Chapter 14- Agency relationship

Respondent superior

"let the master answer" (the principal)

What is acting within scope of employment

-Is one that servants are generally responsible for -Takes place during hours that the servant is generally employed -Is part of the principal's business -Is similar to the one principal authorized -Is one for which the principal supplied the tools; and -Is not seriously criminal

Servant vs. Independent Contractor

-The principal control details of the work -The principal supplies the tools and place of work -The agents work full-time for the principal -The agents are paid by time, not by the job -The work is part of the regular business of the principal -The principal and the agents believe they have an employer-employee relationship -The principal is in business

Elements Not required for an agency relationship

1. A WRITTEN AGREEMENT: Agency agreement does not have to be in writing. Oral agreement is valid EXCEPT- The equal dignities rule a. 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 2. A FORMAL AGREEMENT: P and A do not need to agree formally that they have an agency relationship. As long as they act like P and A, law will abide by it 3. CONSIDERATION: Does not need to meet all standards of the contract law. Ex. A contract is not valid without consideration but an agency agreement is valid even if the agent is not paid

To create an Agency relationship

1. A principal (a person) 2. An agent 3. Who mutually consent that the agent will act on behalf of the principal and 4. Be subject to the principal's control 5. Thereby creating a fiduciary relationship

Duties of Principals to Agents

1. A principal must indemnify an agent for any expenses or damages reasonably incurred in carrying out his agency responsibilities. 2. 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. Ex. Ravj quitting noisy parties down, not knowing that she didn't own one building. Sued for trespassing, Marissa would have to pay all his fees and such 3. The principal must indemnify the agent for any liability she incurs from third parties as a result of entering into a contract on the principal's behalf, including attorney's fees and reasonable settlements

P or A can no longer perform

1. If either the agent or the principal fails to obtain (or keep) a license necessary to perform the duties under the agency agreement, the agreement ends. Ex. If hired to work in a gun shop, if lose license agreement is broken 2. The bankruptcy of the agent or the principal terminates an agency relationship only if it affects their ability to perform. Ex. If an agent goes bankrupt, they can still participate in agreement (does not matter if rich or poor) If principal goes bankrupt, bad thing because they have to pay an agent. Thus more likely to terminate an agreement. 3. An agency relationship terminates upon the death or incapacity of either the principal or the agent. 4. If the agent violates her duty of loyalty, the agency agreement automatically terminates. Ex. Agents are to represent the principal's interest!

Principal's remedies when agent breaches a duty

1. Principal can recover from the agent any DAMAGES the breach has caused. 2. If an agent breaches the duty of loyalty, has to turn over to the principal any PROFITS he has earned as a result of his wrongdoings 3. If agent has violated duty of loyalty, principal may RESCIND the transaction

Termination by A or P

1. Term Agreement 2. Achieving a Purpose 3. Mutual Agreement 4. Agency at will 5. Wrongful termination

Principal can say will be bound by actions if requirements are met

1. The agent indicates to the third party that she is acting for a principal 2. The principal knows all the material facts of the transaction 3. The principal accepts the benefit of the whole transaction, not just part 4. The third part does not withdraw from the contract before ratification Ex. Failing to revoke can constitutes a ratification, thus hotel was liable

Duty to Cooperate

1. The principal must furnish the agent with the opportunity to work. EX. Ida has to allow access to Lewis if he is going to try to sell the house 2. The principal cannot unreasonably interfere with the agent's ability to accomplish his task. EX. Ida allows Lewis to show house, but does not clean it and makes remarks to potential buyers= unreasonable interference 3. The principal must perform her part of the contract. EX. If agent has complete task, principal must pay him, even if principal changed their mind and does not want it performed

Authority

A Principal is bound by the acts of an agent if the agent has authority. There are three types, Express, Implied, and Apparent

Principal's Liability for Torts

A master for physical harm caused by the negligent conduct of servants within the scope of employment.

Liability for torts (2 types of people)

A principal may be liable for the torts of a servant but generally is not liable for the torts of an independent contractor.

When is it not always binding... (undisclosed principal)

A third party is not bound to the contract with an undisclosed principal if 1) the contract specifically provides that the third party is not bound to anyone other than the agent, or 2) the agent lies about the principal because she knows that third party would refuse to contract with him.

