Agency

Question 1

What is a big indicator to look for in determining if someone is an employee or an independent contractor to an employer?

Answer 1

The degree of control that a employer can exert. The more control the more likely it is an employee

Question 2

If an employee creates intellectual property while on the job who does it belong to?

Answer 2

the employer

Question 3

What does an employer have to worry about with an employee but not an independent contractor?

Answer 3

1- fed and state income tax withholding

2- social security taxes

3- fringe benefit inclusion

4- workers compensation insurance

5- unemployment compensation insurance

6- Respondeat superior liability

7- workplace safety rules

8- anti-discrimination laws

Question 4

Generally a independent contractor can’t cause vicarious liability because of the doctrine of “Respondeat Superior”, however, if ____________ then the employer too will be potentially liable.

Answer 4

the work is ultra-hazardous

ex. someone hired to destroy the employers building

Question 5

How is agency authority created?

Answer 5

1- Appointment

2- Apparent authority / Estoppel (before the fact)

3- Emergency / Necessity (during the fact) (spouse admitting the other to the hospital)

4- Ratification (after the fact)

Question 6

What are the two ways that appointment can take place? Define them.

Answer 6

• Express appointment: express agreement in words between principle and agent
• Implied appointment: words and/or conduct by the principle that reasonably implies IN THE MIND OF THE AGENT that there is an agency relationship

Question 7

Define apparent Authority / Estoppel in the creation of agency authority.

Answer 7

Words and / or conduct by the principle that reasonably imply IN THE MIND OF A THIRD PARTY that there is an agency relationship

Question 8

An agent with authority does not necessarily have all authority to act. What word represents the extent of authority?

Answer 8

scope

Question 9

From least scope to most scope list the types of authority that can be granted…

Answer 9

Smallest: Express

• Implied
• Apparent

Biggest: Ratification of unauthorized acts

Question 10

If an agent has the power to bind a principal he still may be liable. Why is this?

Answer 10

He may not have the “right” to bind

Question 11

For the different types of authority below, for which does the agent have the right to bind? For which the power?

• Express
• Implied
• Apparent
• Ratification of unauthorized acts

Answer 11

• Express: both
• Implied: both
• Apparent: power only
• Ratification of unauthorized acts: both

Question 12

What relationships do power and right focus on?

Answer 12

Power: Principal and 3rd party

Right: Principal and agent

Question 13

Under which type of authority is the agent at risk of liability?

Answer 13

• apparent authority / estoppel

and

• ratification

Question 14

What are the three levels of disclosure of a principal? Define.

Answer 14

1- Disclosed Principal : 3rd party knows agent is an agent and the principal the agent is working for

2- Partially disclosed Principal: 3rd party knows person is agent, but doesn’t know who for

3- Undisclosed Principal: 3rd party doesn’t know person is an agent

Question 15

Concerning the liability of a principal to a 3rd party when is there liability with a simple contract?

How does the agents disclosure come into play?

Answer 15

If the agent had power to bind then there is liability

the level of disclosure is irrelevant

Question 16

Concerning the liability of a principal to a 3rd party when is there liability with a negotiable instrument?

How does the agents disclosure come into play?

Answer 16

If there is power to bind then the principal may be liable if the agent disclosed the principal.

If the agent partially disclosed the principal then the principal is liable if the original parties are still involved.

Undisclosed –> no liablity

Question 17

Concerning the liability of a agent to a 3rd party when is there liability with a contractual liability?

How does the agents disclosure come into play?

Answer 17

If there is less than full disclosure of the principal then the agent has contractual liability

Question 18

Concerning the liability of a agent to a 3rd party when is there liability with a warranty liability?

How does the agents disclosure come into play?

Answer 18

When the agent didn’t have power to bind then the agent has breached his warranty of authority and is liable,

unless the reason the agent didn’t have power was due to an event unknown to him

Question 19

How can an agent avoid liability to its principal?

Answer 19

1- have the right (not just power, and must be in scope)

AND

2- observe all of the duties owed to the principal

Question 20

What are the agent’s duties to the principal?

Answer 20

1- Loyalty

2- Conefidentiality

3- obedience and performance

4- Reasonable Care

5- Accounting

6- Notification

Question 21

What does loyalty mean in the context of an agent’s duties?

Answer 21

the agent is a fiduciary who has to put his own personal interest behind those of the principal.

This means they can only represent one principal unless their is consent from multiple

Question 22

What does confidentiality mean in the context of an agent’s duties?

Answer 22

agent keeps all confidential and/or sensitive info during and after the agency relationship

Question 23

What does obedience and performance mean in the context of an agent’s duties?

Answer 23

duty to obey all lawful instructions

Question 24

What does reasonable care mean in the context of an agent’s duties?

Answer 24

The agent must abide by the reasonable person standard or even a higher standard if the agent is an expert

Question 25

What does accounting mean in the context of an agent’s duties?

Answer 25

The agent must account for everything in her possession that belongs to the principal, or she may lose the principals plus the funds they are commingled with if the funds are too hard to distinguish

Question 26

What does notification mean in the context of an agent’s duties?

Answer 26

The agent must notify the principal of any info that is relevant to the subject matter of the agency (this is important because the principal is deemed to know all that the agent knows in a claim by another party)

Question 27

What are the principals duties to the agent?

Answer 27

1- honor the contract between principal and agent

2- Compensation

3- Reimbursement for rightful and proper expenditures made by agent for principal

4- Indemnity

5- Co-operation

6- Safe working conditions

Question 28

what is the compensation hierarchy (3) in regards to a principals duties

Answer 28

1- agreed upon amount

2- customary amount

3- reasonable amount

Question 29

What does indemnity mean in the context of an principals duties?

Answer 29

it means the principal will compensate the agent for any harm or loss incurred in doing the principals work

Question 30

What does co-operation mean in the context of an principals duties?

Answer 30

The principal must not hinder the agent in doing her work

Question 31

What does honor the contract mean in the context of an principals duties?

Answer 31

the principal honors the duration of the relationship, exclusivity (not hiring someone else in same area), compensation, etc.

Question 32

What are the ways that agency can be terminated by “operation of law”?

Answer 32

1- Death or insanity of either principal or agent

2- Impossibility - specific subject matter is lost or destroyed

3- Changed circumstances that would cause a reasonable agent to believe that principal would no longer wish her to proceed as per the original instructions

4- Bankruptcy of either principal or agent

5- War is declared between principal and agents home countries.

Question 33

When an event causes termination of agency power under operation of law, when does the power terminate?

What is the effect on third parties?

Answer 33

It terminates immediately

This terminates the agents ability whether or not the 3rd party is aware

Question 34

Terminations by acts of the parties requires ______ before becoming effective.

Answer 34

communication to third parties

Question 35

What is the general rule of unilateral terminations of agency?

Answer 35

either party has the power to terminate the relationship but not necessarily the right to do so. If one of the parties terminates without the right to do so, then the other party may be entitled to damages.

Question 36

What is the exception to the general rule for unilateral termination of agency?

Answer 36

When an agent obtains for his own personal benefit an ownership or other beneficial interest in the subject matter of the agency (besides just commission) it is not terminable by the principal

Question 37

When firing an agent who must the principal notify in order to take away the agents power and rights?

Answer 37

• Power - must notify the 3rd parties of the termination

- Right - must notify the agent of termination