MGMT 311- Exam II- Ch. 19

Who is liable if an AGENT commits a crime?

"you do the crime you do the time" so agent (employee) is liable, not the employer

CIP 19.5 Francis Azur was president and chief executive officer of ATM Corporation of America. Michelle Vanek was Azur's personal assistant. Among other duties, she reviewed his credit-card statements. For seven years, Vanek took unauthorized cash advances from Azur's credit-card account with Chase Bank. The charges appeared on at least sixty-five monthly statements. When Azur discovered Vanek's fraud, he fired her and closed the account. He filed a suit against Chase, arguing that the bank should not have allowed Vanek to take cash advances. What did the court say?

Azur (the principal) had given the bank reason to believe that Vanek (the agent) had authority. Therefore, Azur was estopped (prevented) from denying Vanek's authority.

Example of Agency by Ratification

Mom accepts that her daughter used her credit card w/o permission to buy clothes

A11. Meyer: stopped at store. Hits Watts (employee). Unclear whether Meyer hit her w/ intention or to retrieve the charger. Watts: In reponse, grabbed Meyer by the hair + hit her in the back of the head. Watts: fired. Meyer: sued the store for liability for the tort (assault + battery). How is the store's potential liability affected by whether Watt's behavior constituted an intentional tort or the tort of negligence?

Under respondeat superior it does not matter if the tort was intentional or not. NO DISTINCTION! This is bc the tort was committed in the scope of employment, so employer directly liable. (repsondeat superior)

Issue Spotter 1 Winona contracted with XtremeCast, a broadcast media firm, to cohost an Internet-streaming sports program. Winona and XtremeCast signed a new contract for each episode. In each contract, Winona agreed to work a certain number of days for a certain salary. During each broadcast, Winona was free to improvise her performance. She had no other obligation to work for XtremeCast. Was Winona an independent contractor?

Winona is an independent contractor - not controlled by the person who hires - no control over the details of performance (improvise)

A11. Meyer: stopped at store. Hits Watts (employee). Unclear whether Meyer hit her w/ intention or to retrieve the charger. Watts: In reponse, grabbed Meyer by the hair + hit her in the back of the head. Watts: fired. Meyer: sued the store for liability for the tort (assault + battery). Is Buy-Mart criminally responsible for what happened to Meyer?

Yes, this is bc of negligent/hiring + retention and because of respondeat superior.

A11. Meyer: stopped at store. Hits Watts (employee). Unclear whether Meyer hit her w/ intention or to retrieve the charger. Watts: In reponse, grabbed Meyer by the hair + hit her in the back of the head. Watts: fired. Meyer: sued the store for liability for the tort (assault + battery). If Watts had a violent convictions, but the store hired her anyways, would Buy-Mart be liable?

Yes, this is negligent/hiring retention, which makes them directly liable. It doesn't matter if the tort was not in the scope of employment if the employer committed negligent hiring + would be directly liable.

In Bryant v. Livigni and National: the employer was being sued for Negligent Retention AND repsondeat superior. Tell me what you know POSSIBLE SAQ

Yes- Negligent Retention. They should have fired him, he had 2 previous assault cases. Yes- Respondeat Superior. This is bc the employer is liable for the actions of the employee bc it harmed a 3rd party and it was within the course + scope.

Issue Spotter 2 Davis contracts with Estee to buy a certain horse on her behalf. Estee asks Davis not to reveal her identity. Davis makes a deal with Farmland Stables, the owner of the horse, and makes a down payment. Estee does not pay the rest of the price. Farmland Stables sues Davis for breach of contract. Can Davis hold Estee liable for whatever damages he has to pay? Why or why not?

Yes. A principal has a duty to indemnify (reimburse) an agent for liabilities incurred because of authorized and lawful acts and transactions, and for losses suffered because of the principal's failure to perform his or her duties.

