Advanced blaw ch 23

Ratification of Agent's Action

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 transactions at time agent engages in act, and at time principal ratifies;third party must also have legal capacity to engage intransaction. 5. Principal's affirmation must occur before third party withdraws from transaction. 6. Principal must observe same formalities when approving act done by agent, as would have been required to authorize initially (e.g. if writing required for contract, writing required for ratification).

Whose agent is it? 1. Clerk helping you at McGuckins 2. Travel Agent finding you a cheap airfare 3. Real Estate Agent helping you find a home 4. Car Salesperson taking your offer to the sales manager

1. McGuckins 2. yours 3. sellers 4. dealers

Determining Employee/Independent ContractorStatus Criteria Used by the Courts

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?

Agency by operation of law

A court may find an agency relationship in the absence of a formal agreement, mainly in family relationships or emergencies (ex. railroad engineer on behalf of railroad)

Agency by ratification

A principal affirms a contract that previously was not enforceable because person was not principal's agent agent makes a contract that they didn't have authority to but principal wants it so it's ratified

Principal's Liability for Agent's Torts and Crimes Liability for Agent's Misrepresentation:

A principal is exposed to tort liability whenever a third person sustains a loss due to the agent's misrepresentation.

Principal's Liability for Agent's Torts and Crimes Principal's Authorization of Agent's Tortious Conduct:

A principal who authorizes an agent to commit a tort may be liable to persons or property injured thereby, because the act is considered to be the principal's.

Requirements to form Agency

Agreement is needed. • Express or • Conduct Based (implied) Object must be legal Consideration is not needed Agent does not need contractual capacity, but Principal does • Why? Who remains liable? • Equal Dignity rule requires writing if related contracts do -like real estate

Termination of an Agency

Always possible by either party • "Wrongful" if done contrary to agreement • If Wrongful, agency does terminate, though other party possibly can collect damages Power v. Right to do something • Power: Are you able to do it? • Right: Is it proper for you to do it? Exception: Agency coupled with interest cannot be terminated by principal • Main situation: Sale of Collateral in which an agent has an interest in the property beyond a sales commission. (See example in book on p. 589). (Agent is given interest in sale of property in return for loan to principal).

Contract Liability Issues

Assuming authority, Principal is Liable and wants to be. • Generally, it is the principal, not the agent who is liable. • But, like all things in law, there are exceptions! Issue: If principal breaches, can 3rd Party recover from agent? Outcome (the crucial factor) is based on the degree of disclosure of the agency arrangement to the 3rd Party

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.

Which statement below is false? A. Employees are controlled by the employer. B. Independent contractors are controlled by the employer. C. Employers have limited liability over independent contractors. D. None of the above

B. independent contractors are not controlled by the employer

Determining Employee Status

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. Employers often try to treat employees as independent contractors •Why? (don't have to pay social security and other taxes) Employee status and "works for hire" (employee vs. freelance artist/writer/computer programmer

Actual- express or implied authority

Express (includes power of attorney) or Implied (Conduct, custom, or incidental related to express) Ex. Grocery store manager has implied authority to do what's reasonably required to operate business

Scope of Agency/Employment Issues:

Frolic and/or Detour •Has the employee abandoned the job? •Coming and Going rule

Principal's Liability for Independent Contractors Torts

Generally, 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 the contract.

Agent's Contract Liability -Rationale

If the 3rd Party does not know principal's identity, the 3rd party can rely only on the reputation of the agent..... Thus, agent can be held liable

Termination of Agency-Acts of Parties

Lapse of Time: Stated or Reasonable (Ex. Property listing agreement for 6 months) Purpose Achieved: (Ex. Agent for purchasing livestock ended when purchase made) Occurrence of Event: (Ex. Agent handling business affairs while principal is away) Mutual Agreement: (Ex. Both agree to end agency relationship for procuring business equipment)Termination by one party (next slide)

Liability for torts and crimes

Principal's tortious conduct. A principal conducting an activity through an agent, may be liable for harm resulting from the principal's own negligence or recklessness.

