Legal Environment of Business - Agency

Fiduciary

a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking

Agent's Duties to the Principal - Loyalty

The agent has the duty to act solely for the benefit of his or her principal, and not in the interest of the agent or of a third person.

Requirements for Ratification

The agent must have acted on behalf of an identified principal who subsequently ratifies the action. The principal must know of all material facts involved in the transaction. If a principal ratifies a contract without knowing all of the facts, the principal can rescind (cancel) the contract. The principal must affirm the agent's act in its entirety. The principal must have the legal capacity to authorize the transaction at the time the agent engages in the act and at the time the principal ratifies. The third party must also have the legal capacity to engage in the transaction. The principal's affirmation must occur before the third party withdraws from the transaction. The principal must observe the same formalities when approving the act done by the agent as would have been required to authorize it initially

Agent's Duties to the Principal - Accounting

Unless an agent and a principal agree otherwise, the agent has the duty to keep and make available to the principal an account of all property and funds received and paid out on behalf of the principal.

Agency By Estoppel

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, the principal is "estopped to deny" the agency relationship. In such a situation, the principal's actions create the appearance of an agency that does not in fact exist

Principal's Duties to the Agent - Compensation

When a principal requests services from an agent, the agent reasonably expects payment. The principal therefore has a duty to pay the agent for services rendered.

Termination - Lapse of time

When an agency agreement specifies the time period during which the agency will exist, the agency ends when that period expires. If no definite time is stated, the agency continues for a "reasonable time" and can be terminated at will by either party. "Reasonable time" depends on circumstances and nature of the agency

Termination - Termination by Operation of Law

When an agency terminates by operation of law, there is no requirement to notify third parties

Duties of Agents and Principals

When one party violates his or her duty to the other person, the remedies available to the nonbreaching party arise out of (1) contract and (2) tort law. These remedies include monetary damages, termination of the agency relationship, an injunction, and required accountings.

Termination - War

When the principal's country and the agent's country are at war, the agency is terminated, because there is no way to enforce the legal rights and obligations of the parties

Principal's Duties to the Agent - Reimbursement and Indemnification

Whenever an agent disburses funds at the request of the principal or to pay for necessary expenses in the reasonable performance of his or her agency duties, the principal has the duty to reimburse he agent for these payments

Disputes Involving Tort Liability

Whether a worker is an employee or an independent contractor can also affect the employer's liability for the worker's actions

Determining Scope of Employment (8)

Whether the employee's act was authorized by the employer. The time, place, and purpose of the act. Whether the act was one commonly performed by employees on behalf of their employers. The extent to which the employer's interest was advanced by the act. The extent to which the private interests of the employee were involved. Whether the employer furnished the means or instrumentality by which the injury was inflicted. Whether the employer had reason to know that the employee would do the act in question and whether the employee had ever done it before. Whether the act involved the commission of a serious crime.

Permalancers

freelancers who stay on at a business for years. They are independent contractors, and as such they are not entitled to withholding of payroll and unemployment taxes, workers compensation, healthcare benefits, or profit sharing; they are viewed as employees

Liability for Torts and Crimes - Principal's Tortious Conduct

A principal conducting an activity through an agent may be liable for harm resulting from the principal's own negligence or recklessness, such as (1) giving improper instructions, (2) authorizing the use of improper materials or tools, or (3) establishing improper rules that resulted in the agent's committing a tort.

Liability for Torts and Crimes - Agent's Misrepresentation

A principal is liable based upon whether the agent is actually or apparently authorized to make representations, and whether the agent was acting within the scope of the agency. A principal is always directly responsible for an agent's misrepresentations made within the scope of the agent's authority

Principal's Duties to the Agent - Safe Working Conditions

A principal is required to provide safe working premises, equipment, and conditions for all agents.

Liability for Torts and Crimes - Agent's Negligence

A principal may be liable to a third party for harm an agent caused in the course and scope of their agency or employment under the doctrine of respondeat superior, which is Latin for "let the master respond." It imposes vicarious liability (indirect liability imposed on a supervisory party for the actions of a subordinate because of the relationship between the two parties) on the principal

Detour or Frolic: Strict Liability

Certain situations, such as unusually hazardous activities, blasting operations, transportation of highly volatile chemicals, use of poisonous gases, have strict liability imposed on them, and the principal/employer will be liable.

