Agency
Ratification
- The later supplying of authority (or even creation of agency) where none existed at the time 1 person purported to act as another's agent - Relates back and furnishes authority as if it had existed at the time, when it fact it didn't - Must comply with the following for effective ratification: a) The person on whose behalf the action was purportedly taken must've had the capacity to take the action at the time b) The 3rd party must've believed that the purported agent was authorized and acting on behalf of the P c) inapplicable for undisclosed P situations d) Ratifying person must be in possession of ALL material facts relating to the action being ratified e) Ratification must be COMPLETE - NO partial ratifications! f) Ratifying person must make an effective affirmance (can be implied, as by knowingly accepting & retaining the benefit of the act). To be effective, the act of affirmance must be unequivocal (must bear NO interpretation other than as an act of ratification) and must occur before 3rd party disaffirms the transaction (if 3rd party has changed position prior to affirmance, it may elect to avoid) - By clothing the purported agent with authority that it lacked at the time, ratification insulates the purported agent from an action for fraud or breach of warranty of authority
Knowledge
- What a person knows
Where one person works for another, what issues arise? What needs to be determined in answering these issues?
- What duties owed between employer & the worker? - To what extent can worker render employer liable in tort? - To what extent can worker render employer liable in K? --- - Whether agency existed - Whether A was a servant - If a servant, whether A acted w/in scope of employment (P liable in tort) - Whether A acted w/in scope of authority (P liable in K)
Agent's Agent
- When an agent is NOT authorized by their P to employ further agents to assist in performance of agent's duties, but agent does so anyway, employed person is an agent's agent - NO duties run between P & agent's agent - P NOT liable for acts of agent's agent because agent is agent's agent principal
How does language in an employment contract declaring that a relationship is that of employer and independent contractor relate to the issue of control?
- evidence on the issue, but NOT dispositive - primary test is the intention of the parties to do those things which in law render them principal and agent
Capacity of parties to create agency relationship - husband & wife
- no presumption of agency arises from the marital relationship, BUT on the basis of restitution, a W has traditionally been empowered to find her H for necessaries
Estoppel (Agency by Estoppel)
- not agency at all - true estoppel - Elements: i) No agency exists ii) But 3rd party is foreseeably & reasonably justified in relying iii) On some appearance of an agency iv) Created by P OR allowed to persist by P v) 3rd party does so rely vi) To their detriment - If all elements met, alleged P estopped to deny existence of agency - Remedy measured by 3rd party's reliance, NOT by any lost expectation
What are independent contractors? What is the independent contractor rule?
- people who perform services for another but who are NOT agents Rule is that they do NOT bind the person who hires them in either K or tort
Scope of employment re: deviation ("frolic") & detour
- servant's deviation from employment is SLIGHT and NOT UNUSUAL --> court may determine that the servant was within the scope of employment - servan't deviation is VERY MARKED and UNUSUAL --> court may determine that the servant was not on master's business, but on his own
What is agency?
- the fiduciary relationship that results when 2 persons agree that 1 (the agent) will act on behalf of and under the control of the other (the principal) - Elements: "Co Co Obo" 1) consent 2) control 3) "on behalf of" - existence is a question of fact
3 Classifications of Principals
1) Disclosed Principal 2) Partially Disclosed Principal 3) Undisclosed Principal
Conduct of a servant is within the scope of employment IF, BUT ONLY IF...
1) It's of the kind the agent is employed to perform 2) It occurs substantially within the authorized time & space limits 3) It's actuated, at least in part, by a purpose to serve the master, AND 4) The use of force is NOT unexpectable by the master if force is intentionally used by the servant against another
2 types of breach of warranty of authority
1) Nonexistent principal 2) Misrepresentation or breach of warranty of authority
3-step analysis to discover when an agent will render his P liable in tort
1) Was there agency? 2) Was the agent a servant? (key issue is P's right of control) 3) Was the agent acting within the scope of employment?