Principal's Liability for Agent's Torts Vicarious (Indirect) Liability for Agent's Negligence

Respondeat superior: a doctrine under which a principal (or an employer) is held liable for the wrongful acts committed by agents (or employees) while acting within the course and scope of their agency (or employment). • Determining the scope of employment • The distinction between a "detour" from their duties and a "frolic" not working anymore just did it on their own • Employee travel time • Notice of dangerous conditions worker driving and gets a speeding ticket that's on them to and from work is not in scope either

Liability for contracts

Unauthorized acts: If an agent has no authority but contracts with a third party, the principal cannot be held liable on the contract.

Agent's Liability- Depends on Degrees of Disclosure

Undisclosed: Agent Liable. 3rd party knows neither existence nor identity of principal Partially disclosed: Agent Liable. 3rd party knows existence of principal, but not identity Fully disclosed: Agent not liable. 3rd party knows identity of principal

Tort Liability Issues- Scope of Agency general rule

Unlike contracts, a tort is never desired •Agent is always liable for agent's tort •Issue is whether Principal can be held liable when Agent cannot pay (as is often the case) General Rule: Principal is liable for all actions of the agent" within the scope of the agency." Depends on "all facts and circumstances."

Agency by estoppel

When a principal causes a third person to believe the other person is the principal's agent

Power of attorney

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

Duties of principal

compensation reimbursement and indemnification cooperation safe working conditions

Agency

consensual agreement where an agent enters contracts with one or more third parties on behalf of a principal (3 parties involved) both principal and agent must agree exist in business and society can be employees, independent contractors or neither

agency relationship

most of the time principal is liable not the agent

Duties of agent

performance notification loyalty obedience accounting

Duty of loyalty

reaches occur if •Dual Agency •Self-Dealing •Usurping an Opportunity •Competing with Principal •Misuse of confidential information

agent authority

same authority as the principal and allows principal to be in multiple places at once

Laurel Creek Health Care Center v. Bishop (2010)—Agency by Estoppel The attending emergency room physician, an independent contractor, misdiagnosed Aaron Riedel's condition. Riedel filed a suit against Lodi Community Hospital, alleging that the physician's negligence was the proximate cause of his subsequent paraplegia.Lodi hospital argued that it was not liable because the physician was not its employee or agent. Was hospital liable for physician's negligence, even though physician was an independent contractor?

yes the hospital is liable appears to be agent by third party

Principal's Liability for Agent's Torts Liability for agent's intentional torts Direct Liability

• There is a distinction between torts prompted by the principal himself and torts of which the principal was innocent. • If the principal directed the agent to commit a tort or knew that the consequences of the agent's carrying out his instructions would bring harm to someone, the principal is liable. • This is an application of the general common-law principle that one cannot escape liability by delegating an unlawful act to another.

Principal's Liability for Agent's Crimes Liability for agent's crimes

•A principal (or employer) is not liable for an agent's crime even if the crime was committed within the scope of authority or employment, unless the principal participated by conspiracy (or other action).

Principal/Agent

•A separate issue from any type of Employment •Can exist with any employment relationship, or in absence of employment relationship •Exists if the person can contract on behalf of the employer or principal •Determines Liability of Employer if Employee causes harm!

Employer/Employee

•Ability of employer to control how the work is done •Employees who deal with 3rd parties are usually agents (many employees are not agents)

4 ways to form agency

•Agency by Agreement •Agency by Ratification •Agency by Estoppel •Agency by Operation of Law

Termination—Operation of Law

•Death or insanity •Impossibility •Changed circumstances •Bankruptcy...usually, not always

Employer/Independent Contractor

•Independent contractor decides how to do the work •Employer concerned with result •Example: CPA

Agency by agreement

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