chpt 15 bus law review

termination continued

(3) mutual agreement: no matter what the principal and agent agree at the start, they can always change their minds later on, as long as change is mutual. Ex: if boris and alex originally agree a 5 year contract term, but only after 3 years boris wants to go back to school and alex runs out of money, they can decide to terminate the agency (4) agency at will: if they make no agreement in advance about the term of the agreement, either principal or agent can terminate at ay time.

Authority - express

- a principal is bound by the acts of an agent if the agent has authority. there are 3 types: -express = the principal grants express authority by words or conduct that reasonably interpreted, cause the agent to believe the principal desires her to act on the principals account. the principal asks the agent to do something and the agent does. Ex: craig calls his stockholder alice and asks her to buy 100 shares of banshee. she has express authority to do so

creating an agency - fiduciary relationship

- a special relationship with high standards. the beneficiary places special confidence in the fiduciary who, in turn, is obligated to act in good faith and candor, putting his own needs second. the purpose of a fiduciary relationship is for one person to benefit another. -agents have a fiduciary duty to their principals.

duty of loyalty - competition with the principal

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

undisclosed principal

- in the case of an undisclosed principal, the third party can recover from either the agent or the principal - a principal is undisclosed if the third party did not know of his existence - 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 then the agent, or (2) the agent lies about the principal because she knows the third party would refuse to contract with him.

doctrine of respondent superior

- let the master answer. traditionally called servant and master: it means that the principal has control over the agents work. -employees are always servants - the master is the principal, or the one in control

physical & non physical harm

-A master is liable for negligent conduct of a servant that causes physical harm, if it is within the scope of employment. -With negligent conduct of a servant that causes non-physical harm (harm to reputation or finances), the principal is liable only if the servant acted with actual or apparent authority.

principals liability for torts

-A principal may be liable for the torts of a servant but generally is not liable for the torts of an independent contractor -A master (principal) is liable for physical harm caused by the negligent conduct of servants (agent) within the scope of employment. -The principal is liable for the physical torts of an independent contractor only if the principal has been negligent in hiring or supervising. -Principals are only liable for torts that a servant commits within the scope of employment.

liability for agents torts

-Agents are always liable for their own torts, even if the principal is also liable. -Agents and principals are jointly and severally liable, which means that the injured party may sue either one or both, as she chooses. -The injured party may not recover twice, but may recover partially from both parties. -The principal can sue the agent, if the injured party recovers from the principal

negligent and intentional torts

-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 the desire to serve the master, or the conduct was reasonably foreseeable

agency law

-agency law is concerned with your responsibility for the actions of others. what happens if your agent assaults someone or enters into an agreement?

duties of agents to principals

-agents owe a fiduciary duty to their principals -there are four elements to this duty:

creating an agency - all 3 elements

-all three elements - consent, control, and a fiduciary duty are necessary to create an agency relationship. -if horace sells his car to lily, they both expect to benefit under the contract, but neither has a fiduciary duty to the other and neither controls the other, so there is no agency relationship.

duty to provide information

-an agent has a duty to provide the principal with all information in her possesion that she has reason to believe the principal wants to now. she also has a duty to provide accurate information. - angie knew the fords counteroffered for 800, she had a duty to pass that information to taylor.

duty of loyalty- outside benefits

-an agent may not receive profits unless the principal knows and approves. -suppose hope is an employee of the agency big egos and she has been representing will smith in his movie negotiations. he is thrilled that she has arranged for him to star in a new movie that he buys her a maybach. can hope keep it? - only with big egos permission. - she must tell big ego, the company may then take the vehicle or allow her to keep it.

other duties of an agent. EX

-before taylor leaves to england he hires angie to rent his house. she does not list the home on the regional rental list used by all other brokers. she shows the fords the house and they offer 750. she called taylor in england, he responded he wouldn't take any less then 850. he said call back if theres a problem. the fords will go no higher then 800. instead of calling him back in england angie left a message on his home answering machine. when fords pressed her for an answer, she said she could not get in touch with taylor. not untill taylor returned did he learn the fords rented another house.

terminating an agency relationship

-either the agent or principal can terminate the relationship at any time. in addition, the relationship terminates automatically if the principal or agent can no longer preform their required duties or a change in circumstances renders the agency relationship pointless.