Did the employee do a detour or a frolic in Studebaker v. Nettie's Flower Shop?

a detour! the employer was on his way to deliver flowers at the next shop

agent

a person who agrees to represent/ act on behalf of another

fiduciary

a person who has a special duty created by his agreeing to act for the benefit of another

Agent- apparent authority

agency by estoppel leads to apparent authority

Authorized Acts-- The Agent's Liability for Disclosed principal

agent has no contractural liability for principal's nonperformance

Authorized Acts-- The Agent's Liability for a Undisclosed principal

agent is liable BUT is entitled to compensation from the principle

Authorized Acts-- The Agent's Liability for a Partially Disclosed principal

agent is treated as a party to the contract

Example of an exception to general indp. contr. tort rule

an explosive! the person who hires would be liable

Examples of independant contractors

consultant, Uber driver, builder

Course + Scope Rule- frolic

employee acts like they have no concern for employer's business

Course + Scope Rule- Special Errand Exception

employee on a special errand at the time of the accident the employer IS liable

Course + Scope Rule- Going + Coming Rule

employee traveling to and from work is NOT acting in course and scope of employment unless it is a traveling salesperson

IRS criteria for employees

employers are legally liable for employees

Agency by Agreement (2 requirements)

expressed agreement (oral, written) OR implied agreement (inferred from nature of relationship

The relationship is a fiduciary relationship based on trust + confidence. Both should engage in _______, _______ ________ behavior with one another

honest, good faith

Agent Authority-- Expressed Authority- Equal Dignity Rule

in most states IF - the contract being executed is or must be in writing, then the agent's authority must be in writing too.

Agency by Operation of Law

legal steps to declare agency- agency needed in an emergency. Limited to that situation

Example of Operation of Law

parents asked to make medical decisions if in a coma

Authorized Acts-- The principal is obligated to

perform the contract

Liability-- Independent Contractor's Torts general rule

person who hires an independent contractor is NOT liable if a 3rd party is injured by the acts of the independent contractor.

Course + Scope Rule- detour

personal errand, slight deviation from business

As an agent, stay within the scope or you create

personal liability

What is the best evidence of Agent's Express Authority?

power of attorney

Principal's liability for when the agent performs unauthorized acts

princ has no liability agent has liability

Agent's Authority- Ratification

principal accept's responsibility for agent's UNauthorized actions

Implied Authority

reasonably necessary to carry out express authority, can be conferred by - custom - inferred from agent's position

A11. Meyer: stopped at store. Hits Watts (employee). Unclear whether Meyer hit her w/ intention or to retrieve the charger. Watts: In reponse, grabbed Meyer by the hair + hit her in the back of the head. Watts: fired. Meyer: sued the store for liability for the tort (assault + battery). Under what doctrine might the store be held liable for the tort committed by Watts?

respondeat superior

Agency by Ratification

someone acting on behalf. This act gives legal force to something. - agent accepts responsibility + unlawful actions

Power of Attorney

special or general-- gives an agent express authority

What established employer control in Studebaker v. Nettie's Flower Shop?

the control of the - air conditioning - dress - direction for driver

Work for Hire (independent contractor)

the creator owns it UNLESS they did a Works for Hire agreement

Employer-Independent Contractor Relationship

the independent contractor has their own business and they are hired for the job.

Principal

the person whom the agent represents or acts on behalf of

Work for Hire (employee)

the work is owned by the company

Liability-- Employer's Negligent Hiring/ Retention of Employees

they are liable! They could have done - background checks - looked at previous employment history

Employer commits negligence- When an employee commits a ___ harming 3rd parties

tort. A 3rd party can sue employer for $$

Fiduciary relationship requires

trust and confidence btwn parties

Agent's Authority- Emergency Powers

unforseen emergency demands action by an agent to protect rights and/or property of principal; agent is unable to communicate w/ principal; agent has emergency pwr.

What was established in Studebaker v. Nettie's Flower Shop?

vicarious liability! employer is responsible/liable for the actions of others even though the employer did not directly cause the harm.

