Agency

Question 1

Creation of Agency Relationship

Answer 1

• Agency = Fiduciary relationship, where a person or entity (the Ag) acts on behalf of another (the Pr).
• Agency relationship exists if there is:
  
  1. Assent – a formal or informal agreement;
  2. Benefit – the conduct primarily benefits the Pr; AND
  3. Control – the Pr has the right to control the agent

*The characterization of the relationship by the parties is irrelevant.

Question 2

Actual Authority

Answer 2

• Pr is bound to a k entered into by its Ag if Ag had actual authority.
• Express Authority: Oral or in writing
• Implied Authority:
  
  1. Action is necessary to carry out the Ag’s express authorized duties;
  2. Similar prior dealings with the principal; OR
  3. Customary for an Ag in that position (silence/acquiescence can give rise to a reasonable belief of authority in the future).
• Ag has actual authority when acting within their reasonable understanding of authority, even if the principal later shows the Ag was mistaken.

Question 3

Apparent Authority

Answer 3

• Pr is bound to a k entered into by its Ag if the Ag had apparent authority.
• Exists when:
  
  1. A third-party reasonably believes Ag has authority to act on behalf of the Pr; AND
  2. That belief is traceable from Pr’s manifestations (Pr holds the Ag out as having authority).
• A Pr holds the Ag out as having authority when he:
  
  1. gives a position or title indicating authority;
  2. previously held the Ag out and did not publish a revocation; OR
  3. cloaked the Ag with the appearance of authority.

*Continues until the Pr communicates termination to third-parties.

• Apparent Authority is NOT applicable if:
  
  1. the third-party had knowledge that the Ag did not have actual authority; OR
  2. the transaction was not within the ordinary usages of business.

Unidentified/Partially Disclosed Principal → Apparent Authority CAN exist.
Undisclosed Principal → Apparent Authority CANNOT exist.

Question 4

Agent’s Contractual Liability

Answer 4

• Generally, an Ag has NO liability if they:
  
  1. Fully disclose the Pr to a third-party; AND
  2. Have actual or apparent authority.
• Ag will be liable if both elements above are not met.
• May seek Indemnification from a principal if:
  
  1. Ag is liable; AND
  2. his conduct was authorized.

Question 5

Employee vs Independent Contractor

Answer 5

• Primary focus is whether the Pr had the right to control the manner and method in which the job was performed.
• Factors: courts analyze the following to determine if a person is an employee or independent contractor
  
  1. type of work;
  2. pay (hourly vs. per project);
  3. who supplied the equipment/tools;
  4. degree of supervision;
  5. degree of skill required;
  6. if the work benefits the employer’s business;
  7. extent of principal’s control over work details;
  8. whether agent/contractor is engaged in a distinct business;
  9. length of time employed/engaged;
  10. characterization & belief of relationship; and
  11. whether agent was hired for a business purpose.

Question 6

Respondeat Superior Doctrine

Answer 6

• An employer is liable for an employee’s negligent acts if the employee was acting within the scope of the employment.
• Employee acts within Scope of Employment when:
  
  1. Performing work assigned by the employer; OR
  2. Engaging in a course of conduct subject to the employer’s control.
• Time, Place, & Purpose Test – To determine the scope of employment, courts analyze whether the conduct:
  
  1. Is of the kind the employee is employed to perform;
  2. Occurs substantially within the authorized time and space limits; and
  3. Is motivated (in whole or part) to serve the employer.
• Intentional Torts – are generally outside the scope. EXCEPTIONS:
  
  1. Act was specifically authorized by employer;
  2. Act was driven by a desire to serve employer; OR
  3. Act was the result of naturally occurring friction from the type of employment.

Question 7

Respondeat Superior Doctrine

Answer 7

• An employer is liable for an employee’s negligent acts if the employee was acting within the scope of the employment.
• Employee acts within Scope of Employment when:
  
  1. Performing work assigned by the employer; OR
  2. Engaging in a course of conduct subject to the employer’s control.
• Time, Place, & Purpose Test – To determine the scope of employment, courts analyze whether the conduct:
  
  1. Is of the kind the employee is employed to perform;
  2. Occurs substantially within the authorized time and space limits; and
  3. Is motivated (in whole or part) to serve the employer.
• Intentional Torts – are generally outside the scope. EXCEPTIONS:
  
  1. Act was specifically authorized by employer;
  2. Act was driven by a desire to serve employer; OR
  3. Act was the result of naturally occurring friction from the type of employment.

Conduct is NOT within the scope if it’s unrelated and not intended to serve any purpose of the employer.

Question 8

Duties Owed by Ag to the Pr

Answer 8

1. Duty of Care: duty to use reasonable care when performing Ag’s duties.
2. Duty of Loyalty: duty to act solely and loyally for the Pr’s benefit.
3. Duty of Obedience: duty to obey all reasonable directions of the Pr.

Question 9

Liability if respondeat Superior Doctrine is Inapplicable

Answer 9

• A Pr/employer will be liable for an Ag’s acts outside the respondeat superior doctrine if:
  
  1. Principal intended the conduct / consequences;

b) Principal was negligent or reckless in selecting,

training, supervising, or controlling the agent;

c) It is a non-delegable duty; OR
d) Agent had apparent authority, the agent’s

actions taken with apparent authority constitute the tort (or enable it to be concealed), and the third-party reasonably relied on such authority.