ABA Agency Law: General

Employer-Employee

A type of agency relationship where the employer (principal) hires the employee (agent) to perform some kind of physical service. The employer has control over the employee's conduct.

Employer-Independent Contractor

A type of agency relationship where the employer (principal) hires the independent contractor (agent) to perform a specific tasks but has limited or control over the independent contractor's conduct. Independent contractors often have specialized skills and an occupation or business that is wholly separate from the employer's business.

Tort

A wrongful act, whether intentional or accidental, that causes harm or injury to another.

Frolic and Detour

An exception to the respondeat superior doctrine that applies when an agent, during a normal workday, does something for their own reasons (unrelated to their employment). Employers will not generally be held liable for an employee's negligence that occurred during a large deviation from their employment responsibilities (i.e. a frolic). However, an employer may still be held liable for an employee's negligence during a small deviation (i.e. a detour).

Maggie: "That's the one! Gotta love Latin... I think we can agree that Darren was negligent here - he was not careful. At all."

Darren: "Hey!"

Maggie: "Hold on. We haven't talked about the 'great deal' Darren made on your behalf.... Look at that piece of junk in the corner."

Darren: "Oh right! After I delivered that table to Ms. Jones, she offered to sell us that cabinet thing for $5,000. She said she just needed to get rid of it but that Tina could probably resell it for three time that price."

Tina: "Oh no..."

Darren: "Yeah! Great deal right? So I signed her little paper, brought the cabinet right back here. By the way, you're supposed to pay her the $5k next week."

Negligence

Failure to exercise proper care in doing something. The standard is what a reasonably careful person would have done under the circumstances.

You work at Tina's Treasures, an antique furniture store. Tine and her employees buy furniture from flea markets and estates sales to restore and resell.

Help Tina determine whether she is liable for the damage, bad deals, and accident described, using the principles of agency law and the Key Terms above.

Principal

Hires an agent to represent their interests and act on their behalf.

Respondeat Superior

Legal principle that the employer is liable for any harm the employee causes, if the wrongful act occurred within the scope of their employment.

Me: "Independent contractor. Paul has a distinct occupation that's separate from Tina's Treasures and requires special skills. You requested that Paul do work for Mr. Sharp but didn't supervise or provide him with tools. And, even though you gave Paul money, it wasn't the type of regular payment you'd give an employee."

Maggie: "I completely agree. Paul would be an independent contractor. he's a highly skilled specialist and his compensation really came from the customer. If you didn't supervise and control his work, he's not your employee."

Darren: "Yeah, but I was on my lunch break and had a bunch of time to kill before I had to drop off the table."

Maggie: "Let me get this straight.... you went all the way to the groomer's, you were looking under your seat, and you ran into someone in the parking lot. Is that about it?"

Tina: "Hey, Maggie, and you... do you have a minute?"

Maggie: "Of course, What's up?"

Me: "If you and Paul agreed that he could act on your behalf, then you would be the principal and he would be your agent."

Maggie: "Oh, that's right!"

Darren: "Yeah but Pom Pom was ready to be picked up. I couldn't just leave her there! I'm so glad Pom Pom wasn't in the car with me when the accident happened."

Maggie: "Wait, don't you go to Pretty Pups? That's nowhere near the customer's address!"

Tina: "I don't know where to begin! I feel like there are problems everywhere I look.... Mr. Sharp called. He said that Paul ruined his beautiful antique piano - the one he was supposed to restore. Now Mr. Sharp is threatening to hold me liable??"

Maggie: "Wait.... Why would Tina be responsible for what Paul did?"

Darren: "Yeah. Um. I was delivering that table. And I got into an accident."

Maggie: "We know that already. What we don't know is why it happened."

Me: "A lawyer who drafts a one-time contract for a company."

Maggie: "Yeah, that's a good example of an independent contractor."

Tina: "But why would the lawyer be an independent contractor and not an employee?"