Liability of the Principal to 3rd parties depends on

whether the agent had the authority to bind to the principal

Is it course + scope if the employee is on a special errand going to/coming from work?

yes

19-1. Respondeat Superior. ABC Tire Corp. hires Arnez as a traveling salesperson and assigns him a geographic area and time schedule in which to solicit orders and service customers. Arnez is given a company car to use in covering the territory. One day, Arnez decides to take his personal car to cover part of his territory. It is 11:00 a.m., and Arnez has just finished calling on all customers in the city of Tarrytown. His next appointment is at 2:00 p.m. in the city of Austex, twenty miles down the road. Arnez starts out for Austex, but halfway there he decides to visit a former college roommate who runs a farm ten miles off the main highway. Arnez is enjoying his visit with his former roommate when he realizes that it is 1:45 p.m. and that he will be late for the appointment in Austex. Driving at a high speed down the country road to reach the main highway, Arnez crashes his car into a tractor, severely injuring Thomas, the driver of the tractor. Thomas claims that he can hold ABC Tire Corp. liable for his injuries. Is ABC liable?

(a) All travel time of a traveling salesperson on a business trip is usually considered within the scope of employment. b) At the time the tort was committed, Arnez was on his way to an appointment on behalf of ABC (whereas the negligent act could have taken place on the way to visit his friend). (c) Because of the time between appointments and the distance, this is probably not a substantial departure from ABC's business. On the basis of these factors, ABC is liable for Arnez's tort of negligence and the resulting injuries to Thomas. If Arnez had been on a frolic of his own, only Arnez would have been liable to Thomas. ABC is liable for Arnez's actions. The accident was in the course + scope of employment because Arnez was GOING to an appointment.

Work for Hire

- create art, music, sculpture - they create for a company

Agency by Estoppel

- princ's action creates the appearnace of an agency that does not actually exist - 3rd person reasonably believes that the agency existed - Princ is stopped from denying the agency actually existed

3 Types of Agent Authority

1. Expressed Authority 2. Implied Authority 3. Apparent Authority

Determining Employee Status

1. How much control can the employee exercise over the details of 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 method of payment- by time period or at the completion of the job? 7. What degree of skill is required for the worker?

2 Part Analysis for Respondeat Superior

1. an employee 2. the harm is committed within the course + scope of employment

Equal Dignity Exceptions

1. executive officer in a corporation when acting for the corp in an ordinary business situation 2. when the agent acts in the principals' presence 3. when agent's acts of signing is merely perfunctory (just a formality)

Agent Authority-- Expressed Authority

1. oral or written 2. authority is clear, direct, definite terms 3. Equal Dignity Rule

Liability-- Independent Contractor's Torts general rule exceptions

1. right to control 2. inherently dangerous/ hazardous activities

19-3 Stephen Hemmerling was a driver for the Happy Cab Company. Hemmerling paid certain fixed expenses and followed various rules relating to the use of the cab, the hours that could be worked, and the solicitation of fares, among other things. Rates were set by the state. Happy Cab did not withhold taxes from Hemmerling's pay. While driving the cab, Hemmerling was injured in an accident and filed a claim for workers' compensation benefits in a state court. Such benefits are not available to independent contractors. On what basis might the court hold that Hemmerling was an employee? Explain.

A court might hold that Hemmerling and Happy Cab have an employment relationship primarily on the basis of control. - control the methods or means used by Hemmerling in the course of operating the taxicab by virtue of its exclusive control over the taxicab. - enforcing a variety of rules relating to the use of the cab, solicitation of fares, and so on. Other factors supporting the existence of an employment relationship include that Hemmerling was not engaged in a distinct occupation or business from that of Happy Cab, and the type of work is that which can be done by employees rather than specially skilled independent contractors. Happy Cab supplied the instrumentality of the trade (the cab)

When there is no Agency of Agreement use....

Agency by Ratification Agency by Estoppel Agency by Operation of Law

Respondeat Superior- Employer Liability

Employer (principal) LIABLE for any harm to 3rd party by an employee (agent) within the course + scope of employment

IRS criteria for independent contractors

Employers do not pay taxes on independent contractors

In detour vs frolic, in which is the employee still in the course + scope of employment

DETOUR.

