Chapter 20: Agency and Liability to Third Parties

z. True or false: The Department of Labor, National Labor Relations Board, and Equal Employment Opportunity Commission have each created joint employer doctrines for firms that depend on third-party contractors that no longer safeguard these businesses from employment-related liability issues arising from third-party contractors.

True

Respondeat Superior

"Let the master answer" an employer is vicariously liable for the behavior of an employee working within his or her scope of employment

disclosed principal,

A principal whose identity is known to a third party at the time the agent makes a contract with the third party.

partially disclosed principal

A principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third party form a contract.

undisclosed principal

A principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for a principal at the time the agent and the third person form a contract.

Agency

A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal).

Agency by implied authority

Agency formed by implication, through conduct of parties

Expressed Agency

Agency formed by making written/oral agreement

apparent agency (agency by estoppel)

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

agency coupled with an interest

An agency relationship in which the agent is given an estate or interest in the subject of the agency (the property).

Agency by Ratification

An agency that occurs when (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 the unauthorized act. the principal must also have complete knowledge of all materials and must ratify the entirety of the agents act

(Principal's remedies) Constructive Trust

An equitable trust that is imposed in the interests of fairness and justice when someone wrongfully holds legal title to property.

z. Which of the following is an accurate statement regarding whether a principal can be held liable for the torts of an independent contractor?

An individual who hires an independent contractor cannot be liable for the contractor's tortious actions under the doctrine of respondeat superior.

z. In the context of tort liability and agency relationships, which of the following is an accurate statement?

If an employee tortiously injures a third party and the employer controls the employee's behavior, the employer can be held liable for the tort.

Termination by acts of parties

Lapse of Time Fulfillment of Purpose Occurrence of Specific Event Mutual Agreement Revocation of Authority Renunciation By Agent agency coupled with an interest

independent contractors

Self-employed individuals hired on a contract basis for specialized services.

apparent authority

The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

Agency Relationship

The association between one party and an agent who acts on behalf of that party.

negligent hiring

The failure of an organization to discover, via due diligence, that an employee it hired had the propensity to do harm to others

durable power of attorney

a legal agreement that allows an agent or representative of the patient to act on behalf of the patient

Agent

a party who is authorized to act for and on behalf of the principal, who hires them for representation

Fiduciary

a person who has a duty to act primarily for another person's benefit

z. An agency relationship terminates if either the principal or agent becomes insane. Some states have modified this law so that unless the person has been ______ insane, the agency contract still exists.

adjudicated

(Principal's remedies) Avoidance

allows a principal to nullify any contract the agent negotiated

implied authority

an agent's authority to do things not specifically authorized in order to carry out express authority

Termination by Operation of Law

death, insanity, bankruptcy, change in circumstances, change in law, impossibility of performance, disloyalty of agent, war

classifications of principal

disclosed principal, partially disclosed principal, and undisclosed principal

Actual notice of termination

given when third parties are directly informed, orally or in writing, that an agency agreement has been terminated.

(Principal's remedies) indemnification

if a third party sues a principal whose agent made a breach of contract, the principal can sue the agent for damages.

Demand for an Accounting

if an agent feels they are not being adequately compensated, they can withhold further performance and demand that the principal give an accounting

gratuitous agent

is an agent that works for free.

z. If an independent contractor engages in extremely hazardous activities, such as blasting operations, for his or her principal, the principal ______.

is responsible for any damages caused by the independent contractor

constructive notice

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

Express Authority (Actual Authority)

the authority of an agent that arises when the principal explicitly instructs the agent to do something

Principal

the party that an agents authority can bind or act on behalf of

The Restatement of Agency

"fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act."

If an agent mispresents themselves, a third party has two options:

1. The third party can cancel the contract with the principal and be compensated for any money lost 2. the party can affirm the contract and sue the principal to recover damages

Fair Labor Standards Act

1938 act which provided for a minimum wage and restricted shipments of goods produced with child labor

Power of Attorney

Document giving agent authority to sign legal documents on behalf of principal

Principal's Duties to the Agent

Duty of compensation Duty of reimbursement and indemnification (authorized expenditures must be repaid.) Duty of cooperation Duty of provide safe working conditions

Agency's Duties to the Agent

Duty of loyalty Duty of performance Duty of notification Duty of obedience Duty of accounting

vicarious liability

Legal doctrine under which a party can be held liable for the wrongful actions of another party.

z. Which of the following is an incorrect statement regarding whether a principal can be held liable if an agent misrepresents himself or herself to a third party?

Misrepresentation liability depends on whether the agent was acting in the scope of employment.

Agent's Remedies

Tort and Contract Remedies, and Demand for an accounting