Principal's Duties to the Agent (4)

Compensation, Reimbursement and Indemnification, Cooperation, Safe Working Conditions

Termination - Termination by one party

Either party can terminate an agency agreement. It is a revocation if done by the principal, and a renunciation if done by the agent.

Agency Relationships That Must be in Writing

(1) If an agent is empowered to do something that is required to be in writing (such as sign a deed), his authority must be in writing. (2) A power of attorney must also be in writing.

Work for Hire

(1) any copyrighted work (2) created by an employee (3) within the scope of his or her employment (4) at the request of the employer is a "work for hire" and the employer owns the copyright; Under the same circumstances, an independent contractor owns the copyright (unless the parties agree in writing it is a work for hire).

Employer-Independent Contractor Relationships

(1) one who works for, and receives payment from, an employer but (2) whose working conditions and methods are not controlled by the employer; they are not employees because, by definition, those who hire them have no control over the details of their physical performance; they may be a agent

Agency By Ratification

A person who is in fact not an agent or who is an agent acting outside the scope of his or her authority may make a contract on behalf of another (a principal). If the principal affirms that contract by word or by action, an agency relationship is created by ratification

10 factors to be considered when deciding whether one acting for another is an independent contractor or an employee:

1. The extent of control which, by agreement, the employer may exercise over the details of the work; 2. Whether or not the one employed is engaged in a distinct occupation or business; 3. Whether or not the work to be performed is usually done under the direction of the employer or by a specialist who needs no supervision; 4. The skill required in the particular occupation; 5. Whether the employer supplies the tools and the place of work for the one employed; 6. The length of time for which the person is employed; 7. The method of payment, whether by the time or by the job; 8. Whether or not the work to be performed is a part of the regular business of the employer; 9. Whether or not the parties believe they are creating an agency relationship; and 10. Whether the employer is or is not in business.

Liability for Torts and Crimes - Principal's Authorization of Agent's Tortious Conduct

A principal who authorizes an agent to commit a tort may be liable to persons or property injured thereby, because the act is considered to be the principal's. For example, principal authorizes agent to harvest corn in a field neither has the right to harvest. The harvest is a trespass and principal is liable to the owner.

Termination of Agency

Agency is terminated (1) by an act of the parties, or (2) by operation of law.

Examples of independent contractors

Building contractors and subcontractors are independent contractors, since the property owner does not control the acts of either of these. Truck drivers who own their own rigs and hire themselves out on a per-job basis are independent contractors. Insurance agents are independent contractors and also agents of the insurance company, but insurance brokers are agents for those obtaining insurance.

Agent's Duties to the Principal - Obedience

An agent has a duty to follow all lawful and clearly stated instructions of the principal. In case of emergency, the agent may deviate from the instructions without violating his duty. If the instructions are not clearly stated, the agent can fulfill the duty of obedience (1) by acting in good faith and (2) in a manner reasonable under the circumstances

Agent's Authority - Apparent Authority

An agent has apparent authority when the principal, by either words or actions, causes a third party reasonably to believe that an agent has authority to act, even though the agent has no express or implied authority

Agent's Authority - Implied Authority

An agent has the implied authority to do what is reasonably necessary to carry out his or her express authority and accomplish the objectives of the agency

Agent's Duties to the Principal - Notification

An agent is required to notify the principal of all matters that come to his or her attention concerning the subject matter of the agency. This is the duty of notification, or the duty to inform.

Detour or Frolic: Agent's Crimes

An agent is responsible for his or her own crimes.

Agent's Authority

An agent's authority to act can be either actual (express or implied) or apparent

Detour or Frolic: Employee Travel Time

An employee going to and from work (commuting) and to and from meals is usually considered to be outside the course of employment, unless that employee has travel as part of his or her position (traveling sales, regional representative).

Detour or Frolic: Independent Contractor's Torts

An employer is not liable for the intentional torts or negligent actions of an independent contractor because the employer does not have the right to control the details of an independent contractor's performance.

Agent's Duties to the Principal - Performance

An implied condition in every agency contract is the agent's agreement to use reasonable diligence and skill in performing the work. When an agent fails entirely to perform her or his duties, liability for breach of contract normally will result

Detour or Frolic?

If a servant merely took a detour from his master's business, the master is responsible. If, however, the servant was on a frolic of his own and not in any way on his master's business, the master is not liable.