Implied Authority vs Apparent Authority

Implied authority entails leadership given to an individual to perform all duties entailed to the position given representing the one in authority whereas apparent authority on the other hand entails giving powers to someone else to represent the one in power but an extra individual is engaged as a third party.

19-4 Nelson Ovalles worked as a cable installer for Cox Rhode Island Telecom, LLC, under an agreement with a third party, M&M Communications, Inc. The agreement stated that no employer-employee relationship existed between Cox and M&M's technicians, including Ovalles. Ovalles was required to designate his affiliation with Cox on his work van, clothing, and identification badge. Cox had minimal contact with him, however, and had limited power to control how he performed his duties. Cox supplied cable wire and similar items, but the equipment was delivered to M&M, not to Ovalles. On a workday, while Ovalles was fulfilling a work order, his van rear-ended a car driven by Barbara Cayer. Is Cox liable to Cayer? Explain.

No. Cox is not liable to Cayer for any injuries or damage that she sustained in the accident with Ovalles. General rule: an employer is not liable for physical harm caused to a third person by the negligent act of an independent contractor in the performance of a contract. This is because the employer does not have the right to control the details of the performance. In determining whether a worker has the status of an independent contractor, how much control the employer can exercise over the details of the work is the most important factor weighed by the courts. In this problem, Ovalles worked as a cable installer for Cox under an agreement with M&M. The agreement disavowed any employer-employee relationship between Cox and M&M's installers. Ovalles was required to designate his affiliation with Cox on his van, clothing, and an ID badge. But Cox had minimal contact with Ovalles and limited power to control the manner in which he performed his work. Cox supplied cable wire and other equipment, but these items were delivered to M&M, not Ovalles. These facts indicate that Ovalles was an independent contractor, not an employee. Thus, Cox was not liable to Cayer for the harm caused to her by Ovalles when his van rear-ended Cayer's car.

Employer is the _________ and the employee is the _________

PRINCIPAL AGENT

Liability for Contracts- Disclosed Principal

Principal identity: known X Agent for Peter Piper

Liability for Contacts- Undisclosed Principal

Principal identity: not known but 3rd party has no knowledge that the agent is acting on the principal's behalf at the time of the contract. X Andy Amos

Liability for Contacts- Partially Disclosed Principal

Principal identity: not known but 3rd party may know agent may be working for a principal X Andy Amos, Agent

(T/F) Employer is legally liable for the employee's (agent's) actions

T

Case 19.1 Akron General Health System owns and operates health-care centers, including Lodi Community Hospital, in Ohio. Aaron Riedel was experiencing severe back pain when he visited the emergency room at Lodi. Attending physician Chris Kalapodis failed to timely diagnose the problem—a spinal epidural abscess. Riedel filed a suit in an Ohio state court against the hospital, alleging that the physician's negligence was the proximate cause of Riedel's subsequent paraplegia and seeking to recover medical expenses and the cost of future care. Lodi argued that it was not liable because Kalapodis was not its employee or agent. What did the court rule?

The jury issued a verdict in Riedel's favor and found that he was entitled to $5.2 million in damages, which the court awarded. Lodi appealed.

19-5. Agency Relationships. Standard Oil of Connecticut, Inc., sells home heating, cooling, and security systems. Standard schedules installation and service appointments with its customers and then contracts with installers and technicians to do the work. The company requires an installer or technician to complete a project by a certain time but to otherwise "exercise independent judgment and control in the execution of any work." The installers and technicians are licensed and certified by the state. Standard does not train them, provide instruction manuals, supervise them at customers' homes, or inspect their work. The installers and technicians use their own equipment and tools, and they can choose which days they work. Standard pays a set rate per project. According to criteria used by the courts, are these installers and technicians independent contractors or employees? Why?