Nelson v. Yellow Cab factors evidencing control
1) direct evidence of the right to, or exercise of, control 2) method of payment 3) furnishing of equipment 4) right to fire
Restatement test for control
1) skill required 2) who supplies the tools 3) type of occupation (whether the work is usually done by specialists without supervision) 4) a line of business distinct from that of the master 5) terms of employment Ks (Did the parties believe that they were creating a master-servant relationship?) 6) right of master to dismiss or discharge servant 7) payment by time rather than by fixed amount for a job
Post-employment non-competition clauses are NOT favored in SC & will be struck down UNLESS...
1) they're reasonable as to time, place & activity 2) they're supported by valid consideration, AND 3) a valid proprietary interest is being protected
Principal's Duties to Agent
"DR P's Negligence Reimbursed Conduct Opposing Accounts Indemnified, Not Interfering w/ Commissions" 1) Duty to disclose any risks A might encounter in performance of the agency 2) P liable to A for any injury to A caused by P's negligence 3) Duty of reimbursement for expenses incurred by A in performance of P's business 4) Duty of indemnification to A for liability A may incur in performance of the agency **Performance must've been w/in the scope of A's authority/power 5) Duty to furnish opportunity for work 6) Duty to keep & render accounts 7) Duty of good conduct 8) Duty to pay compensation 9) Duty not to interfere with commission income
Co-Agents
- 2+ more agents acting for the same principal - No rights or obligations run between co-agents, even if 1 subordinate to the other - Each co-agent's range of agency rights & duties run directly to P
Undisclosed Principal
- 3rd party has NO notice that an agent is acting on behalf of a P - they believe that the agent is acting on their own behalf - P & 3rd party bound to each other AS LONG AS agent acted within the scope of his authority BUT NOTE that agent is also a party to the transaction & liable to 3rd party
Partially Disclosed Principal
- 3rd party knows that agent is an agent, but does not know and couldn't with ordinary prudence ascertain the identity of P - P & 3rd party bound to each other AS LONG AS agent acted within scope of their authority - Agent is also a party to the transaction & liable to the 3rd party because agent is the only person whose credit can be evaluated by 3rd party
Scope of employment re: unauthorized intentional torts
- A master is normally NOT liable for his servant's willful acts, UNLESS they are at least partly in furtherance of the master's business - If the act is *solely* in furtherance of the master's business, the master may be liable EVEN IF master expressly forbade the act
How is agency formed?
- A mutual manifestation of intent by the parties is usually sufficient to create the relationship - Intent to actually create NOT required (can actually be created in the face of a stated intention not to create an agency) - Requisite intent is the intent to do those acts which, in law, create agency - Needn't be contractual, and neither consideration nor contractual capacity of either party is required
Agent's Duties to Principal
- Agents are fiduciaries - owe their principals duties of care & loyalty, overlain by good faith - Specific duties owed to principals: a) Full disclosure of all facts pertinent to the transactions w/in the relationship b) Exclusivity in the subject matter **If agent makes "secret profits" in connection with the subject matter of the agency, agent holds those profits in constructive trust for the benefit of the principal & can be compelled to account to principal for them c) Exercise of reasonable care in the conduct of the P's business & in the mgmt of all property in A's custody & control
Nonexistent principal
- An "agent" purports to be acting on behalf of a "principal" who doesn't exist or doesn't have the requisite capacity making the "agent" liable for breach of warranty of authority - "P" obviously can't ratify, so "agent" remains liable
Misrepresentation or breach of warranty of authority
- An agent who misrepresents authority to act may be found liable to the 3rd party in tort - The agent also may be found liable for breaching an implied or express warranty of authority **REMEMBER: a P can ratify their agent's conduct! If this happens, the agent's liability to the 3rd party will thereby be terminated
Servant
- An agent whose P (called a "master") has the right of immediate physical control over the performance of the agency. -Under respondeat superior, the master is liable for the torts of the servant committed within the scope of the servant's employment.