Me: "Because an independent contractor has: Specialized skills and as occupation or business that's separate from the employer. The employer doesn't supervise their work, supple them with tools, or pay them for long periods of time."

Tina: "But I need to know whether I could be held liable. He was supposed to be making a delivery for our company! What do you think?"

Me: "Darren acted way outside the scope of his employment when he drove to the groomer so you probably aren't liable."

Maggie: "What do you think? Did Darren have authority to make this contract?"

Me: "Darren had apparent authority to enter into this contract. Tina asked Darren to buy items from Ms. Jons in the past. In Ms. Jones' eyes, he was her agent and had purchasing power. Tine has to uphold the agreement."

Maggie: "Isn't there a weird phrase for when an employee acts outside of the scope of their employment?"

Me: "Frolic and detour."

Tina: "Oh, ok... but why does it matter whether Paul is my employee or an independent contractor??? My head is spinning here..."

Me: "The distinction between an employee and an independent contractor matters because: An employer will usually be held responsible for the negligence of an employee and an employer will be held liable for the contracts their employee enters on their behalf. That isn't the case for an independent contractor (unless it's clearly part of the agency agreement)."

Tina: "But we never agreed that Paul could act on my behalf. Mr. Sharp said that he wanted to have the piano he bought from us restored. I asked Paul to take a look. Mr. Sharp kept calling Paul my 'employee.' Does being an employee have anything to do with being an agent?"

Me: "The relationship between an employer and employee is a type of agency relationship. An employee is an agent of their employer."

Maggie: "Still.... we have to be 100% sure you aren't responsible for what Paul did. How do we figure out whether or no Paul is Tina's "employee"?

Me: "Tina and Paul would have an employer-employee relationship if: Tina hired Paul to perform some kind of physical service and had control over how he completed the work."

Maggie: "I forget... What's the rule for when an employer is held liable for when am employer is held liable for harm an employee causes?"

Me: "Under the principle of "respondeat superior," employers are responsible for harm an employee causes but only if the wrongful act (tort) occurred within the scope of their employment."

Apparent Authority (Agency by Estoppel)

Principal acts as if an individual is their agent and makes a third party believe that person is their agent. The principal is "estooped" (prevented) from denying responsibility for the agent's acts later on.

Express or Actual Authority

Principal explicitly gives the agent authority to do a specified act on their behalf.

Agent

Represents the interests of the principal and acts on the principals behalf.

Agency

The relationship formed between a principal and an agent where the agent acts on the principal's behalf. Agency relationships can be formed informally or through a formal contract.

Sales Agreement

This Sales Agreement is entered into as of the 15th day of July, 2018, by and between Janice Jones ("Seller") and Tina's Treasures ("Buyer"). Each Seller and Buyer may be referred to in this Agreement individually as a "Party" and collectively as the "Parties." 1. Sales of Goods. Seller agrees to sell to Buyer, and Buyer agrees to purchase and take receipt of Seller's antique dressed ("Goods")> 2. Purchase Price. Buyer will pay to Seller the full and complete purchase price of the Goods, the sum of $5,000. Unless otherwise states, Seller shall be responsible for all taxes in connection with the purchase of Goods in this Agreement. 3. Payment. Is due within 14 days of Buyer taking receipt of the Goods. 4. Warranties. Buyer acknowledges that it has not relied on, and Seller has not made, any representations or warranties with respect to the quantity or condition of the Goods, and it is purchasing the Goods on an "as is" basis. Seller expressly disclaims all warranties, whether express or implies, including any implied warranty of merchantability or fitness. 5. Entire Agreement. This Agreement contains the entire understanding between the Parties and supersedes and cancels all prior agreements of the Parties, whether oral or written, with respect to such subject matter. IN WITNESS WHEREOF, the Parties have executes this agreement as of the date first written above. Janice Jones, Seller Darren Drake, Buyer

Maggie: "Exactly. If Paul is your employee, then he is also your agent."

Tina: "But Paul doesn't work here!"