creating an agency - control

-principals are liable for the acts of their agents because they exercise control over the agents. -if principals direct their agents to commit an act, it seems fair to hold the principal liable when the act causes harm Ex: mans plane hijacked , he was killed on it. he originally bought a ticket for northwest but traded for s seat on kuwait airlines. airlines had policy permitting pasangers to exchange tickets from one to another. his widow sued northwest on the theory that Kuwait was northwests agent. -no agency relationship existed because northwest had no control over kuwait. northwest did not tell kuwait how to fly planes or handle terrorists; therefore it should not be liable when kuwait made fatal errors -an agent and principal must not only consent to an agency relationship, but the principal must also have control over the agent.

greenman vs. yuba power products: calif 1963

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scope of employment

Authorization: -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. Abandonment: -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.

termination continued

(5)wrongful termination: if an agency relationship is not working out, the courts will not force the agent and principal to stay together. -either party always has the power to walk out. they may not however, have the right. Ex: if borris has agreed to work for alex for 5 years but wants to leave after 3, he can leave provided he pays alex the cost of hiring and training a replacement - if the agent is a gratuitous agent he has both the power and the right to quit any time he wants, regardless of the agency agreement. Ex: if boris is doing the job as a favor he will not owe alex damages when he stops work

elements not required for agency - continued

- a formal agreement: the principal and agent need not agree formally that they have an agency relationship. they do not even have to think the word agent. as long as they act like an agent and a principal, the law will treat them as such -consideration: an agency relationship need not meet all the standards of contract law, - for example, a contract is not valid without consideration, but an agency agreement is valid even if the agent is not paid.

apparent authority

- a principal can be liable for the acts of an agent who is not, in fact, acting with authority if the principals conduct cause a third party reasonably to believe that the agent is authorized. - the principal has not authorized the agent, but has done something to make an innocent third party believe the agent is authorized -as a result the principal is every bit as liable to the third party as if the agent did have authority.

duty of loyalty - confidential information

- agents can neither disclose nor use for their own benefit any confidential information they acquire during their agency -this duty continues even after the agency relationship ends

duty of care

- an agent has a duty to act with reasonable care. an agent must act as a reasonable person would, under the circumstances. -a reasonable person would not have left a message on taylors home answering machine when she knew he was in europe. -under some circumstances an agent is held to higher or lower standards. an agent with special skills is held to a higher standard because she is expected to use those skills. - a trained real estate agent should know enough to use the regional rental list.

duties of agents to principals- duty of loyalty

- an agent has a fiduciary duty to act loyally for the principals benefit in all matters connected ith the agency relationship -the agent has an obligation to put the principal first, to survive to accomplish the principals goals. - the various components of the duty of loyalty follow:

fully disclosed principal

- an agent is not liable for contracts she makes on behalf of a fully disclosed principal. - a principal is fully disclosed if the third party knows of his existence and identity.

duty of loyalty - appropriate behavior

- an agent may not engage in inappropriate behavior that reflects badly on the principal. -this rule even applies to off-duty conduct. =ex: a coed trio of flight attendants went wild at a hotel bar in london. they kissed and caressed each other, showed off their under ware, and poured alcahol down their trousers. - the airline fired two of the employees and gave a warning letter to the third

duty to obey instructions

- an agent must obey her principals instructions unless the principal directs her to behave illegally or unethically - taylor instructed angie to call him if the fords rejected the offer. -when angie failed to do so she violated her duty to obey instructions - if taylor asked her to say the house basement was dry, when in fact it was flooded every spring. she would be under no obligation to follow those illegal instructions

duty of loyalty - secretly dealing with the principal

- if a principal hires an agent to arrange a transaction, the agent may not become a party to the trsnsaction without the principals permission. -ex:

effect of termination

- if an agent continues to act once an agency relationship ends, she is liable to the principal for any damages he incurs - duties that continue after a relationship ends: -principals duty to reimburses agent -confidential information

partially disclosed principal

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

gratuitous agents

- suppose taylor asked his neighbor jed to help him sell his house. jed is not a trained real estate agent and is not being paid, making him a gratuitous agent. -a gratuitous agent is held to a lower standard because he is doing his principal a favor. -gratuitous agents are liable if they commit gross negligence, but not ordinary negligence. - if jed left taylor an important message on his answering machine because he forgot about his trip to england, he would not be liable to them for that ordinary negligence. -but if the answering machine warned him he was away and wouldn't be picking up messages, he would be liable for gross negligence and a violation of his duty

duties of principals to agents - duty to reimburse

- the agent must reimburse the agent for any expenses she has reasonably incurred, the general rules follow: -a principal must reimburse an agent for any expense or damages reasonably incurred in carrying out his agency responsibilities. - a principal must identify an agent for tort claims brought by a third party if the principal authorized the agents behavior and the agent did not realize he was committing a tort - the principal must reimburse the agent for any liability she incurs from third parties as a result of entering into a contract on the principals behalf, including attorney fees and reasonable settlements.

