CH 16

respondeat superior

-"let the master respond" -states principal is held liable for negligent acts of agent during scope of their employment -imposes vicarious liability on employer (liability without regard to the personal fault of the employer) -Determining scope of employment: • Agents acts authorized by principal • Time, place, purpose of acts • Act commonly performed by agent on behalf of principal • Principals interest advanced • Agents interests advanced • Principals furnished instrumentality by which injury occurred • Principal had reason to know agent would perform act • Act is a serious crime

Termination of agency relationship

-Once relationship between principal and agent ends, agent no longer has right (actual authority) to bind principal. But, apparent authority-notification to 3rd person may be necessary; actual notice for knowns, constructive notice for others 1. by act of the parties 2. by operation of law

Detour v. Frolic

-a useful insight into the scope of employment concept -judge's distinction between a "detour" and a "frolic" in the case of Joel v. Morison. -English court held that if a servant merely took a detour from his master's business, the master is responsible. If the servant was on a "frolic of his own" and not in any way "on his master's business", the master is not liable. -employee going to and from work or to and from meals; usually not in scope of employment -if job requires traveling; may be in scope of employment

implied authority

-agent -Authority customarily associated with the position of the agent or authority that is deemed necessary for the agent to carry out expressly authorized tasks.

express authority

-agent -Can be oral or in writing. Authorization must be in writing if the agent is to execute a contract that must be in writing.

apparent authority

-agent -Exists when the principal, by word or action, causes a third party reasonably to believe that an agent has authority to act, even though the agent has no express or implied authority.

ratification authority

-agent -The affirmation by the principal of an agent's unauthorized action or promise. For the ratification to be effective, the principal must be aware of all material facts. -Requirements: ♣ Agent acts on behalf of principal who then ratifies ♣ Principal knows all material facts ♣ Principal ratifies acts in entireity ♣ Principal has legal capacity ♣ Principal ratifies before 3rd person withdraws ♣ Principal observes all formalities as if pre-authorized

duty of accounting

-agent -the agent has a duty to make available to the principal records of all property and funds received and paid out on behalf of the principal

duty of obedience

-agent -the agent must follow all lawful and clearly stated instructions of the principal

duty of Performance

-agent -the agent must use reasonable diligence and skill in performing her or his duties

duty of notification

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

duty of loyalty

-agent -♣ the agent has a duty to act solely for the benefit of the principal and not in the interest of the agent or a third party

Duties of principal

-compensation -reimbursement and indemnification -cooperation

Coker v. Pershad

-facts: AAA contracted with Five star Auto Service to perform towing and auto services for them. Pershad is a tow truck driver for five star and responded to a AAA call for assistance. At the scene he got in a fight with the passenger, Coker, and assaulted him with a knife. Coker filed suit against, Pershad, Five Star, and AAA. Courts determined that Five Star was independent contractor of AAA not an employee so AAA not responsible for actions of Pershad and Five Star. o Holding/Law: employer not responsible for independent agents action when agent operates an independent business and is not subject to the immediate direction and control of the employer o Rationale: to determine whether the relationship of the parties is that of employer/employee or that of employer/independent contractor, factors to be considered: a) extent of control over details of work b) is worker engaged in distinct business, c) industry standards, d) skill level, e) who supplies tools/equip and f) length of employment

Duties of agent

-performance -notification -loyalty -obedience -accounting

duty of cooperation

-principal -a principal must cooperate with and assist an agent in performing her or his duties

duty of compensation

-principal -the principal must pay the agreed-on value (or reasonable value) for the agent's services

duty of reimbursement and indemnification

-principal -the principal must reimburse the agent for all funds disbursed at the request of the principal and for all funds that the agent disburses for necessary expenses in the reasonable performance of his or her agency duties

partially disclosed principal (authorized acts)

-principal is liable to a third party for contract made by an agent who is acting within the scope of their authority -agent also treated as a party to the contract, 3rd party can hold agent liable for contractual nonperformance

disclosed principal (authorized acts)

-principal is liable to a third party for contract made by an agent who is acting within the scope of their authority -agent has no contractual liability for nonperformance of principal or the 3rd party

