BADM 351 - Chapter 28

An agent owes these duties to the principal:

- Duty of Loyalty - Duty to Obey Instructions - Duty of Care - Duty to Provide Information

The Principal's Remedies in the Event of a Breach (3):

- Recovery of damages the breach has caused - Recovery of any profits earned by the agent from the breach - Rescission of any transaction with the agent.

An agency relationship automatically terminates if...

- The Principal or Agent no longer can perform the required duties or - If a change in circumstances renders the agency relationship pointless

A principal is not liable for the intentional physical torts of an employee unless...

- The employee intended to serve some purpose of the employer or - The employer was negligent in hiring or supervising this employee.

The Principal has these (3) duties to the Agent:

- To compensate as provided by the agreement - To reimburse legitimate expenses - To cooperate with the agent

An agency relationship can exist without...

- Written Agreement or - Formal Agreement or - Compensation

Creating a Fiduciary Relationship

A principal and an agent mutually consent that the agent will act on behalf of the principal and be subject to the principal's control

Kurt asked his car mechanic, Quinn, for help in buying a used car. Quinn recommends a Ford Focus that she has been taking care of its whole life. Quinn was working for the seller. Which of the following statements is true? A: Quinn must pay Kurt the amount of money she received from the Ford's prior owner. B: After buying the car, Kurt finds out that it needs $1,000 in repairs. He can recover that amount from Quinn, but only if Quinn knew about the needed repairs before Kurt bought the car. C: Kurt cannot recover anything because Quinn had no obligation to reveal her relationship with the car's seller. D: Kurt cannot recover anything because he had not paid Quinn for her help.

A: Quinn must pay Kurt the amount of money she received from the Ford's prior owner.

An Agents liability for a contract

An agent is not liable for any contract she makes on behalf of a fully disclosed principal. The principal is liable. In the case of an unidentified or undisclosed principal, both the agent and the principal are liable on the contract.

A Principal's liability for Torts

An employer is liable for a physical tort committed by an employee acting within the scope of employment and a nonphysical tort of an employee acting with authority.

At Business University, semester enrollment begins at midnight on April 1. Jasper asked his roommate, Alonso, to register him for an important required course as a favor. Alonso agreed to do so but then overslept. As a result, Jasper could not enroll in the required course he needed to graduate and had to stay in school for an additional semester. Is Alonso liable to Jasper? A: No, because an agency agreement is invalid unless the agent receives payment B: No, because Alonso was not grossly negligent C: No, because the cost of the extra semester is unreasonably high. D: Yes, because Alonso disobeyed his instructions.

B: No, because Alonso was not grossly negligent.

A principal will not be liable to a third party for a tort committed by an agent: A: Unless the principal instructed the agent to commit the tort. B: Unless the tort was committed within the scope of the agency relationship. C: If the agency agreement limits the principal's liability for the agent's tort. D: If the tort is also regarded as a criminal act.

B: Unless the tort was committed within the scope of the agency relationship.

Implied Authority

Includes authority to do acts that are incidental to a transaction, usually accompany it, or are reasonably necessary to accomplish it.

Apparent Authority

Means that a principal is liable for the acts of an agent who is not, in fact, acting with authority if the principal's conduct causes a third party reasonably to believe that the agent is authorized.

A soldier was drinking at a training seminar. Although he was told to leave his car at the seminar, he disobeyed orders and drove to a military club. On the way to the club, he was involved in an accident. Is the military liable for the damage he caused?

No, he was not acting within the scope of employment.

Sarah went to an auction at Christie's to bid on a tapestry for her employer, Fine Arts Gallery. The good news is that she purchased a Dufy tapestry for $77,000. The bad news is that it was not the one her employer had told her to buy. In the excitement of the auction, she forgot her instructions. Fine Art refused to pay, and Christie's filed suit. Is Fine Arts liable for the unauthorized act of its agent? Argument for Christie's: Christie's cannot possibly ascertain in each case the exact nature of a bidder's authority. Whether or not Sarah had actual authority, she certainly had apparent authority, and Fine Arts is liable. Argument for Fine Arts: Sarah was not authorized to purchase the Dufy tapestry, and therefore Christie's must recover from her, not Fine Arts.

Sarah had apparent authority and Fine Arts is liable (yes).

A Principal is liable for the contracts of the agent if...

The agent has express, implied, or apparent authority.

A principal is liable for nonphysical torts of an employee (whether intentional or not) only if...

The employee was acting with express, implied or apparent authority

Express Authority

The principal grants express authority by words or conduct that, reasonably interpreted, cause the agent to believe that the principal desires her to act on the principal's account.

The principal is liable for the physical torts of an independent contract only if...

The principal has been negligent in hiring or supervising him.

Both the Agent and the Principal have the power to terminate an agency relationship, but...

They may not have the right. If the termination violates the agency agreement and causes harm to the other party, the wrongful party must pay damages.

Agents are always liable for their own torts. True or False?

True

An elementary school custodian hit a child who wrote graffiti on the wall. Is the school district liable for this intentional tort by its employee?

Yes, because the custodian thought he was serving the purpose of his employer.