Effect of Termination

Agency has no authority for the principal, if so liable for damages. Principals Duty to Indemnify Agent: Must pay for the expenses that were incurred before the agency ended Confidential Information: Can not use this information even after the termination of the relationship

Wrongful Termination

Agency relationship is a personal relationship. If not working out then courts will not force to stay together. Either party always has the POWER to walk out. They may not, however have the RIGHT. If departure violates the agreement and causes harm to other party, the party must pay damages.

Conflict with 2 principals

Agent cannot represent two principals that have a conflict of interest

Competition with Prinicpal

Agents are not allowed to compete with their principal in any matter within the scope of the agency business

Confidential Information

Agents can never disclose nor use for their own benefit any confidential information they acquire during their agency (continues even after relationship)

Authorization (Scope of employment)

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.

Duty of Care

An agent has a duty to act with reasonable care. Act as a reasonable person would. Held to a higher standard--> if has special skills, 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 ahs reason to believe the principal wants to know. She also has a duty to provide accurate information.

Fully Disclosed Principal

An agent is not liable for any contracts she makes on behalf of a full disclosed principal. -Fully disclosed if know if his existence and his identity

Appopriate Behavior

An agent may not engage in inappropriate behavior that reflects badly on the principal

Outside Benefits

An agent may not receive profits unless the principal knows and approves

Duty to Obey Instructions

An agent must obey her principal's instructions unless the principal directs her to behave illegally or unethically.

Implied Authority

Authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it -Actual authority, authorized to act for the Principal

Change in Circumstantes - Termination

Change in law or Loss or destruction of subject matter

Gratuitous Agent

He has both the power and the right to quit any time he wants, regardless of the agency agreement.

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 as 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

Agency At will

If no agreement ahead of time of when to end, they can end at any time

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.

Partially Disclose Principal

In case of a partially disclosed principal, the third party can recover from either the agent of the principal. -Partially disclosed if the third party knew of his existence, but not his identity

Undisclosed Principal

In case of an undisclosed principal, the third party can recover from either the agent of the principal.

Gratuitous Agent

Not being paid, held to a lower standard. Liable if they commit GROSS negligence, not ordinary negligence

Achieving A Purpose

P & A agree relationship will terminate when the P goal's have been achieved

Term Agreement

P & A can agree in advance how long relationship will be. Ex. Lasting five years

Mutual Agreement

P & A can change their agreement as long as its mutual later on.

Apparent Authority

P 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 -Principal has NOT authorized the agent, but has done something to make an innocent third party believe the agent is authorized -Principal is liable, not the third party Ex. Principal could have prevented the third party from losing money * Issue is always what the Principal has done to make the third party believe that the agent has authority

Express Authority

Principal grants by words or conduct; P asks A to do something and he does -Actual authority, authorized to act for the Principal

Consent of Relationship

Principal must ask agent to do something, agent must agree

Scope of Employment

Principals are only liable for torts that a servant commits within the scope of employment.

Who is liable for relationship

Principals are reliable for the acts of their agents because they exercise control over the agents (if cause harm both are liable)

Duty of Loyalty

The agent must act solely or the benefit of the principal in all matter connected with the agency.

Abandonment (Scope of Employment)

The master is liable for the actions of the servant that occur while the servant is at work, but not for actions that occur after the servant has abandoned the master's business.

Negligent and Intentional Torts (Employment)

The master is liable if the servant commits a negligent tort that causes physical harm to a person or property. A master is not liable for the intentional torts of the servant unless the servant was motivated, at least in part, by a desire to serve the master, or the conduct was reasonably foreseeable.

Principal's Liabilty

The principal is bound by acts of an agent if 1) the agent had authority, or 2) the principal, for reasons of fairness, is estopped from denying that the agent had authority, or 3) the principal ratifies the acts of the agent. (The principal is always liable even if the agent disobeys)

Negligent Hiring

The principal is liable for the physical torts of an independent contractor only if the principal has been negligent in hiring or supervising her.

Subagent

agents underneath the principal who is agents for the agents

Agency Relationship

someone (the agent) agrees to perform a task for, and under the control of, someone else (the principal)

Intermediary Agent

someone who hires subagents for the principal

Nonphysical torts

→ Nonphysical torts are treated more like a contract claim, and the principal is liable only if the servant acted with actual, implied or apparent authority.