Chapter 14 Agency Relationships

Employer-Employee Relationships

-Normally all employees who deal with thri

The agent owes the principal five duties

1. performance 2.notification 3.loyalty 4.obedience and 5.accounting

respondeat superior

A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees acting within the course and scope of their agency or employment.

Agency by Ratification

A party's act of accepting or giving legal force to a contract or other obligation entered into by another that previously was not enforceable.

notary public

A public official authorized to attest to the authenticity of signatures.

agency

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

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.

Performance

Agent must reasonable diligence and skill when performing duties

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.

Principal's Duties to the Agent

Compensation, reimbursement and indemnification, cooperation and safe working conditions

Agency by Agreement

Most agency relationships are based on an express or implied agreement that the agent will act for the principal and the principal agrees to have the agent so act

independent contractor

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An independent contractor is not an employee but may be an agent.

Criteria Used by the IRS

To the IRS, the most important factor in this determination is the degree of control the business exercises over the worker

Agency by Operation of Law

a court may find an agency relationship in the absence of a formal agreement such as in family relationships or emergencies

Express authority

authority declared in clear, direct, and definite terms. Express authority can be given orally or in writing.

An agency relationship can arise in four ways

by agreement of the parties, by ratification, by estoppel, and by operation of law.

Agency by Estoppel

is an agency relationship that is created because the principal's action caused a third party to believe that an agency relationship exists.

Ratification

occurs when the principal affirms an agent's unauthorized act. When ratification occurs, the principal is bound to the agent's act, and the act is treated as if it had been authorized by the principal from the outset.

Loyalty

the agent must act solely for the benefit of the principal

Obedience

the agent must follow all lawful and clearly stated instruction of the principal when acting on behalf of that principal

implied authority

to do what is reasonably necessary to carry out his or her express authority and accomplish the objectives of the agency.

Criteria Used by the Courts to determine Employee Status

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?

disclosed principal

A principal whose identity is known to a third party at the time the agent makes a contract with the third party.

undisclosed principal

A principal whose identity is unknown by a third party, and the third party has no knowledge that the agent is acting for a principal at the time the agent and the third party form a contract.

partially disclosed principal

A principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third party form a contract.

fiduciary

As a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking. As an adjective, a relationship founded on trust and confidence. (heart of agency law)

power of attorney

Authorization for another to act as one's agent or attorney in either specified circumstances (special) or in all circumstances (general).

Accounting

the agent must keep and make available to the principal an account of all property and funds received and paid out on behalf of the principal, unless the agent and principal have agreed otherwise

Notification

the agent must notify the principal of all matters that come to her or his attention concerning the subject matter of the agency