C713 Chapter 28 Agency Law
nonphysical tort
(whether intentional or unintentional) are treated like a contract claim: The principal is liable only if the employee acted with express, implied, or apparent authority.
Agent
A person who acts for someone else.
Principal
A person who has someone else acting for him.
Apparent Authority
A principal can be 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. The principal has not authorized the agent, but has done something to make an innocent third party believe the agent is authorized.
Authority
A principal is bound by the acts of an agent if the agent had authority.
Fully Disclosed Principal
A principal is fully disclosed if the third party knows of his existence and his identity. To avoid liability when signing a contract on behalf of a principal, an agent must clearly state that she is an agent and also must identify the principal.
Negligent Hiring
A principal is liable for the physical torts of an independent contractor if the principal has been negligent in hiring or supervising her.
Intentional Torts
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.
Duty to Indemnify
A principal must indemnify an agent for tort claims brought by a third party if the principal authorized the agent's behavior and the agent did not realize he was committing a tort.
Competition with the Principal
Agents are not allowed to compete with their principal in any matter within the scope of the agency business.
Agent's Liability for Torts
Agents who commit torts are personally responsible, whether or not their principal is also liable.
jointly and severally liable
All members of a group are liable. They can be sued as a group, or any one of them can be sued individually for the full amount owed. But the plaintiff cannot recover more than the total she is owed.
The principle is still held liable
An act is within the scope of employment, even if expressly forbidden, if it is of the same general nature as that authorized or if it is incidental to the conduct authorized.
Compensation
An agency relationship need not meet all the standards of contract law. a contract is not valid without consideration, but an agency agreement is valid even if the agent is not paid.
Termination by Agent or Principal
An agency relationship terminates upon the death or incapacity of either the principal or the agent.
Duty of Care
An agent has a duty to act with reasonable care. An agent with special skills is held to a higher standard because she is expected to use those skills.
Duty to Provide Information
An agent has a duty to provide the principal with all information in her possession that she has reason to believe the principal wants to know. She also has a duty to provide accurate information.
Agents owe a fiduciary duty to their principals. There are four elements to this duty.
An agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency relationship.
Fully Disclosed Principal
An agent is not liable for any contracts she makes on behalf of a fully disclosed principal.
Appropriate Behavior
An agent may not engage in inappropriate behavior that reflects badly on the principal. This rule applies even to off-duty conduct.
Duty to Obey Instructions
An agent must obey her principal's instructions unless the principal directs her to behave illegally or unethically.
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.
respondeat superior
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.
Duty to Indemnify
As a general rule, the principal must indemnify (i.e., reimburse) the agent for any expenses she has reasonably incurred.
Change in Circumstances
Change of law, Loss or destruction of subject matter
A principal has three potential remedies when an agent breaches her duty:
Damages. The principal can recover from the agent any damages the breach has caused. Thus, if Taylor can rent his house for only $600 a month instead of the $800 the Fords offered, Angie would be liable for $2,400—$200 a month for one year. Profits. If an agent breaches the duty of loyalty, he must turn over to the principal any profits he has earned as a result of his wrongdoing. Thus, after Klein violated his duty of loyalty to Harrison, he forfeited profits he would have earned from the copyright of "He's So Fine." Some states also allow punitive damages against disloyal employees. Rescission. If the agent has violated her duty of loyalty, the principal may rescind the transaction. When Trang sold a script to her principal, Spielberg, without telling him that she was the author, she violated her duty of loyalty. Spielberg could rescind the contract to buy the script
Terminating an Agency Relationship
Either the agent or the principal can terminate the agency relationship at any time.
Ratification
If a person accepts the benefit of an unauthorized transaction or fails to repudiate it, then he is as bound by the act as if he had originally authorized it. He has ratified the act
Secretly Dealing with the Principal
If a principal hires an agent to arrange a transaction, the agent may not become a party to the transaction without the principal's permission.
equal dignities rule
If an agent is empowered to enter into a contract that must be in writing, then the appointment of the agent must also be written. For example, under the Statute of Frauds, a contract for the sale of land is unenforceable unless in writing, so the agency agreement to sell land must also be in writing.
Principal or Agent Can No Longer Perform Required Duties
If either the agent or the principal fails to obtain (or keep) a license necessary to perform duties under the agency agreement, the agreement ends.
Unauthorized Agent
If the agent has no authority (express, implied, or apparent), the principal is not liable to the third party, and the agent is
Termination by Agent or Principal
If the agent violates her duty of loyalty, the agency agreement automatically terminates.
Principal or Agent Can No Longer Perform Required Duties
If the principal or the agent is unable to perform the duties required under the agency agreement, the agreement terminates.
Change in Circumstances
If these changes are significant enough to undermine the purpose of the agreement, the relationship ends automatically.
Written Agreement
In most cases, an agency agreement does not have to be in writing. An oral understanding is valid, except in one circumstance—the equal dignities rule.
