ch 14 - agency relationships Flashcards
Agency
relationship btw 2 parties in which 1 party (the agent) represents or acts for the other party (the principal)
principal-agent relationship
The parties agreed that the agent will act on behalf/instead of the principal in negotiating and transacting business with third parties
Fiduciary
- heart of agency law
Fiduciary Noun
- refers to a person who refers to a person who has undertaken a certain enterprise on behalf of another and has a duty to act for the other person’s benefit in matters related to the enterprise
Fiduciary Adjective
means the relationship has trust and confidence
Employees who deal w third parties are …
agents
-Ex- macys salesperson (agent) owner (principal)
true or false
any sale the agent makes is binding on the principal
true
t or f
Agency relat. cannot exist outside an emp-employee relationship
false
it can it j has broader reach
what type of law is agency and employment law based on
agency-common
employment-statutory
why is it impactful when courts determine if a worker is an employee or IC
bc it can have significant impacts, for example, if it is an employee, employers will have to pay for things such as tax
Criteria to Determine if a worker is emp or IC
-How much control can employer exercise
-If worker is engaged in an occupation or business distinct from that of the employer?
-What degree of skill is required
-what is the method of payment
-Does the employer supply the tools
-Is the work usually done under the employer’s direction or by a specialist without supervision
F-or how long is the person employed?
how are agencies formed
- by mutal agreement that doesnt have to be in writing and consideration is not required
to be a principal, what is true
one must be able to legally enter a contract on their own bc if not an agent cant do it for them
t or f
anyone can become agent
t
t or f
agencies created for illegal purposes ex mafia and drug dealer are enforceable
F - unenfoceable
4 ways an agency relationship can form
-agreement of parties
-ratification
-estoppel
-operation of law
agency by agreement
-based on expressed or implied agreements that the agent will act for the principal and that the principal
-can be written/oral
agency by ratification
-when someone who isn’t acc the agent or they are acting outside of their authority and makes a contract on behalf of principle
If the principal later approves/ratifies this contract - then an agency relationship is formed
Involves question of intent which can be expressed by words/conduct
agency by estoppel
when a principals actions causes a third person to believe that someone else is their agent
bc they had reasonable reason to believe so due to the impression the principal created, they are estopped (prevented) from denying the relationship now
Agency by operation of law + 2 ex
when agency relationship is created under special circumstances without formal agreement
family situations - if the wife uses the hubbies card to pay for necessities, courts hold the hubby responsible due to societal duties
emergency situations - When the agent cant reach the principal and not acting immediately would cause loss, then the agent may act beyond their authority
Duties of agents and principals
Once principal-agent relationship has been created, both parties have duties that govern their contract
Bc its fiduciary (of trust) each party owers the other to act with good faith
For every duty of the principal the agent has a corresponding right
5 duties to principal from agent
performance, notification, loyalty, obedience, and accounting
performance (talk about special skills and gratious)
it is Implied that agents should use diligence and skill in performing the work and failing
to do so, liability for breach of contract may result
standard usually being what a reasonable person would show
If an agent claims to have special skills, they must be able to perform, failing is a breach
Some agents work without payment (gratuitously) so they can’t be sued for breach of contract , but must still act responsibly and follow the same standards as agents. If they fail, they may be liable in tort (wrongdoing
brian and alice example (perfromance )
-gracious agent example
-Bryan’s friend Alice offers to sell Bryan’s home at no charge. If Alice never attempts to sell the home, Bryan has no legal cause of action to force her to do so. If Alice does attempt to sell the home, but then performs so negligently that a sale falls through, Bryan can sue Alice for negligence. (tort)
Notification + lang ex
the agent is required to notify the principal of any matters that concern the matter of the agency
-Lang is about to negotiate a contract to sell paintings to Barber’s Art Gallery for $25,000. Lang’s agent learns that Barber is insolvent and will be unable to pay. The agent has a duty to inform Lang bc it is relevant to the subject matter.
Loyalty + don and leo
Agent has duty to act solely on the benefit of the principal and not in the interest of any third party or himself
-cant represent 2 principals
-any info acquired thru the relationship is confidential even after agency is terminated
-don hires leo a real estate agent to buy a building but the owner will only sell it with another property so leo buys both planning to resell don, by acting secretly, leo violates loyalty
Obedience
-agent has duty to follow all instructions of the principal any deviation form of it is a violation of this duty
-during emergencies, when principal cannot be contracted, the agent may deviate from instructions if acting in good faith with reasonable manner
Accounting + marta example
Unless agreed otherwise, the agent has a duty to keep records and make available to principal an acct of all property and funds received and paid out on behalf of principal
(includes gifts from third parties)
ex-Marta, a salesperson for Roadway Supplies, receives a tablet from a client, Knife River Construction, as thanks for her work. The tablet actually belongs to Roadway, not Marta, as it was given due to her role as their agent.
4 duties from principal to agent
-compensation
reimbursement and indemnification
cooperation
and safe working conditions
compensation
Principal has duty to pay agent for services rendered- usually implied and expected in a timely manner
Unless person is a gratuitous agent, principal must pay agreed on value for agents services and if no money was agreed principal owed agent customary compensation for such services
reimbursement (reimbursement and indemnification)
If the agent spends money at the principals request it is Ps duty to reimburse the agent (ex-getting olives for gar)
must also reimburse for any expenses the agent incurs in the reasonable performance of duties (ex- gas)
BUT - agents cant recover for expenses incurred thru their own misconduct (car crash cuz texting while driving)
Indemnifications (reimbursement and indemnification)
P must cover agent for liabilities resulting from required actions
Ex- if an agent makes a contract on the principal’s behalf, and the principal doesn’t fulfill it, causing a lawsuit against the agent, the principal must cover the agent’s legal costs.
