BLAW 308

4 factors in determining reasonability

1) Prior dealings 2) Position in company ( carries most weight) 3) Nature of business/transaction 4) Customs and usage

However, the rule that principals are not liable for torts committed by nonemployee agents has exceptions. For example:

1. A principal can be directly liable for tortious behavior connected with the retention of a nonemployee agent. One example is the hiring of a dangerously incompetent non- employee agent. 2. A principal is liable for harm resulting from the non- employee agent's failure to perform a nondelegable duty. 3. A principal is liable for a nonemployee agent's neg- ligent failure to take the special precautions needed to conduct certain highly dangerous or inherently dangerous activities.

Agents are usually liable for their own torts. Normally, they are not absolved from tort liability just because they acted at the principal's command. However, there are ex- ceptions to this generalization.

1. An agent can escape liability if she is exercising a privilege of the principal. 2. A principal who is privileged to take certain actions in defense of his person or property may often authorize an agent to do the same. 3. An agent who makes misrepresentations while con- ducting the principal's business is not liable in tort unless he either knew or had reason to know their falsity. 4. An agent is not liable for injuries to third persons caused by defective tools or instrumentalities furnished by the principal unless the agent had actual knowledge or reason to know of the defect.

Termination by act of the principal and/or agent occurs:

1. At a time or upon the happening of an event stated in the agreement. 2. When a specified result has been accomplished, if the agency was created to accomplish a specified result. 3. By mutual agreement of the principal and the agent, at any time. 4. At the option of either party.

Termination by operation of law

1. The death of an individual principal. Under the Restatement (Third) of Agency. 2. The death of an individual agent. 3. The principal's permanent loss of capacity. This is a permanent. 4. The cessation of existence or suspension of power. 5. Upon the occurrence of circumstances from which the agent should reasonably conclude that the principal no longer would want the agent to take action

an agent is not liable for making an unauthorized contract if any of the following applies:

1. The third party actually knows that the agent lacks authority. however, that the agent still is liable where the third party merely had reason to know that authority was lacking. 2. The principal subsequently ratifies the contract. Here, the principal is bound, and there is no reason to bind the agent. 3. The agent adequately notifies the third party that he does not warrant his authority to contract.

When does an agent have implied authority

An agent generally has implied authority to act in a way the agent reasonably believes the principal wants him to act. For example, the tree removal expert in the example above would have authority to choose a method for removing the tree, such as topping the tree first and removing it in sections or felling the tree with one cut.

Gratuitous agent

An agent who receives no compensation for his services

What does apparent authority depend on?

Apparent authority depends on what the principal communicates to the third party--either directly or through the agent. And agents cannot give themselves apparent authority, Finally, the third party must reasonably believe in the agent's authority.

A principal is directly liable for misrepresentations made by her agent during authorized transactions if she intended that the agent make the misrepresentations

In some states, a principal also may be directly liable if she negligently allows the agent to make misrepresentations. Even where a principal is not directly at fault, she may be liable for an agent's misrepresentations if the agent had actual or apparent authority to make true statements on the subject.

If undisclosed principal then

Principal in liable and so is Agent

If fully disclosed principal then

Principal is liable NOT Agent

If partially disclosed princ.(unidentified) then

Principal is liable and Agent is too.

If principal is nonexistent then

Principal is not liable but Agent is

What are relevant factors in determining implied authority?

Relevant factors include the principal's express statements, the nature of the agency, the acts reasonably necessary to carry on the agency business, and the acts customarily done when conducting that business.

An Outline of the Principal's Tort Liability

Respondeat Superior 1. Agent must be an employee, and 2. Employee must act within scope of employment while committing the tort Direct Liability 1. Principal intends and directs agent's intentional tort, recklessness, or negligence, or 2. Principal is negligent regarding hiring or training of agent Torts of Nonemployee Agents 1. Principal generally is not liable 2. Exceptions exist for direct liability, highly dangerous activities, and nondelegable duties Misrepresentation 1. Direct liability 2. Vicarious liability when agent has authority to make true statements on the subject of the misrepresentation 3. An exculpatory clause may eliminate the principal's tort liability, but the third party still can rescind the contract

After contemplating their potential liability under the rules just discussed, both honest and dishonest principals may try to escape liability for an agent's misrepresentations by including an exculpatory clause in contracts the agent makes with third parties.

Such clauses typically state that the agent has authority only to make the representations contained in the contract and that only those representations bind the principal. Exculpatory clauses do not protect a principal who intends or expects that an agent will make false statements.