Undisclosed Principal
In the case of an undisclosed principal, the third party can recover from either the agent or the principal
Unidentified Principal
In the case of an unidentified principal, the third party can recover from either the agent or the principal. A principal is unidentified if the third party knew of his existence but not his identity.
agency law
It is concerned with your responsibility for the actions of others and their obligations to you.
respondeat superior
Let the master answer
Effect of Termination
Once an agency relationship ends, the agent no longer has the authority to act for the principal. If she continues to act, she is liable to the principal for any damages he incurs as a result.
nonphysical tort
One that harms only reputation, feelings, or wallet
The bankruptcy of the agent or the principal terminates an agency relationship only if it affects their ability to perform.
Only for bankruptcy of a principal where they will lose control on their assets leading to the inability to pay the agent.
but some of the duties of both the principal and agent continue even after the relationship ends:
Principal's duty to indemnify agent (Reimburse expenses to agent) Confidential information - An agent is not entitled to use confidential information even after the agency relationship terminates.
Control
Principals are liable for an agent's acts because they exercise control over that person. Ex. Northwest did not tell KA how to fly planes or handle terrorists
subagents
Someone appointed by an agent to perform the agent's duties
gratuitous agent
Someone not paid for performing duties. A gratuitous agent is held to a lower standard because he is doing his principal a favor
intermediary agent
Someone who hires subagents for the principal. Daniel, the owner of a restaurant, hires Michaela to manage it. She in turn hires chefs, waiters, and dishwashers.
Consideration
Something of value provided by one party to another. Ex. money
Termination by Agent or Principal
Term Agreement: Time (3 months), Achieving a Purpose Mutual Agreement Agency at Will Wrongful Termination
Even if an agent acts without authority, the principal can decide later to be bound by her actions as long as these requirements are met:
The "agent" indicates to the third party that she is acting for a principal. The "principal" knows all the material facts of the transaction. The "principal" accepts the benefit of the whole transaction, not just part. The third party does not withdraw from the contract before ratification.
Agent's Liability for Contracts
The agent's liability on a contract depends upon how much the third party knows about the principal. Disclosure is the agent's best protection against liability.
Formal Agreement.
The principal and agent need not agree formally that they have an agency relationship. They do not even have to utter the word agent.
Duty to Cooperate
The principal cannot unreasonably interfere with the agent's ability to accomplish his task.
Express Authority
The principal grants express authority by words or conduct that, reasonably interpreted, cause the agent to believe the principal desires her to act on the principal's account. Ex. Craig calls his stockbroker, Alice, and asks her to buy 100 shares of Banshee Corp.
Abandonment
The principal is liable for the actions of the employee that occur while the employee is at work, but not for actions that occur after the employee has abandoned the principal's business.
Duty to Cooperate
The principal must furnish the agent with the opportunity to work.
Duty to Indemnify
The principal must indemnify the agent for any liability to third parties that she incurs as a result of entering into a contract on the principal's behalf, including attorney's fees and reasonable settlements.
Duty to Cooperate
The principal must perform her part of the contract.
when determining if agents are employees or independent contractors, courts consider whether:
The principal supervises details of the work. The principal supplies the tools and place of work. The agents work full time for the principal. The agents receive a salary or hourly wages, not a fixed price for the job. The work is part of the regular business of the principal. The principal and agents believe they have an employer-employee relationship. The principal is in business
Consent
To establish consent, the principal must ask the agent to do something, and the agent must agree.
Conflict of Interest between Two Principals
Unless otherwise agreed, an agent may not act for two principals whose interests conflict
Implied Authority
Unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it.
The following elements are not required for an agency relationship:
Written Agreement, Formal Agreement, Compensation
To create an agency relationship, there must be:
a principal and an agent, who mutually consent that the agent will act on behalf of the principal and be subject to the principal's control thereby creating a fiduciary relationship.
As a general rule
an agent has no authority to delegate her tasks to another unless the principal authorizes her to do so. But when an agent is authorized to hire a subagent, the principal is as liable for the acts of the subagent as he is for the acts of a regular agent
Gratuitous agents
are liable if they commit gross negligence, but not ordinary negligence.
Scope of employment cases raise two major issues:
authorization and abandonment.
All three elements___,___,___ are necessary to create an agency relationship.
consent, control, and a fiduciary duty
Employee There are two kinds of agents:
employee and independent contractor
Agents
have a fiduciary duty to their principals.
A principal is undisclosed
if the third party did not know of his existence.
Generally, a principal
is liable for the physical torts of an employee but is not liable for the physical torts of an independent contractor.
fiduciary relationship
is one of trust: A trustee acts for the benefit of the beneficiary, always putting the interests of the beneficiary before his own.
An employee is acting within the scope of employment if the act:
is one that employees are generally responsible for, takes place during hours that the employee is generally employed, is part of the principal's business, is similar to the one the principal authorized, is one for which the principal supplied the tools, and is not seriously criminal.
This principle of liability
respondeat superior
agency relationship
someone (the agent) agrees to perform a task for, and under the control of, someone else (the principal).
The principal is liable for the acts and statements of his agent if
the agent had authority, or the principal ratified the acts of the agent.
Authorization
the agent is clearly working for the principal but commits an act that the principal has not authorized.
A third party is not bound to the contract with an undisclosed principal if
the contract specifically provides that the third party is not bound to anyone other than the agent, or the agent lies about the principal because she knows the third party would refuse to contract with him.
