CH 18 Blinn

agency by ratification requirements

(1) a person misrepresents him- or herself as another's agent when in fact he or she is not and (2) the purported principal ratifies (accepts) the unauthorized act.

Principal's Duties to Agent

1. Compensation 2. Reimbursement and 3. indemnification 4. Cooperation

Agent's Duties to the Principal

1. Performance 2. Notification 3. Loyalty 4. Obedience 5. Accounting

Respondeat Superior

A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment.

Megan, who owns a piece of vacant real estate, hires Dashiell, a licensed real estate broker, to list the property for sale. Matt, an adjacent property owner to Megan's property, tells Dashiell that a chemical plant has polluted his property and probably Megan's property. As an agent, Dashiell has a duty to tell Megan about the pollution. Dashiell's duty in this scenario is what?

A duty to notify

Misrepresentation

A false statement or lie that can render the contract void. Agent liable? Yes Principal liable? Yes, The principal is liable for the intentional and innocent misrepresentations made by an agent acting within the scope of his or her authority.

Implied agency example

A homeowner employs a real estate broker to sell his house. A water pipe breaks and begins to leak water into the house. If the homeowner cannot be contacted, the real estate broker has implied authority to hire a plumber to repair the pipe to stop the water leak. The homeowner is responsible for paying for the repairs.

This is an example of frolic and detour

A salesperson stops at home for lunch while on an assignment for his principal. After lunch and while leaving his home in his car, the agent hits and injures a pedestrian. The principal would be liable if the agent's home were not too far out of the way from the agent's assignment. The principal would not be liable, however, if an agent who is on an assignment for his employer in Cleveland, Ohio, deviates from his assignment and drives to a nearby city to meet a friend and is involved in an accident. The facts and circumstances of each case determine its outcome.

work-related test

A test that determines whether an agent committed an intentional tort within a work-related time or space; if so, the principal is liable for any injury caused by the agent's intentional tort

motivation test

A test that determines whether an agent's motivation in committing an intentional tort is to promote the principal's business; if so, the principal is liable for any injury caused by the tort

partially disclosed agency

A type of agency relationship in which the third party knows that the agent is representing a principal but does not know the actual identity of the principal. Principal liable? Yes Agent liable? Yes, unless the third party relieves the agent's liability

intentional tort

A wrongful act knowingly committed. Agent liable? Yes. Principal liable? Motivation test: The principal is liable if the agent's motivation in committing the intentional tort was to promote the principal's business. Work-related test: The principal is liable if the agent committed the intentional tort within work-related time and space.

Agency is governed by a large body of common law known as _________________

Agency Law

What is an agency?

Agency relationships are formed by the mutual consent of a principal and an agent.

Apparent Agency

Agency that arises when a principal creates the appearance of an agency that in actuality does not exist. Principal and third party are bound to the contract.

A party who agrees to act on behalf of another is called an ___________

Agent

fully disclosed agency

An agency in which a contracting third party knows (1) that the agent is acting for a principal and (2) the identity of the principal. Principal liable? Yes Agent liable? No, unless the agent (1) acts as a principal or (2) guarantees the performance of the contract

Express Agency

An agency relationship based on a formal agreement between the parties. Principal and third party are bound to the contract.

Agency by ratification example

Bill Livingston sees a house for sale and thinks his friend Sherry Maxwell would want to buy it. Bill enters into a contract to purchase the house from the seller and signs the contract "Bill Livingston, agent for Sherry Maxwell." Because Bill is not Sherry Maxwell's agent, she is not bound to the contract. If Sherry agrees to purchase the house, however, there is an agency by ratification. On ratification of the contract, Sherry Maxwell is obligated to purchase the house.

___________ is a situation where an agency terminates because of the occurrence of any of the following circumstances: 1. The death of either the principal or the agent 2. The insanity of either the principal or the agent 3. The bankruptcy of the principal 4. The outbreak of a war between the principal's country and the agent's country

By operation of law

Any property, money, or other benefit received by the agent in the course of an agency belongs to the principal. If an agent breaches the agency contract, the principal CAN/CANNOT sue the agent to recover damages caused by breach.

CAN

Your mother employs a real estate agent to sell her house. Your mother owes a duty to allow the agent to show the house to prospective purchasers during reasonable hours. Your mother's duty is called a duty to ____________

Cooperate

______________ is the most common form of agency

Express agency

Jennifer, a salesperson, is on an assignment for her employer in San Jose, California. She then deviates from her assignment and decides to drive up to San Francisco to meet a friend for lunch. On the way there, Jennifer is involved in an accident. Jennifer's employer would not be liable because Jennifer's negligence actions stemmed from which of the following?

Frolic and detour

Although the employee in an employer-employee relationship may not have contracting authority, the principal ___IS/ISN'T____ liable for tortious conduct of its employees committed while acting within the scope of their employment.