P must also indemnify agent for value of benefits they may offer, usually specified but if not courts will determine it.
Applies to gratuitous agents
Ex- If someone finds a sick dog, takes it to the vet, and pays the bill, the dog’s owner must reimburse the finder for those costs.
Cooperation +penny
P has duty to cooperate w agent and assist them in performing agency duties
If P gives agent an exclusive territory to operate in, the principal cannot compete in that area or hire another agent
ex-Penny (the principal) creates an exclusive agency by granting Andrew (the agent) an exclusive territory within which Andrew may sell Penny’s organic skin care products. If Penny starts to sell the products herself within Andrew’s territory—or permits another agent to do so—Penny has failed to cooperate with the agent. Because she has violated the exclusive agency, Penny can be held liable for Andrew’s lost net profits
Safe working conditions
P is req to provide safe working env, equipment, and conditions for all agents and employees
They must inspect for hazards and inform agents/emps of any risks.
This is responsibility is covered by workers comp insurance and subject to state and fed safety laws
Agents authority
Agents authority to act can either be actual (express/implied) or apparent
Equal dignity rule
Requires that if the contract being executed is/must be in writing then so should the agents authority
Failure to comply w this cna make a contract voidable at the option of the principal (atp considered an offer)
If P decides to accept the offer, agent authority must be ratified or affirmed in writing
Implied authority
Agents have implied authority to do what is reasonably necessary to carry out their express authority and accomplish objectives of agency
Actual authority can also be implied from the position the agent occupies.
Apparent authority
When the principal causes third party to reasonably believe that the agent has authority, even if the agent doesn’t have actual authority.
Emergency powers
In unforeseen emergencies, an agent may need to take action even when cant communicate w principal
This situation grants agent the emergency power
ex-Rob, an engineer for company is injured on an oil rig far from home. Acosta, the rig supervisor, instructs a doctor, Thompson, to provide medical help to Rob and charge the costs to Pacific. Although Acosta has no express or implied authority to commit Pacific to these costs, the emergency grants him temporary authority to make necessary decisions to protect Rob’s well-being.
Emergency powers r
In unforeseen emergencies, an agent may need to take action even when cant communicate w principal
This situation grants agent the emergency power
Ratification again for some reason
occurs when the principal affirms an agent’s unauthorized act and bounds principal to agents act
If P does not ratify - then it is viewed as an unaccepted offer
t or f
An agent who exceeds his or her authority and enters into a contract that the principal does not ratify may be liable to the third party on the ground of misrepresentation.
true
requirements for RAT
check doc
Principals tortious conduct
P can be liable for harm on agent caused by their own negligence
Ex- giving unsafe instructions or giving them dangerous materials
Ex- Scott knows that Nureen is not qualified to drive trucks but nevertheless tells her to use the company truck to deliver some equipment. If nureen causes an accident that injures someone, scott will be liable for giving improper instructions
Liability for Agent’s Misrepresentation
P can be liable for agents misrepresentation if a third party suffers a loss bc of it
Depends on if the agent had actual or apparent authority and if they were acting within the scope of their agency if it is the P is responsible
Liability for Agent’s Negligence
Under the doctrine of respondeat superior (“let the master respond”), P may be liable for harm caused by an agent to a third party, even if the principal wasn’t directly at fault.
This vicarious liability means the employer can be held responsible for torts committed by an employee as long as they occurred within the course or scope of their employment
Determining scope of employment
To decide if P is liable for an agent’s torts ,courts consider if it was within the scope of employment
chekc notes for factors
The Distinction between a “Detour” and a “Frolic.”
In case Joel v. Morison, the court clarified the concept of “scope of employment” by distinguishing between a “detour” and a “frolic”:
detor
A detour - minor deviation from the principal’s business. If an agent (or employee) takes a brief side trip while still essentially doing the principal’s work, the principal is still liable for the agent’s actions.
frolic
A frolic - when the agent completely steps away from the principal’s business for personal reasons. If the agent is on a frolic of their own, the principal is not liable for their actions, as they are not acting within the scope of employment.
Liability for Agent’s Intentional Torts
Employers not liable for employees’ intentional torts that are unrelated to their job.
BUT employers can be liable for intentional torts if within the scope of employment.
Example: A nightclub owner is liable if a bouncer assaults someone while on the job.
Liability for Agent’s Crimes
Agents are usually personally liable for their own crimes even if committed within the scope of employment
Only if the principal participated in the crime will they be held liable
Some areas do have specific laws that may hold a principal liable for agents criminal violations related to work such as pricing
Termination of an agency
Similar to contract law in which it can be terminated thru act of parties or operation of law
One relationship has ended, agent no longer has right (actual authority) to bind the principal
For agent apparent authority to be determined, third persons may also need to be notified
Termination by act of parties
May be terminated by certain acts of the parties
Lapse of time - terminates automatically at the end of stated time
purpose achieved - terminates automatically on the completion of the purpose of formation
Occurrence of a Specific Event - Agency terminates automatically on the event’s occurrence.
Mutual agreement - when both parties consent to termination
At the option of one party - Either party normally has a right to terminate the agency
t or f
when an agency terminates by operation of law, there is no duty to notify third persons.
t
termination of operation by law
1-death/insanity
2-impossibility
3-changed circumstances
bankruptcy
5-war