agents liability for contracts

- the agents liability on a contract depends on how much the third party knows about the principal -disclosure is the agencys best protection against liability

termination by agent or principal

- the two parties have five choices in terminating their relationship: (1) term agreement: the principal and agent can agree in advance how long their relationship will last. Ex: alex hires boris to help her purchase easter eggs. if they agree the relationship will last five years they have a term agreement (2) achieving a purpose: the principal and agent can agree that the agency relationship will terminate when goals have been achieved. Ex: alex and boris might agree their relationship will end when alex buys 10 eggs.

principal remedies when agent breaches duty

- three potential remedies: - principal can recover from the agent any damages the breach has caused. Ex:f taylor can only rent his house for 600 instead of 800 the fords offered. angie would be liable for 200 -if an agent breaches the duty of loyalty, he must turn over the principal any profits he has earned as a result of his wrongdoing. - if an agent has violated her duty of loyalty, the principal may rescind the transaction

creating an agency relationship- consent

- to establish consent, the principal must ask the agent to do something, and the agent must agree. -in the most straightforward ex: you ask your neighbor to walk your dog and she agrees.

duty of loyalty - conflict of interest between two principals

- unless otherwise agreed, an agent may not act for two principals whose interests conflict. - suppose travis represents both director steven and actor julia. steven is casting the title role in his new movie, a role that julia covets. travis cannot represent these two clients when they are negotiating with each other, unless the both know about the conflict and agree to ignore it -this represents the dangers of acting for two principals at once

implied authority

- unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it. Ex: david recently inherited a house he hires nell to auction it off. nell hires an auctioneer,advertises,rents a tent and does everything to conduct a sucessful auction. after david recieves the expensive bill he calss aying he wont pay cause he never gave permission. david is wrong. -the agent has authority to do anything that is reasonably necessary to accomplish her task.

elements not required for an agency relationship- equal dignities rule

-consent control and a fiduciary relationship are necessary to establish an agency relationship. the following are not required: -a written agreement: in most cases an agency does not have to be in writing, an oral understanding is valid, except in one circumstance: - the equal dignities rule - according to this rule, 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. - for Ex: under the statute of frauds, a contract for the sale of land is unenforcable unless in writing, so the agency agreement to sell land must also be in writing.

creating an agency relationship

-principal= in an agency relationship, the person for whom an agent is acting. -agent= in an agency relationship,the person who is acting on behalf of a principal -in an agency relationship, someone(the agent) agrees to preform task, and under the control of, someone else (the principal). -to create an agency relationship, there must be: a principal and an agent: who mutually consent that the agent will act on behalf of the principal and be subject to the principals control thereby creating a fiduciary relationship.

duties of principals to agents - duty to cooperate

-principals have a duty to cooperate with their agent: -the principal must finish the agent with the opportunity to work -the principal cannot unreasonably interfere with the agents liability to accomplish his task -the principal must preform her part of the contract

employee vs contractor

Yes responses to these questions may indicate a servant, or employee relationship: -does the principal control details of the work? -does the principal supply tools and place of work? -does the agent work full-time for the principal? -is the agent paid by time rather then by job? - is the work part of the regular business of the principal? -do the parties believe they have an employee-employer relationship?

termination - change in circumstances

after agency agreement is negotiated, circumstances may change. if they are significant enough to undermine purpose of agreement relationship ends.: Ex: melissa hires andrew to sell his farm for 100000, shortly after the largest oil reserve is discovered nearby, the farm is now worth 10 times more. andrews authority terminates immediately -change in law: if the agents responsibilities become illegal, the agency agreement terminates. -loss or destruction of subject matter: andrew hired bob to sell his palm beach condo, andrews creditors attached the condo. damien is no longer authorized to sell it because andrew has lost subject matter of his agency with damien

termination - principal or agent can no longer preform duties

if principal or agent is unable to preform th duties required under the agency agreement, the agreement terminates: - if either the agent or the principal fails to obtain a license necessary to preform duties under the agency agreement, the agreement ends. -the bankruptcy of the agent or the principal terminates an agency relationship only as it affect their ability to preform - an agency relationship terminates upon death or incapacity of either the principal or the agent -if the agent violates her duty of loyalty, the agency automatically terminates.