IS

Some agents are _______________

Independent contractors. They are outside contractors who are employed by a principal to conduct limited activities for the principal.

courts generally apply one of the two following tests in determining whether an agent's intentional torts were committed within the agent's scope of employment:

Motivation, work related

A party who employs another person to act on his or her behalf is called a ___________

Principal

A ________________ relationship is formed when an employer hires an employee and gives that employee authority to act and enter contracts on the employer's behalf.

Principal- agent

This is an example of a dual purpose mission

Suppose a principal asks an employee to drop off a package at a client's office on the employee's way home. If the employee negligently injures a pedestrian while on this dual-purpose mission, the principal is liable to the pedestrian.

termination of an agency by operation of law

Termination of agency because of events: The death of either the principal or the agent The insanity of either the principal or the agent The bankruptcy of the principal The outbreak of a war between the principal's country and the agent's country.

Chris works as a high school teacher. His home is 15 miles from the school. Chris leaves his home one morning and is driving to work when his negligence causes an automobile accident in which several pedestrians are injured. In this example, Chris is personally liable for his negligence, but the school is not liable because of what?

The coming and going rule

An agency can be terminated by the following acts.

The mutual assent of the parties. (they both agree to) If a stated time has lapsed. If a specified purpose is achieved. The occurrence of a stated event.

Give an example of a principal-agent relationship

The president of a corporation usually has the authority to enter into major contracts on the corporation's behalf, and a supervisor on the corporation's assembly line may have the authority only to purchase the supplies necessary to keep the line running.

Express agency contracts can be either oral or written unless the Statute of Frauds stipulates that they must be written. T/F

True

courts rely on the following factors to determine whether an agent's conduct occurred within the scope of employment:

Was the act specifically requested or authorized by the principal? Was it the kind of act that the agent was employed to perform? Did the act occur substantially within the time period of employment authorized by the principal? Did the act occur substantially within the location of employment authorized by the employer? Was the agent advancing the principal's purpose when the act occurred?

factors in determining independent contractor status include the following:

Whether the worker is engaged in a distinct occupation or an independently established business The length of time the agent has been employed by the principal The amount of time that the agent works for the principal Whether the principal supplies the tools and equipment used in the work The method of payment, whether by time or by the job The degree of skill necessary to complete the task Whether the worker hires employees to assist him or her Whether the employer has the right to control the manner and means of accomplishing the desired result.

Under this test, if an agent commits an intentional tort within during working hours or on the principal's premises, the principal is liable for any injuries caused by the agent's intentional torts. Which test is this?

Work related test

Can a principal authorize an independent contractor to enter into contracts?

Yes

Arielle, who is driving her automobile, is injured when another driver negligently causes an automobile accident. Arielle then hires a lawyer to represent her on a 35 percent contingency-fee basis. If the lawyer wins the case for Arielle or settles the case with Arielle's approval, he will earn 35 percent of whatever is collected from the defendant. If the lawyer does not win or settle the lawsuit, he gets paid nothing. In this scenario, Arielle has which of the following duties?

a duty to compensate

You're going on a two-month-long road trip. You decide to give your sister the power to make all decisions on your behalf while you're gone. This power includes the power to purchase or sell stocks or real estate, pursue or defend lawsuits, and to make all other relevant decisions. Which of the following did you confer on your sister?

a general power of attorney

general power of attorney

a power of attorney where a principal confers broad powers on the agent to act in any matters on the principal's behalf

Your friend needs to make a little extra money. She contracts with a romance novel ebook publishing company as a freelance copyeditor for their books. Your friend's relationship with the ebook publishing company is best described as ____________

a principal- independent contractor relatinonship

What are examples of agency relationships?

a salesperson who sells goods for a store, an executive who works for a corporation, and a partner who acts on behalf of a partnership.

Frolic and Detour

a situation in which an agent does something during the course of his or her employment to further his or her own interests rather than the principal's

dual-purpose mission

a situation that occurs when a principal requests an employee or agent to run an errand or do another act for the principal while the agent is on his or her own personal business

A situation where the parties to an agency contract terminate their contract by mutual agreement or when a previously agreed on event occurs is called termination of an agency by ______________

an act of the parties

undisclosed agency

an agency in which a contracting third party does not know of either the existence of the agency or the principal's identity Principal liable? Yes Agent Liable? Yes

Implied Agency

an agency that occurs when a principal and an agent do not expressly create an agency, but it is inferred from the conduct of the parties Principal and third party are bound to the contract.

Agency that arises when a principal creates the appearance of an agency that in actuality does not exist is called _______

an apparent agency

An example of independent contractor is

an attorney who is hired to represent a client and a real estate broker who is employed by an owner to sell the owner's house.