Implied Authority
- Authority which, though not expressed to the agent, is reasonably necessary to carry out express authority - Never contradicts express authority
Special Agent
- Authorized to conduct a single transaction OR a series of transactions NOT involving a "continuity of service" like a general agent - normally CANNOT bind P outside the scope of actual or apparent authority - 3rd parties ARE generally under a duty to inquire as to extend of agent's authority
Breach & remedies for agent's duty of care to principal
- Breached by negligence - Remedy is $$ damage
Breach & remedy for duty of loyalty from agent to principal
- Breached by some form of self-dealing - Remedies include equitable remedies such as injunction, accounting & constructive trust
Capacity of parties to create agency relationship - principal
- Can be any person who can give a legally binding consent - Can't be a principal if adjudicated to lack capacity - Infant principal voidable at instance of infant
General Agent
- Conducts a series of similar transactions on behalf of P involving a "continuity of service" - NO general authority to act for P in all matters - may bind their Ps to agmts within the nature of the general agency EVEN IF outside the scope of their actual authority - 3rd parties NOT required to inquire into A's authority
Express Authority
- Created by a manifestation by P to agent - P tells agent what they're authorized to do - P bound by agent's acts within the scope of authority
Apparent Authority
- Created by a manifestation from P to a 3rd party - Effective ONLY as to 3rd parties to whom the manifestation is made - P bound by agent's acts w/in the scope of apparent authority - Adequate manifestation may be explicit or implied: a) explicit = "Bob can sell you my house" b) implied = company stationary lists Bob as president (a holding out of a course of dealing on which a 3rd party reasonably relies) - Must originate with P by means of a manifestation adequate to support reasonable reliance by 3rd party - Extinguished by contrary notice to 3rd party - Does NOT require reliance by 3rd party beyond relying on the apparent authority to enter into a K
Emergency Authority or Power
- Designed to allow an agent to act in circumstances where some unforeseen emergency threatens P's interests & it's NOT possible to get P's authority before some substantial loss occurs - In the absence of any type of authority (requiring manifestation by P) the source of the agent's ability to act arises from inherent agency power - Can be viewed as a special application of the general rule that the authority of an agent is interpreted in light of the circumstances at the time of the act - Broad enough in proper situations to allow the agent to delegate necessary authority in the appointment of sub-agents
Subagents
- Generally, agnts assigned to a task have NO authority to delegate the task to another - If P *does* authorize agent to delegate all or part of a task, that delegate is a subagent - Subagent's primary relationship is with agent, BUT P & subagent also owe each other the usual duties that run between P & agent
Restitution
- If all other theories fail, the 3rd party may obtain recovery in equity based on restitutionary theories - Where the 3rd party has performed to the benefit (direct or indirect) of the purported P, they may be able to recover the value of their performance on a theory of unjust enrichment measured by quantum meruit
Scope of employment re: servant disregarding instructions
- Instructions concern the manner of work --> master may still be liable - Servant uses means radically different and increases the risk of harm --> master NOT liable
Capacity of parties to create agency relationship - agent
- Liability coextensive with their capacity - Someone without capacity to comprehend nature of fiduciary relationship CANNOT be held personally liable for breach of fiduciary duty
Inherent Agency Power
- Operates where agent lacks either actual or apparent authority (because P has made no manifestation of authority to EITHER the agent or a 3rd party) but agent has purported to bind P anyway to a 3rd party who doesn't have notice of the "secret" limits on the agent's authority - Basis: as between an equally innocent P & 3rd party, 3rd party should win - Follows cardinal policy of agency doctrine: 3rd parties should NOT be disadvantaged because they dealt with agent rather than P - Most often applied in cases of general agents or undisclosed principals - Holding an agent out as manager may be a sufficient manifestation to support apparent authority.
Disclosed Principal
- P is "disclosed" as to a 3rd party who has notice: a) that the agent is not acting on his own behalf, but is the agent of another, AND b) of the principal's identity - Liable to 3rd parties on Ks entered into by agents acting w/in the scope of their authority - 3rd party bound to P - Agent for disclosed P normally NOT a party to the K & therefore NOT liable on it
Scope of employment re: use of instrumentality NOT furnished by the master
- Servant uses an instrumentality (such as a car) other than that furnished by the master --> issue is whether the instrumentality was authorized, either expressly or impliedly, by the employer (generally sustains liability) - A master is NOT liable for injuries in the use of instrumentalities of a substantially different kind from that authorized for performing the master's services - A servant's use of their personal car does NOT preclude the master's liability
Notification
A purposeful attempt to alter legal relations by imparting knowledge
SC's test for when conduct of a servant is within the scope of employment
A servant doing some act in furtherance of the master's business will be regarded as acting within the scope of employment EVEN IF acting outside the master's instructions. HOWEVER, if the servant acts for some independent purpose, wholly disconnected with the furtherance of his master's business, the conduct falls outside the scope of his employment.