Darren: "But he ran into ME! I mean, I know he broke his nose, but the guy should have been more careful."

Tina: "Come on... I know he's my employee, but there's no way I'm responsible for this mess. Right?"

Maggie: "Unfortunately, I think you are right. Apparent authority is also called "agency by estoppel." You can't make a third party believe someone is your agent then cancel the contract later on."

Tina: "I can't believe we're stuck with this piece of junk. The best we can do is to fix it up, sell it for as much as we can get."

Me: "Your liability under the contract depends on the authority you gave Darren as your agent/employee."

Tina: "I never said he could buy furniture on my behalf!"

Maggie: "This thing is maybe worth $500. At most."

Tina: "I'm not paying her $5,000! Thee has to be some way to get out of this contract."

Maggie: "What if you and Paul had a principal-independent contractor relationship? That's another type of agency relationship. If you hired Paul and had control over his conduct, he would be your employee. If you paid Paul to do something for a third party but had no control over how he did the work, he could be an independent contractor."

Tina: "I'm not sure what you mean. Can you give me an example of who would be considered an independent contractor?"

Maggie: "That's right. Because an employer has more control over an employee's conduct, the employer can be held liable for torts the employee commits or contracts the employee makes. It's less likely that an employer will be liable for an independent contractor's conduct."

Tina: "Let me see if I have it... So, if Paul is my agent, he is probably an independent contractor and not an employee. (Is that correct?) It would be difficult for Mr. Sharp to hold me responsible for the damage to his piano. Is that right?"

Darren: "Uh, that's not true. You had me buy that other stuff from Ms. Jones a few months ago."

Tina: "Oh yeah... but that was just a small stuff. $200 total. This is completely different!"

Maggie: "Well, except for that check you always send him over the holidays...."

Tina: "Oh, that's nothing. I just wanted him to make our customers a priority. If one of our customers needed a piano tuned or restored, I would suggest that Paul could do the work. Until now, he has always done a great job and I wanted to reward him. The customers would pay him directly for his work. I had nothing to do with that."

Maggie: "That's exactly right. That's why they're 'independent.' The lawyer is providing a one-time service. The company is just a client and doesn't control the lawyer's work. The lawyer has the freedom to do her work based on her specialized skills."

Tina: "Paul is a real expert in his field. I never supervise his work because he has such a great reputation. That's why this is such a shock. Do you think Paul would be considered an employee or an independent contractor?"

Maggie: "Aah, that's right! So we need to figure out whether Tina hired Paul and what kind of control she had over his conduct."

Tina: "Paul wasn't on the payroll or anything. And he didn't get any other employment benefits."

Maggie: "That's the one! It's an exception to the principle of respondeat superior. I'd say that Darren's trip to the groomer's across town was a 'frolic' and that Tina isn't liable for his negligence."

Tina: "Phew. That's a relief. The last thing I want to do is pay for what Darren did."

Darren: "It wasn't even my fault! I was pulling into the parking lot at the groomer's and looking under my seat for her leash... Then bam! Dude ran straight into me."

Tina: "The groomer's??? You were supposed to be on a delivery run!"

Darren: "Yeah. Hey."

Tina: "We never had the chance to talk about that accident last week. What happened?"

Maggie: "Yeah. I think you're covered."

Tina: "Well, let me ask you about one of our actual employees - Darren. He got into a pretty bad accident last week when he was delivering that dining set. Hey Darren! can you come in here for a second?"

Me: "If Tina and Paul had an agency relationship, then Tina could possibly be liable for his actions."

Tina: "What do you mean by 'agency relationship?'"

Maggie: "Exactly! When Darren stopped at the groomer, he made a substantial departure from Tina's Treasures business."

Tina: "Yeah, there's no way I should be liable for what Darren did when he was running errand on his lunch break."

Ratification

When an individual claims to be agent and acts on the principal's behalf, and the principal knows about the act and accepts the entirety of what the "agent" did, then the principal is liable for the agent's conduct.