Business Law Chapter 30

Which of the following *is true* of tort liability for principals and agents? A) A principal is responsible for the tortious conduct of an agent irrespective of the scope of his or her authority. B) An agent is fully liable for his or her tortious conduct while on duty for the principal. C) An agent is liable for the principal's tortious conduct if he or she participates in it. D) An agent and a principal cannot be held responsible for the same tort

C) An agent is liable for the principal's tortious conduct if he or she participates in it.

Minksine Corporation employs Sandy as its marketing manager. Sandy is driving her sedan to attend a meeting with a client on behalf of her employer. On her way to the meeting, Sandy is involved in an automobile accident that is caused by her negligence. Several people are seriously injured in the accident. Which of the following is true of this case? A) Sandy is solely liable for damages caused by the accident. B) The injured people cannot recover damages from Sandy. C) Minksine Corporation is liable for the injuries caused by Sandy. D) The injured people can only claim medical reimbursement from Minksine Corporation.

C) Minksine Corporation is liable for the injuries caused by Sandy.

Which of the following best describes a partially disclosed agency? A) an agent with multiple principals who do not know each other's identities B) a transaction in which the third party does not know the identity of the agent C) a transaction in which the third party knows the agent, but not the principal D) an agent who discloses only the name of his or her principal in a transaction

C) a transaction in which the third party knows the agent, but not the principal

Susanna hires Shane, a lawyer, as an independent contractor to represent her in a civil lawsuit against a defendant to recover monetary damages. If Susanna authorizes Shane to settle the case within a certain dollar amount and Shane does so, which of the following would be true? A) The agreement is invalid after Shane's contract with Susanna terminates. B) The agreement is void because independent contractors cannot enter into contracts. C) The agreement is binding only when there is no financial settlement involved. D) The settlement agreement is binding for Susanna

D) The settlement agreement is binding for Susanna

Harrison hires an agent to look for a three-bedroom house in Atlanta. Elaine, the agent, finds a three-bedroom house in Harrison's budget but buys it herself without informing Harrison. This is an instance of an agent ________. A) self-dealing B) misusing information C) competing with the principal D) usurping an opportunity

D) usurping an opportunity

Work-related test

Determines whether an agent committed an intentional tort within a work-related time or space

Motivation test

Determines whether an agent's motivation in committing an intentional tort is to promote the principal's business

Respondeat superior

Employer is liable for an agent's tortious conduct, if: - The agent is an employee - The employee was acting within the scope of employment

Duty of loyalty

Fiduciary duty owed by an agent, not to act adversely to the interests of the principal

Employee's Intentional Tort Case - Burlarley v. Wal-Mart Stores, Inc.

Issue - Is Wal-Mart vicariously liable for the personally motivated acts of its cashier?

Scope of Employment Case - Matthews v. Food Lion, LLC

Issue - Was Hall acting within the scope of her employment at the time of the accident?

Tests to determine whether an agent's intentional torts were committed within the scope of employment:

Motivation Test and Work-related Test

Coming and going rule (going and coming rule)

Principal is generally not liable for injuries caused by its agents and employees while they are on their way to or from work

Respondeat superior is a type of vicarious liability

Principal is liable for an agent's tortious conduct because of the employment contract between the principal and agent

Misrepresentation

Principal is liable for any misrepresentations made by agent within scope of employment

Liability for negligence is based on

Respondeat superior and vicarious liability

Ratification of a contract

Situation in which a principal accepts an agent's unauthorized contract

Frolic and detour

Situation in which an agent does something during the course of his or her employment to further his or her own interests rather than the principal's

Dual-purpose mission

Situation that occurs when a principal requests an employee or agent to run an errand or do another act for the principal while the agent is on his or her own personal business

Principals and agents owe certain duties to each other

and are liable to each other for breaching these duties

Agency law

establishes the liability of principals, agents, and independent contractors for such conduct

Agent's duties

to account, notify and perform

Principal's duties

to compensate, reimburse, indemnify and cooperate

Undisclosed Agency

- Agency in which a contracting third party does not know either the existence of the agency or the principal's identity - Both principal and agent are liable to the third party if the principal fails to perform the contract

Partially Disclosed Agency

- Agency in which a contracting third party knows that the agent is acting for a principal but does not know the identity of the principal - Both principal and agent are liable to the third party if principal fails to perform the contract

Fully Disclosed Agency

- Agency in which a contracting third party knows: Agent is acting for a principal and the Identity of the principal - Principal is liable on the contract - *Agent's signature* must indicate that he or she is acting as an agent for a specifically identified principal

Agent Exceeding Scope of Authority

- Agent is liable for breaching the implied warranty of authority - Principal is liable, only if he or she ratifies

A principal and an agent are each personally liable for their own *tortious conduct*

- Agent is liable for tortious conduct of principal only if agent directly or indirectly, aids and abets the principal's conduct - Principal is liable for tortious conduct of agent acting within the scope of authority

Liability for Intentional Torts

- Includes assault, battery, false imprisonment, and other intentional conduct that causes injury to another person - Principal not liable for intentional torts of agents and employees that are committed outside the principal's scope of business

Sources of tort liability for principals and agents

- Negligence - Intentional torts - Misrepresentation

Independent Contractor

- Person who contracts with another to do something for him who is not controlled by the other nor subject to the other's *right to control* with respect to his physical conduct in the performance of the undertaking - Principal is not liable for the torts of its independent contractors

Liability for Independent Contractor's Contracts

- Principal can authorize an independent contractor to enter into contracts - Principal is not liable on the contract, if the independent contractor enters a contract without the principal's authority

Liability for an Independent Contractor's Torts

- Principal is not liable for the torts of its independent contractors - Independent contractors are personally liable for their own torts - Principals cannot avoid liability for *inherently dangerous activities* that they assign to independent contractors

Agency law imposes *contract liability* on principals and agents

- Principal who authorizes agent to enter into a contract with third party is liable on the contract - Third party can enforce and recover damages from principal - Agent can also be held liable in certain circumstances

Common types of breaches of loyalty

- Self-dealing - Usurping an opportunity - Competing with principal - Misuse of confidential information - Dual agency

Factors for Determining Independent Contractor Status

- Whether the worker is engaged in a distinct occupation or an independently established business - Length of time the agent has been employed by the principal - Amount of time that the agent works for the principal - Whether the principal supplies the tools and equipment used in the work - Method of payment, whether by time or by the job - Degree of skill necessary to complete the task - Whether the worker hires employees to assist him or her - Whether the employer has the right to control the manner and means of accomplishing the desired result

Intentional misrepresentation

Agent makes statements that he or she knows are untrue

Innocent misrepresentation

Agent negligently makes misrepresentation to a third party

Implied warranty of authority

Agent who enters into a contract on behalf of another party warrants that he or she has the authority to do so