How may an agent bind the principal in K?
An agent, whether a servant or not, who is duly authorized by the principal, can bind the principal in K or by representations within the scope of the agent's authority
How and when may agency be terminated?
At any time by the withdrawal of consent by either principal or agent
Notice
Consists of 1) knowledge 2) notification
What is actual authority?
Express Authority + Implied Authority
Defenses to Principal's liability to Agent for any injury to Agent caused by Principal's negligence
Fellow servant rule Assumption of risk Contributory negligence Worker's comp
Scope of employment re: servant's unauthorized guests
If a servant is authorized to invite guests, master liable for the servant's tort injuring the guest (otherwise, guest is trespasser & master not liable)
When will notification be imputed to the principal?
If an agent has, or appears to have, authority to receive notifications on behalf of the P, the notification will be imputed to the P if... a) it's given at a proper time, AND b) the 3rd party giving notice has NO reason to believe that the agent is acting adversely to his P's interest
Scope of employment re: servant misunderstands instructions
If servant misunderstands instructions & does things NOT CONTEMPLATED BY MASTER, master may be charged with servant's mistake
When an agent is a servant & commits a tort, how may the principal be held liable?
If the tort is committed within the scope of the agent's employment, the principal will be held liable for the tort under respondeat superior as though the principal committed the tort themselves
Can agents create their own authority?
NO! Agency authority must ALWAYS derive from some manifestation by the P!
Irrevocable "Agencies" (agencies coupled with an interest)
Relationships that simply look like agency are irrevocable because they're not true agency relationships (usually because the person who appears to be the agent is actually acting on their own behalf rather than on that of a P)
Control
The right to control (whether or not exercised) over the details of the work to be done
How may a subagent bind a principal?
To bind a P, a subagent's act must be w/in BOTH: a) the agent's power bestowed by P to delegate authority, AND b) the authority in fact delegated by the agent
In SC, when may the estate of a deceased principal be bound to a contract with a 3rd party?
When the 3rd party bargains with the agent in good failth without knowledge of P's death
When is an agent's knowledge imputed to the principal?
When the agent: a) is under a duty to disclose, OR b) has actual authority to act on behalf of P
When is a master NOT liable for the negligence of a servant's servant (one hired by his servant)?
When the hiring was: a) not reasonably necessary to get the job done but simply a matter of servant's convenience b) not expressly or impliedly consented to by the master, OR c) not brought about by emergency or unforeseen contingency
When is an agent's knowledge NOT imputed to the principal?
Where: a) the agent is acting on his own behalf b) the agent is acting for another P, OR c) the agent and the 3rd party giving knowledge are attempting to defraud the P
Can a failure to act or omission be within the scope of employment?
Yes!
Methods of termination of agency
a) Agreement of the parties b) Unilateral renunciation of the agent or unilateral revocation by P of agent's authority c) Expiration of time d) Accomplishment of objective for which agency was created e) Loss or destruction of the subject matter for which agency was created, thereby rendering performance impossible f) Death or incapacity of either agent or P **As agency is consensual, any act inconsistent with continuing consent to the relationship by EITHER P or agent terminates the agency
When may a master be held liable for torts of servants committed outside the scope of employment, or of non-servants?
a) Employer intended the consequences or conduct b) Employer was negligent or reckless in hiring/supervising the servant c) Conduct violated a non-delegable duty of employer, involved inherently dangerous work, or otherwise gave rise to direct liability on the part of employer as a matter of law d) Servant purported to act or speak on behalf of a P-master, AND there was reliance upon the apparent agency **NOTE: An apparent master may be estopped to deny that he's the master IF the injured party was led to accept the services of the apparent servant by the appearance that he was employed by the master e) Employer, though NOT a master, "retained control" over the performance of the task that caused the injury f) Employer ratified or adopted the tort
What are the two general categories of agents?
servants non-servants