Tom is opening a new nightclub. He hires Andy to work as a fire baton twirler. Tom cannot avoid liability if Andy gets hurt because working with fire is considered _____________

an inherently dangerous activity

A situation where an agency terminates because an unexpected change in circumstances has occurred that would lead the agent to believe that the principal's original instructions should no longer be valid is called termination of an agency by _________________

an unusual change in circumstances

Intentional torts include acts such as

assault, battery, false imprisonment, and other intentional conduct that causes injury to another person.

Negligence

careless neglect, often resulting in injury. Agent liable? Yes Principal liable? Yes, under the doctrine of respondeat superior if the agent's negligent act was committed within his or her scope of employment.

Examples of independent contractors

doctors, dentists, plumbers, stockbrokers, real estate brokers

A situation that occurs when an agent acts for two or more different principals in the same transaction is called ___________________

dual agency

A duty that an agent owes to maintain an accurate record of all transactions undertaken on the principal's behalf is which of the following?

duty to account

Amanda is a general medical practitioner in a rural area who makes house calls. Amanda is held to the standard of a reasonable general practitioner in rural areas. As an agent, this standard is a part of Amanda's _________________

duty to perform

An ______________ relationship exists when an employer hires an employee to perform some form of physical service but does not give that person authority to enter contracts.

employer-employee

Your uncle was a welder on Ford Motor Company's automobile assembly line. When he tells you stories about his time on the line, he mentions that he was employed to perform a physical task but was not given authority to enter into contracts. Your uncle's relationship with Ford Motor Company is best described as ________________

employer-employer relationship

durable power of attorney

exists when person executes a power of attorney which will become or remain effective in the event he or she should later become disabled

Types of agencies:

express agency, implied agency, apparent agency, and agency by ratification

direct notice

express notice of the termination of an agency that needs to be given to all persons with whom the agent dealt

Special Power of Attorney

give authority over a specific item such as managing a person's rental property. A general power of attorney gives authority over all matters.

A situation where an agency terminates because a situation arises that makes the fulfillment of the agency out of the question is called termination of an agency by ____________

impossibility of performance

Information learned by an agent in the course of an agency is _____________ to the principal.

imputed

Information that is learned by an agent that is attributed to the principal is called __________

imputed knowledge

A principal owes a duty to compensate the agent for any losses the agent suffers because of the principal's conduct. This duty is called a duty to ______________

indemnify

Agency by Ratification

is an agency relationship that is created because the principal approved of an agents unauthorized action after the action occurred. Principal and third party are not bound to the contract unless the principal ratifies the contract.

Contract Liability

liability of principals and agents for contracts entered into with third parties

the three main sources of tort liability for principals and agents are ________________

negligence, intentional torts, and misrepresentation.

Constructive Notice

notice of agency termination that is usually given by publishing an announcement in a newspaper

exclusive agency contract

principal cannot employ any agent other than the exclusive agent

Independent contractors operate their own business or profession. This arrangement creates a ___________________ contractor relationship

principal-independent

Unless otherwise agreed, the principal owes a duty to pay back the agent for expenses incurred by the agent on behalf of the principal. This duty is called a duty to

reimburse

You're going on a two-month-long road trip. Meanwhile, your house is listed for sale. You decide to give your brother the power to make decisions regarding the selling of your house while you are gone, including accepting offers to sell the house and signing documents and deeds necessary to sell the house. Which of the following did you confer on your brother?

special power of attorney

A test that determines whether an agent's goal in committing an intentional tort is to promote the principal's business is called

the motivation test

contingency fee

the principal owes a duty to pay the agent an agreed-on contingency fee only if the objective of the agency is obtained.

Custom Management Corporation employs Elaina as its marketing manager. Elaina is driving her automobile to attend a meeting with a client on behalf of Custom Management. On her way to the meeting, Elaina is texting and not paying attention and is involved in an automobile accident. Several people are seriously injured because of Elaina's negligence. In this example, Elaina is personally liable to the injured parties. In addition, Custom Management Corporation is liable as the principal because Elaina was acting within the scope of her employment when she caused the accident. Custom Management Corporation is liable under which of the following?

vicarious liability. Vicarious liability occurs where a principal is liable for an agent's tortious conduct because of the employment contract between the principal and agent, not because the principal was personally at fault.

wrongful termination

when an employee is fired for wrongful reasons

Vicarious Liability

when one person is liable for the torts of another

Your father employs a licensed real estate agent to sell your family's house. The agency contract gives the agent an exclusive listing for four months. After one month, your father unilaterally terminates the agency. The agent can no longer act on behalf of your father. Because your father did not have the right to terminate the contract, however, the agent can sue him and recover damages (i.e., lost commission) for which of the following?

wrongful termination