A principal ordinarily is not liable for torts committed by nonemployee agents (independent contractors).

TRUE

Direct liability

The typical direct liability case, however, involves harm caused by the principal's negligence regarding the agent. Examples of direct liability for negligence include (1) giving the agent improper or unclear instructions; (2) failing to make and enforce appropriate regulations to govern the agent's conduct; (3) hiring an unsuitable agent; (4) failing to discharge an unsuitable agent; (5) furnishing an agent with improper tools, instruments, or materials; and (6) carelessly supervising an agent. Today, suits for negligent hiring are common.

When an agency is ended at the option of either party

This is called revocation when done by the principal and renunciation when done by the agent.

When does apparent authority arise?

When the principal's manifestations cause a third party to believe reasonably that the agent is authorized to act in a certain way.

Ratification

a process whereby a principal binds himself to an unauthorized act done by an agent, or by a person purporting to act as an agent.

A principal is disclosed if

a third party knows or has reason to know (1) that the agent is acting for a principal, and (2) the principal's identity. Unless he agrees otherwise, an agent who represents a disclosed principal is not liable on authorized contracts made for such a principal.

Agent has obligation to

act within her actual authority and act with the care, competence, and diligence finally n agent must use reasonable efforts to provide the principal with facts the agent knows or has reason to know, when the agent knows or should know the principal wants the facts or the facts are material to the agency. An agent's duties require that she not deal with the principal's property so that it appears to be the agent's, not mingle the principal's prop- erty with the agent's property or anyone else's, and keep ac- counts of the principal's money and other property. Duty Not to Receive a Material Benefit

Authority comes in 2 forms what are those forms?

actual authority and apparent authority. Each is based on the principal's manifested consent that the agent may act for and bind the principal.

A principal normally is liable on a contract made by his agent if the agent had

actual or apparent authority to make the contract. Yet even when the agent lacks author- ity to contract, a principal may bind herself by later ratify- ing a contract made by an unauthorized agent.

Duty of loyalty

an agent must subordinate his personal concerns by (1) avoiding conflicts of inter- est with the principal, and (2) not disclosing confidential information received from the principal.

subagent

an agent of an agent. More precisely, a subagent is a person appointed by an agent to perform tasks that the agent has undertaken to perform for his principal.

Implied ratification

arises when the principal's conduct justifies a reasonable assumption that he consents to the agent's act.

Why is the Agency relationship a fiduciary relationship

because the principal entrusts the agent with power to make contracts for the principal and to possess and use the principal's property. As a fiduciary, the agent must use the entrusted power and property in the best interest of the principal.

Actual Authority

consent must be communicated to the agent

Apparent authority

consent must be communicated to the third party.

general agent

continuously employed to conduct a series of transactions

Actual authority comes in two forms:

express authority and implied authority. Express authority is actual authority that the principal has manifested to the agent in very specific or detailed language.

Ratification can be

express or implied.

An agent may bind herself to contracts she makes for a principal by

expressly agreeing to be liable. This is true regardless of the principal's nature. An agent may expressly bind herself by (1) making the contract in her own name rather than in the principal's name, (2) joining the principal as an obligor on the contract, or (3) acting as surety or guarantor for the principal.

Relevant factors to consider in implied authority

include the principal's express statements, the nature of the agency, the acts reasonably necessary to carry on the agency business, the acts customarily done when con- ducting that business, and the relations between principal and agent.

Express authority

is actual authority that the principal has manifested to the agent in very specific or detailed language. For example, a principal—a homeowner—may tell her agent—a tree removal expert—that the agent is authorized to "remove the diseased ash tree in my front yard."

Authority

is an agent's ability to affect his principal's legal relations.

Special agent

is employed to conduct a single transac- tion or a small, simple group of transactions.

most important of the duties the principal owes the agent

most important of these duties are the principal's obligations to compensate the agent, to reimburse the agent for money spent in the principal's service, and to indemnify the agent for losses suffered in conducting the principal's business.

An express ratification

occurs when the principal manifests assent that his legal relations be af- fected, such as stating orally that he wishes to be bound by a contract that has already been made.

Review cases and what they are in notes

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go thru all concept reviews

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According to the Restatement, an employee acts within the scope of employment when

performing work assigned by the employer or when engaging in a course of conduct subject to the employer's control. An employee's act is not within the scope of employment when it occurs within an independent course of conduct not intended by the employee to serve any purpose of the employer.