Issues that arise from employee v. independent contractor

-taxes (employee may get a break of taxes where contractors do not) -employment discrimination -workplace safety -liability -workers comp -ownership/copyright of work

by act of the parties

-termination o notice to third parties is required when an agency is terminated by act of the parties. Direct notice is required for those who have previously dealt with the agency, but constructive notice will suffice for all other third parties ♣ lapse of time (terminates due to a specified term stated in contract) ♣ purpose achieved ♣ occurrence of specific event ♣ mutual agreement ♣ termination by 1 party (revocation)

by ratification

-the principal either by act or by agreement ratifies the conduct of a person who is not in fact an agent -Involves question of intent, and intent can be expressed by either words or conduct

undisclosed principal (authorized acts)

-when fact of agency nor identity of principal disclosed, principal bound to perform just as if they were fully disclosed. -agent liable as a party to contract -agent has right to indemnification if they were forced to pay 3rd party due to principal's nonperformance **agent liable for nonperformance of principal but get indemnification**

Agent's Authority

1. express authority 2. implied authority 3. apparent authority 4. ratification

agency

A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal). -exercises their powers for the benefit of the principal only -has fiduciary duties -can be an employer/employee situation -can be employer/independent contractor situation

by operation of law

Formation when the agency relationship is based on a social duty or formed in emergency situations when the agent is unable to contact the principal and failure to act outside the scope of the agent's authority would cause the principle substantial loss. ex: a railroad engineer may contract on behalf of her or his employer for medical care for an injured motorist hit by the train

Equal dignity rule

If contract is/must be in writing, then agents authority must be in writing. Failure to comply with EDR can make contract voidable at option of principal

Motorsport Marketing inc. v. Weidmaier

Marsha Weidmaier and husband own a truck stop in name of weidmaier inc. son who works there but has no ownership interest opens another business called extreme diecast llc. In order for son to obtain line of credit from motorsport marketing, Marsha signs paperwork for line of credit as "Marsha Weidemair secretary owner of weidmaier inc" Son added his name later to the list of owners. Son stopped making payments. Plaintiff sued Marsha/Weidmaier inc.. Court Ruled that because of Marsha's actions, motorsport marketing reasonably believed that son was apparent agent of weidmaier inc in ordering merchandise

independent contractor

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

by estoppel

The principal causes a third person to believe that another person is the principal's agent, and the third person acts to his or her detriment in reasonable reliance on that belief. -"Estopped to deny" (when a principal causes a third person to believe that another person is his or her agent, and the third person deals with the supposed agent) -♣ principals actions create the appearance of an agency that does not in fact exists. ♣ Third person must prove that they reasonably believed that an agency relationship existed ♣ Facts and circumstances must show that an ordinary, prudent person familiar with business practice an custom would have been justified in concluding that the agent had authority -Deeds or statements of the principal create this as well

Liability for agent's intentional torts

Usually, employers are not liable for intentional torts that their agents commit, unless: ♣ a. the acts are committed within the scope of employment, and thus the doctrine of respondeat superior applies ♣ b. the employer knows or should know that the employee has a propensity for committing tortious acts ♣ c. the employer allowed the employee to engage in reckless acts that caused injury to another ♣ d. the agent's misrepresentation causes a third party to sustain damage, and the agent had either actual or apparent authority to act -if no relation to employment, no liability to principal

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

Liability for agent's crimes

an agent is responsible for his or her own crimes, even if the crimes were committed while the agent was acting within the scope of authority or employment. A principal will be liable for an agent's crime only if the principal participated by conspiracy or other action or (in some jurisdictions) if the agent violated certain government regulations in the course of employment

Liability for contracts

depends on how principal is classified: -disclosed principal (Everyone knows who principal is, 3rd party is aware that agent is working for principal) -Partially disclosed principal (3rd person knows principals identity and knows agent is acting on principals behalf when 3rd person and agent form contract) -undisclosed principal (principal identity not known, 3rd party not aware agent is acting on behalf of principal when contract formed)

Notice of dangerous condition

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

principal agent relationship

o An agent acts on behalf of and instead of the principle in dealing with third parties o Employee who deals with third parties is normally an agent o An independent contractor is not an employee, and the employer has no control over the details of the person's physical performance; May or may not be an agent

SHL Imaging v. Artisan House

o Artisan house hired professional photographer lindner (SHL imaging) to take photos of its products for creation of slides to be used by sales force. Lindner controlled work; chose lighting, angles, lindner discovered artisan house used photos without his permission, sues because photographer is an independent contractor and owns the photos. Artisan liable for copyright infringement.

