duties and the accomplishment of the agency -Unless otherwise agreed upon -Example Unless otherwise agreed, a principal who employs a real estate agent to sell a house owes a duty to allow the agent to show the house to prospective purchasers during reasonable hours.
Principal's Duty to Indemnify
•Principal owes a duty to indemnify (reimburse) the agent for any losses the agent suffers because of the principal's conduct -Arises when an agent is held liable for the principal's misconduct -Example An agent enters an authorized contract with a third party on the principal's behalf, the principal fails to perform on the contract, and the third party recovers a judgment against the agent. The agent can recover indemnification of this amount from the principal
Principal's Duty to Reimburse
•Principal owes a duty to reimburse the agent for expenses incurred by the agent if the expenses were: -Authorized by the principal -Within the scope of the agency -Necessary to discharge the agent's duties in carrying out the agency §Unless otherwise agreed upon §Example A principal must reimburse an agent for authorized business trips taken on the principal's behalf.
Independent Contractor
•Principal-independent contractor relationship: -Contractor is not an employee of the principal but has been employed by the principal to perform a certain task on behalf of the principal •Principal can authorize an independent contractor to enter into contracts which the principle is bound by §For example, if a client authorizes an attorney to settle a case within a certain dollar amount and the attorney does so, the settlement agreement is binding. -Examples Doctors, dentists, consultants, stockbrokers, architects, certified public accountants, real estate brokers, and plumbers are examples of those in professions and trades who commonly act as independent contractors.
Termination of Agency by Act of Parties
•Situation where the parties to an agency contract terminate their contract by mutual agreement or when a previously agreed on event occurs •Agency can be terminated by the following acts: -Mutual assent of the parties -If a stated time has lapsed -If a specified purpose is achieved -Occurrence of a stated event •Notice of termination -A notice that must be given by a principal that notifies third parties that person is no longer his or her agent. Failure to give such notice may make the principal liable for the prior agent's acts under the doctrine of apparent agency -The termination of an agency extinguishes an agent's actual authority to act on the principal's behalf. Types: -Direct Notice -Constructive Notice
Wrongful Termination
•Termination of an agency contract in violation of the terms of the agency contract -Non-breaching party may recover damages from the breaching party -Example A principal employs a licensed real estate agent to sell his house. The agency contract gives the agent an exclusive listing for 4 months. After one month, the principal unilaterally terminates the agency. The agent can no longer act on behalf of the principal. Because the principal did not have the right to terminate the contract, however, the agent can sue him and recover damages (i.e., lost commission) for wrongful termination.
Termination by an Unusual Change in Circumstances
•Unusual change in circumstances leads the agent to believe that the principal's original instructions should no longer be valid •Example An owner of a farm employs a real estate agent to sell the farm for $1 million. The agent thereafter learns that oil has been discovered on the property, a discovery that makes the land worth $5 million. The agency terminates because of this change in circumstances.