They are independent contractors 1. How much control can the employee exercise over the details of work? Installers/techs exercises their own judgement over their work. 2. Is the worker engaged in an occupation or business distinct from that of the employer? Installers/techs are independent from Standrard. 3. Is the work usually done under the employer's direction or by a specialist without supervision? Installers/techs not supervised by Standard 4. Does the employer supply the tools at the place of work? Installers/techs use their own tools 5. For how long is the person employed? They choose their own times to complete the project 6. What method of payment- by time period or at the completion of the job? Paid at completion of the job. 7. What degree of skill is required for the worker?

CIP 19.2 As a freelance contractor, Brian Cooley created two sculptures of dinosaur eggs for the National Geographic Society for use in connection with an article in its magazine, National Geographic. Cooley spent hundreds of hours researching, designing, and constructing the sculptures. National Geographic hired Louis Psihoyos to photograph Cooley's sculptures for the article. Cooley and Psihoyos had separate contracts with National Geographic in which each transferred the copyrights in their works to National Geographic for a limited time. The rights to the works were returned to the artists at different times after publication. Psihoyos then began licensing his photographs of Cooley's sculptures to third parties in return for royalties. He digitized the photographs and licensed them to various online stock photography companies, and they appeared in several books published by Penguin Group. Cooley sued Psihoyos for copyright infringement. The court found that Psihoyos did not have an unrestricted right to use and license the photos. When Psihoyos reproduced an image of a Cooley sculpture, he reproduced the sculpture, which infringed on Cooley's copyright. Therefore, the court granted a summary judgment to Cooley.

This is Work for Hire! Cooley is an independent contractor

Harrison v Tallahassee Furniture Co. Furniture co- no background checks/ interviews. Mr. Turner (driver) assaults Harrison in her home. She sues for monetary dmgs. Why did the court end up finding the Furniture Co. Liable?

This is bc the Furniture practiced negligent hiring. They did not do a background check. If they did, they would have seen that Turner had a background of violent crim history.

19-2. Peter hires Alice as an agent to sell a piece of property he owns. The price is to be at least $30,000. Alice discovers that the fair market value of Peter's property is actually at least $45,000 and could be higher because a shopping mall is going to be built nearby. Alice forms a real estate partnership with her cousin Carl. Then she prepares for Peter's signature a contract for the sale of the property to Carl for $32,000. Peter signs the contract. Just before closing and passage of title, Peter learns about the shopping mall and the increased fair market value of his property. Peter refuses to deed the property to Carl. Carl claims that Alice, as Peter's agent, solicited a price above that agreed on when the agency was created and that the contract is therefore binding and enforceable. Discuss fully whether Peter is bound to this contract.

Upon creation of an agency, the agent owes certain fiduciary duties to the principal. Two such duties are the duty of loyalty and the duty to inform or notify. The duty of loyalty is a fundamental concept of the fiduciary relationship. The agent must act solely for the benefit of the principal, not in the agent's own interest or in the interest of another person. One of the principles invoked by this duty is that an agent employed to sell cannot become a purchaser without the principal's consent. When the agent is a partner, contracting to sell to another partner is equivalent to selling to oneself and is, therefore a breach of the agent's duty. In addition, the agent has a duty to disclose to the principal any facts pertinent to the agency's subject matter. Failure to disclose to Peter the knowledge of the shopping mall and the increased market value of the property also was a breach of Alice's fiduciary duties. When an agent breaches fiduciary duties owed to the principal by becoming a recipient of a contract, the contract is voidable at the election of the principal. Neither Carl nor Alice can hold Peter to the contract, and Alice's breach of fiduciary duties also allows Peter to terminate the agency relationship.

A11. Meyer: stopped at store. Hits Watts (employee). Unclear whether Meyer hit her w/ intention or to retrieve the charger. Watts: In reponse, grabbed Meyer by the hair + hit her in the back of the head. Watts: fired. Meyer: sued the store for liability for the tort (assault + battery). What are the key factors determining if the store is liable?

Watt's tort if they were in the course + scope of their employment (under respondeat superior)