Aberty-Velez v. Corporacion de Puerto Rico para la diffusion publica

o Defendant television station contracted with plaintiff to cohost a tv show. There was a new contract for each episode. Plaintiff free to pursue other opportunities between filming. No withholding of taxes and lump sum payments for each contract. She became pregnant and contract not renewed. Plaintiff sued claiming employment discrimination. She was determined to be independent contractor and could not pursue employment discrimination suit

criteria used in courts to determine if employee or independent contractor

o How much control employer exercises over details of work o Is worker engaged in occupations distinct from employer o Is work usually done under employer's supervision or without supervision o Does employer supply tools/equipment/computers? o Length of employment o Method of payment o Degree of skill required o I.R.S. Criteria—degree of control business exercises over worker

Formation of agencies

o Normally consensual between 2 parties and the agreement doesn't need to be in writing o Person must have contractual capacity to be a principal o Any person can be an agent regardless of whether he or she has the capacity to enter a contract o Can be created for any legal purpose o Illegal for physicians and other licensed professionals to employ unlicensed agents to perform professional actions o Formation happens in the following ways: ---1. Agreement ---2. Ratification ---3. Estoppel ---4. Operation of law

liability for independent contractor's torts

o a principal usually is not liable for harm caused by an independent contractor's negligence ♣ exception- unusually hazardous activities

By agreement

o the agency relationship is formed through express consent or implied conduct -agent will act for the principal and that the principal agrees to have the agent so act

Lundberg v. Church Farm inc

• Gilbert Church owned Church Farm INc., a horse breeding Farm in IL. Herb Bagley managed the farm for church. Advertisements for the breeding rights to one of Church Farms stallions, Imperial, Guard, directed all inquiries to "Herb Bagley. Manager". Vern and Gail Lundberg bred thoroughbred horses. They contacted bagley and executed a preprinted contract giving them breeding rights to imperial guard at imperial guards location subject to approval by Church. Bagley handwrote a statement on the contract that guaranteed the Lundergs 6 live foals in the first 2 years. He signed it" Gilbert G. Church by H. Bagley" Lundergs bred 4 mares and one live foal. Church then moved Imperial Guard from IL to OK. Lundbergs sued Church Farm for breaching the contract by moving the horse. Church claimed that Bagley was not authorized to sign contracts for him or to change or add terms but only to present preprinted contracts to potential buyers. Church testified that although Bagley was his farm manager and the contact person for breeding rights, Bagley had never before modified the preprinted contracts. Jury found in favor of Lundburgs and awarded $147,000 in damages. Church appealed. Appellate court affirmed lower courts decision. A principal may be bound by the unauthorized acts of an agent if the principal leads a third party to believe or allows a third party to believe that the agent has authority to perform the act. • Holding/law: agent may bind principal by act which principal has not been given actual authority, but which they appear authorized to perform. Principal knowingly permits agent to possess this authority or holds agent out as possessing. • Rationale: apparent authority of agent is authority that a reasonable prudent person. In view of principal's conduct, would naturally suppose agent possesses.

Laurel Creek Healthcare Center. V. Bishop

• Holding/law: Bishops wife was bishop's agent when she signed admission forms to hospital which called for mandatory arbitration, principal (bishop) manifested assent to be affected by agent's action, agent's actions indicated agent's assent to act as agent, and by acting within such authority, agent affected principal's legal relationship with 3rd party • Rationale: upon learning spouse could sign form, bishop asked his sisters to get wife to come to hospital to sign firms. Wife arrived and signed all of the forms. And wife signing of the forms affected bishops relationship with hospital • Facts: Bishop admitted to hospital with various ailments, couldn't sign paperwork so wife signed for him and things went badly and they wanted to sue but the contract said arbitration only.

Liability for agent's negligence

♣ Principal held liable for wrongful acts committed by agent acting within course/scope of agency under doctrine of respondeat superior

Unauthorized acts

♣ Principal is not liable, no matter if disclosed, partially disclosed, undisclosed ♣ Agent is liable

termination by operation of law

♣ notice to third parties is not required when an agency is terminated by operation of law. ♣ Death/insanity ♣ Impossibility ♣ Changed circumstances ♣ Bankruptcy ♣ War