BusinessLaw Chapter 33

Termination of an Agency

-Agency can be terminated by an act of the parties or by operation of law -Once agency has terminated, the agent has no actual authority to bind the principal -For an agent's apparent authority to be terminated, third persons may also need to be notified that the agency has been terminated

Liability for Agent's Crimes

-Agent is liable for her own crimes. -Principal is not liable, even if the crime was committed within the scope of employment, unless principal participated in the crime. -Some states, principals may be liable for agent violation of regulations.

Termination by Operation of Law

1. Death or insanity 2. Impossibility 3. Changed circumstances 4. Bankruptcy (Insolvency does not necessarily terminate the relationship) 5. War

Termination by Act of the Parties

1. Lapse of time 2. Purpose achieved 3. Occurrence of a specific event 4. Mutual agreement 5. Termination by one party

An undisclosed principal can require the third-party to fulfill the contract, unless one of the following is true:

1. The undisclosed principal was expressly excluded as a party in the written contract 2. The contract is a negotiable instrument signed by the agent with no indication of signing in a representative capacity 3. The performance of the agent is personal to the contract, thus allowing the third-party to refuse the principal's performance

Determining the Scope of Employment

1. Whether the employee's act was authorized by the employer 2. The time, place, and purpose of the act 3. Whether the act was one commonly performed by employees on behalf of their employers 4. The extent to which the private interests of the employee were involved 5. Whether the employer furnished the means or instrumentality by which an injury was inflicted 6. The extend to which the employer's interest was advanced by the act 7. Whether employer had reason to know employee would perform action in question 8. Whether the act involved the commission of a serious crime

The Doctrine of Respondeat Superior

A legal doctrine under which a master is responsible for the torts of his or her servants, that are committed within the scope of employment. Basically the liability is imposed on the employer regardless of fault

Disclosed Principal

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

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.

Undisclosed Principal

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

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.

E-agent

A semiautonomous computer program that is capable of executing specific tasks.

Power of Attorney

A written document, which is usually notarized, authorizing another to act as one's agent; can be special (permitting the agent to do specified acts only) or general (permitting the agent to transact all business for the principal).

An agent's authority can either be:

Actual (expressed or implied) or apparent

Agency Coupled with an Interest

An agency relationship that is created for the benefit of the agent, not the principal.

Employee Travel Time

An employee going to and from work or to and from meals is usually considered to be outside the scope of employment. In contrast, all travel time of traveling salespersons or others whose jobs require them to travel normally is considered to be within the scope of employment for the duration of the business trip, including the return trip home, unless there is a significant departure from the employer's business.

Express Authority

Authority declared in clear, direct, and definite terms - can be given orally or in writing

Implied Authority

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal.

If an agent has no authority to act on behalf of a principal but the agent still enters into a contract with a third party, the principal:

Cannot be held liable on the contract, whether they were disclosed, partially disclosed, or undisclosed. The agent is liable.

Liability for Independent Contractor's Torts

Generally, an employer is not liable for acts of independent contractors because employer has no right to control. Exceptions: Strict liability for unusually hazardous activities, transportation of highly volatile chemicals, or use of poisonous gases.

The Distinction Between Detour and Frolic

If a servant was on a master's business and merely took a detour, the master will be responsible. If, however, the servant was on a frolic of his own, the master will not be liable.

A principal who acts through an agent may be liable for harm resulting from principal's own negligence or recklessness. Examples:

If they give improper instructions, authorizes the use of improper materials/tools, or establishes improper rules that result in agent committing a tort

When a principal's identity is undisclosed and the agent is forced to pay the third party, the agent is entitled to be ___ by the principal.

Indemnified (compensated)

Vicarious Liability

Legal responsibility placed on one person for the acts of another. (Indirect Liability)

Liability for Contracts

Liability for contracts formed by an agent depends on how the principal is classified and on whether the actions of the agent were authorized or unauthorized.

Ratification

Occurs when the principal affirms, or accepts responsibility for, an agent's unauthorized act

The act of termination is called:

Revocation if done by the principal Renunciation if done by the agent

If the third party knows at the time the contract is made that the agent does not have authority, then:

The agent is not liable (similarly, if the agent expresses uncertainty as to the extent of their authority, the agent is not personally liable)

Apparent Authority

The authority an agent is believed by third parties to have because of the behavior of the principal.

Notice of Dangerous Conditions

The employer is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation.

Wrongful Termination

The termination of an agency contract in violation of the terms of the agency contract. The non breaching party may recover damages from the breaching party. (Note: Even in an agency at will where either party can terminate at any time, the principal must give agent reasonable notice)

Notice of Termination

The termination of an agency extinguishes an agent's actual authority to act on the principal's behalf. However, if the principal fails to give the proper notice of termination to a third party, the agent still has apparent authority to bind the principal to contracts with these third parties. If third party has dealt with agent, principal must notify them DIRECTLY. If third parties have heard about agency but have not dealt with agent, constructive notice is sufficient. If agent's authority is written, it normally must be revoked in writing (unless document contains expiration date)

A principal is liable to a third-party for a contract made by the agent if:

They are disclosed or partially disclosed

An agent acting at the principal's direction can be liable for committing the tortious act even if the agent was unaware that the act was wrong

True

Liability for Agent's Negligence

Under the doctrine of respondeat superior, the principal-employer is liable for any harm caused to a third party by an agent-employee within the scope of employment. This doctrine imposes vicarious liability, or indirect liability, on the employer. 3rd parties injured through the negligence of an employee-agent can sue either that employee or the employer, if the employee's negligent conduct occurred while the employee was acting within the scope of employment.

When neither the fact of an agency relationship nor the identity of the principal is disclosed, the:

Undisclosed principal is bound to perform just as if the principal had been fully disclosed at the time the contract was made

Apparent Implied Authority

When a principal has placed an agent in a position of apparent authority—making it possible for the agent to defraud a third party—the principal may also be liable for the agent's fraudulent acts.

Innocent Misinterpretation

When a principal knows that an agent is not accurately advised on facts but doesn't correct either the agent's or third party's impressions, the principal is responsible