Termination - Occurrence of a specific event

If a specific event is stated, the agency automatically ends on the occurrence of that event. For example: agency during principal's trip out of town

Termination - Bankruptcy

If either the principal or the agent files for bankruptcy, the agency is usually terminated. If financial status is immaterial to the agency, the agency may continue. Insolvency, as opposed to bankruptcy, does not usually terminate an agency.

Agent's Authority - Equal Dignity Rule

If the contract being executed is or must be in writing, then the agent's authority must also be in writing; Modern business practices allow exceptions to the equal dignity rule. A (1) corporate officer does not need to obtain written authority from the corporation to conduct ordinary business transactions. It also does not apply when the (2) agent acts in the presence of a principal (wills), or (3) when the signing is merely perfunctory or administrative.

Termination - Impossibility

If the specific subject matter of an agency is destroyed or lost, the agency terminates. For example, a house is destroyed by fire before an agent can sell it. Or, the law is changed, making it impossible for the agent to act.

Termination by Act of the Parties

Lapse of time, Purpose achieved, Occurrence of a specific event, Mutual agreement, Termination by one party, Termination by Operation of Law, Impossibility, Changed Circumstances, Bankruptcy, War

Employer-Employee Relationships

Normally, all employees who deal with third parties are deemed to be agents; Any sale of goods made by the salesperson to a customer is binding on the principal

Agent's Duties to the Principal - Gratuitous Agency

Not all agency relationships are based on contract. In some situations, an agent acts gratuitously, that is, not for money. A gratuitous agent cannot be liable for breach of contract, because there is no contract. He or she can be subject to tort liability

Termination - Purpose achieved

Once the purpose of the agency is accomplished, the agency ends. For example: sale of property.

Agency

One of the most common, important, and pervasive legal relationships, a relationship between two parties in which one party agrees to represent or act for the other.

Agent's Duties to the Principal (6)

Performance, Gratuitous Agency, Notification, Loyalty, Obedience, Accounting,

Liability for Torts and Crimes (4)

Principal's Tortious Conduct, Principal's Authorization of Agent's Tortious Conduct, Agent's Misrepresentation, Agent's Negligence

Termination - Changed Circumstances

Some event occurs that has such an unusual effect on the subject matter that the agent can reasonably infer that the principal will not want the agency to continue. For example, principal hires agent to sell a piece of land for $20,000, but agent discovers that the oil under the land is worth over $1 million. The agency terminates.

Disputes Involving Employment Law

Sometimes workers may benefit from having employee status: for (1) tax purposes; (2) protection under certain employment laws; (3) protection under antidiscrimination laws.

Agency By Operation of Law

The courts find agency relationships in other areas of the law. For example, under family law, one spouse can charge necessities against the other spouse and the courts will find the other spouse liable since he or she is liable to supply necessities to family members; Under emergency situations, the courts will find for the agent, especially when the principal cannot be contacted

Termination - Mutual agreement

The parties can rescind (cancel) their agency relationship by mutually agreeing to do so.

Detour or Frolic: Dangerous Conditions

The principal is charged with knowledge of any dangerous conditions discovered by an employee and pertinent to the employment situation. For example, agent discovered a pipe sticking out of the ground at a facility where agent is a maintenance employee. A third person trips over the pipe and is injured. It does not matter if the agent told the principal or not, the knowledge is imputed to the principal because of the employment relationship.

Detour or Frolic: Agent's Intentional Torts

The principal is liable for intentional torts of the agent committed within the course and scope of employment. For example, agent is a bouncer at a club owned by principal, and bodily throws a patron out (assault and battery) injuring him. Principal is liable because the bouncer acted within the scope of his employment.

Principal's Duties to the Agent - Cooperation

The principal must do nothing to prevent the agency performance by the agent.

How Agency Relationships Are Formed

They come about by voluntary consent and agreement between the parties. Generally (1) the agreement need not be in writing and (2) consideration is not required.

Agent's Authority - Power of Attorney

authorizes another to act as one's agent or attorney in either specified circumstances (special power of attorney) or in all situations (general power of attorney). The holder of a power of attorney is called an attorney-in-fact

Ratification

can be either express or implied

Agent's Authority - Expressed Authority

declared in clear, direct, and definite terms. Express authority can be given orally or in writing.