Chapter 14: Agency and the Employment Relationship

Ratification

acceptance of responsibility- of an agent's activities.

Agency by Estoppel

an agency created by operation of law that arises when the principal, by failing to properly supervise the agent, allows the agent to exercise too many powers, thereby allowing others to be justified in thinking that the agent possesses the powers the agent claimed to have.

Special Agent

an agent with authority to represent the principal only for specific transactions, usually for a limited time.

Agency Relationship

an employment (of an agent) for the purpose of representation in establishing relations between a principal and third parties.

Agency Coupled With an Interest

when an agent pays for the right to have authority for a business. Suppose you lend someone money to buy a house to use as a rental. The borrower agrees that rent from the property will be sent to you to pay off the loan. The borrower has become an agent of the lender for purpose of collecting rent.

contractors as agents

some independent contractors can also be agents. Contractors authorized to enter into contracts for the principal are agents.

Universal Agent

someone designated to do all acts that can be legally granted to an agent. The agent is usually given a general power of attorney to do all business transactions on behalf of the principal.

Apparent Authority

the authority of a reasonable person would assume an agent possesses in light of the principal's conduct. (arises when principal creates "an appearance of authority".)

Reasonable Care

the degree of care that a person of ordinary prudence would use in the same or similar circumstances or in the same line of business.

Duty to Inform

the legal requirement an agent has to inform a principal of any matters related to the agency that can affect its success. (Eminem selling land that just went up in value due to a new highway. HE should inform principal about this.)

Duty to Reimburse

the obligation a principal has, unless otherwise agreed upon, to pay the agent for reasonable expenses incurred in carrying out agency obligations. (paying for gas to go somewhere)

Duty of Loyalty

the obligation an agent has to put the interests of the principal before the interests of the agent in matters related to the agency relationship.

Duty to Cooperate

the obligation of a principal in an agency relationship to act in a manner so as not to impede the ability of the agent to fulfill the purpose of the agency. (provide safe working environment, furniture, etc.)

Duty to Indemnify

the obligation of a principal to pay for damages or losses suffered by an agent in the execution of transactions allowed under the relationship. (if principal told agent to sell goods owned by someone else and got int trouble; he'd have to pay)

Duty of Obedience and Performance

the obligation of an agent to execute the obligations of an agency in the manner instructed by the principal. (does not have to do it if it hurt agent's personal liability.)

Duty to Account

the obligation of an agent to report with accuracy about all financial matters related to the relationship, including expenditures and revenues. (must also avoid mixing personal funds with funds belonging to principal)

Gratuitous Agent

when a person volunteers with no expectation of being paid for her services. The fact that there is no pay does not change the legal consequences of the agent relationship.

Subagents

when a principal authorizes an agent to delegate authority to other agents, that is, to subagents who assist the agent. The subagents work for the agent but owe duties both to the agent and the principal.

Implied Ratification

when the acceptance of an agency relationship by a principal is reasonably presumed given the actions of the principal. (when principal behaves as if he has the intent of ratifying an unauthorized agreement.)

Undisclosed Principal

when the identity of a principal is unknown to a third party, so that the third party is unaware that the agent being dealt with is representing the agency.

Agency by Operation of Law

when the law imposes on a principal the consequence of an agency that was not otherwise accepted, usually in an emergency or other unusual situation. (if boss isn't available and hurricane comes; the agent buys $500 worth of plywood w/o authority. He can't get in trouble.)

Implied Authority

when the right of an agent to act on behalf of a principal is inferred from past actions or from the current position of the agent. (whatever is reasonable to carry out the agency purpose.)

Contracting to Limit At-Will Employment: parties may have agreed to a contract that goes beyond at-will.

1)express contract exists 2)implied contract exists on written or oral statements 3) covenants of good faith and fair dealing(misrepresentation).

exhibit 14.3: Distinguishing Legal Relationships

Principal-Agent: agent acts on behalf of or for the principal, with a degree of personal discretion. Master-Servant (Employer-Employee): The servant is an employee whose conduct is controlled by the employer; a servant can also be an agent. Employer-Independent Contractor: An independent contractor is not an employee, and the employer does not control the details of the independent contractor's performance; the contractor is usually not an agent.

Negligent Hiring

a basis for tort that may arise from an employer's lack of care in selecting an employee who the employer knew or should have known was unfit for the position, thereby creating an unreasonable risk of harm to others.

Employment-At-Will

a doctrine under the common law providing that unless otherwise explicitly stated, an employment contract was for an indefinite term and could be terminated at any time by either party without notice.

Power of Attorney

a document authorizing another person to act as one's agent or attorney with respect to the matters stated in the document. (the term describes the document itself and not the agent actually being a attorney.)

Agent

a person authorized to act for or to represent another, called the principal. Agreement a "meeting of the minds;" a mutual understanding between the parties as to the substance of a contract.

General Agent

a person authorized to execute all transactions connected with a certain business, such as a manager who runs all aspects of a hotel. The principal may limit the extent of the general agent's authority to a portion of the business.

Fiduciary

a person having a duty, generally created by his own undertaking, to act in good faith for the benefit of another in matters related to that undertaking. A Fiduciary Duty is the highest standard of duty implied by law. (Agent occupies a position of trust, honesty, and confidence for the principal.)

Servant (employee)

a person who works in the service of another person (the employer) under an express or implied contract of hire, usually at-will, under which the employer has the right to control the details of work performance.

Master (employer)

a principal who hires another to perform services and who has the right to control the conduct of that person in the performance of the service; more commonly, an employer. (master-service rules apply when employee is under direct control of employer) (when employee does not have authority to represent the employer in business dealings; no agency exists.)

Disclosed Principle

a principal whose identity is revealed by the agent to a third party. (identity is known by the third party at the time a contract is entered into with an agent.) A disclosed principal is liable to a 3rd party for a contract made by an agent who had actual authority to act on behalf of the principal.

Express Ratification

a principal's clear signal to be bound to the otherwise unauthorized agreement. (roommate selling your truck for $8,500.)

Express Authority

in agency law, when an agent has clear authority, verbal or written, to act on behalf of a principal for certain matters.

Principal

in an agency relationship, a person who, by explicit or implicit agreement, authorizes an agent to act on his behalf and perform acts that will be binding on the principal.

Duty to Compensate

in an agency, the obligation of a principal to pay an agent a reasonable fee for services performed or to pay the amount agreed upon by the parties.

Respondeat Superior

doctrine of vicarious liability under which an employer is held liable for the wrongful acts of his employees committed within the scope of their employment. ("let the master answer")

Vicarious Liability

liability that arises from the actions of another person who is in a legal relationship with the party upon whom liability is being imposed. a a principal or employer can be liable for the authorized or unauthorized intentional or negligent torts of agents and employees who were acting within the scope of employment. (rare for an employer to be liable for tort of independent contractor)

Employee Handbooks

manuals issued by employers to inform employees of their duties and rights as employees; often used as evidence of an employment contract that must be followed by both parties.

Independent Contractor

one who provides service in the course of an occupation, who follows the employer's direction as to the result of the work but does the work according to her own methods, unlike a servant or employee, who is subject to detailed control in the performance of work.

Actual Authority

power of an agent to bind a principal; the power is from an express or implied agreement between principal and agent. It confers the power and the right to change the principal's legal status on the agent. Sometimes called real authority.