Unless there is an agreement to the contrary, an agent who purports to act for a legally nonexistent principal, such as an unincorporated association, is

personally liable when the agent knows or has reason to know the principal does not exist. Likewise, the agent is liable when she knows or has reason to know a principal has no capacity.

principal is directly liable for an agent's tortious conduct if

the agent acts within her actual authority or the principal ratifies the agent's conduct.

Agency

the fiduciary relationship that arises when one person (a principal) manifests assent to an- other person (an agent) that the agent will act on the principal's behalf and be subject to the principal's control.

principal's direct liability for an agent's torts

the principal himself is at fault, and there is no need to impute liability to him. Also, no scope-of- employment requirement exists in direct liability cases, and the agent need not be an employee. Of course, a principal might incur both direct liability and respondeat superior liability in cases where due to the principal's fault, an em- ployee commits a tort within the scope of her employment.

an employer-employee relationship exists if

the purported employer controls or has the right to control both the result to be accomplished and the "manner and means" by which the purported employee brings about that result.

A principal is unidentified if

the third party (1) knows or has reason to know that the agent is acting for a principal, but (2) lacks knowledge or reason to know the principal's identity. This can occur when an agent simply neglects to disclose his principal's identity. Also, a principal may tell her agent to keep her identity secret to preserve her bargaining position, such as when a national retailer tries to buy land on which to build a large store.

A principal is undisclosed when

the third party lacks knowledge or reason to know both the principal's existence and the principal's identity. This can occur when a principal judges that he will get a better deal if his existence and identity remain secret, or when the agent neglects to make adequate disclosure.

The two most important factors affecting the agent's liability are

the wording of the contract and the way the agent has signed it. An agent who wishes to avoid liability should make no express promises in her own name and should try to ensure that the agreement obligates only the principal. In addition, the agent should use a signature form that clearly identifies the principal and indicates the agent's representative capacity

As the following Work Connection case makes clear, the principal must have knowledge of all material facts regarding the prior act or contract at the time it is ratified. Here, an agent's knowledge is not imputed to the principal.

true

In ratifying, the principal must use the same formalities required to give the agent authority to execute the transaction. As Chapter 35 stated, few formalities normally are needed to give an agent authority. But when the original agency contract requires a writing, ratification likewise must be written. Note that a principal's ratification is binding even if not communicated to the third party. Also, once a princi- pal has ratified a contract, the principal is estopped from denying its ratification if the other party has been induced to make a detrimental change in position.

true

the principal must ratify the entire act or contract. He cannot ratify the beneficial parts of a contract and reject those that are detrimental.

true

An agent also may be liable to a third party if he contracts for a legally existing and competent principal while lacking authority to do so.

true. Implied Warranty of Authority

apparent authority is based on

(1) manifestations by the principal to the third party (2) that cause the third party to believe reasonably that the agent has such authority.

An agency can terminate in many ways that fall under two general headings

(1) termination by act of the parties, and (2) termination by operation of law.

Respondeat superior is a rule of imputed or vicarious liability because it bases an employer's liability on her relationship with the employee rather than her own fault. This imputation of liability reflects the following beliefs:

(1) that the economic burdens of employee torts can best be borne by employers; (2) that employers often can protect themselves against such burdens by self-insuring or purchasing insurance; and (3) that the resulting costs frequently can be passed on to consumers, thus "socializing" the economic risk posed by employee torts. Respondeat superior also motivates employers to ensure that their employees avoid tortious behavior. Because they typically control the physical details of the work, employers are fairly well positioned to do so.

Under the doctrine of respondeat superior, a principal who is an employer is liable for torts comitted by agents

(1) who are employees and (2) who commit the tort while acting within the scope of their employment. Respondeat superior makes the principal liable both for an employee's negligence and for her intentional torts.

Most courts find that an employee's conduct is within the scope of his employment if it meets each of the following four tests:

1) It was of the kind that the employee was employed to perform. To meet this test, an employee's conduct need only be of the same general nature as work expressly authorized or be incidental to its performance. 2) It occurred substantially within the authorized time period. 3. It occurred substantially within the location authorized by the employer. 4. It was motivated at least in part by the purpose of serving the employer.

Fiduciary duties an agent owes a principal

1) Loyalty (conflict of interest and confidential info) 2) Obedience 3) Care/skill 4) Separate funds/accounts 5) Motive (maybe notice)