Chapter 22 Flashcards
Agency
-a legal relationship in which one party, the agent , transacts business
for and under the control of the second, the principal.
-Agent must agree to act for the principal
Third party
individual with whom the agent deals for the principal
Principle Agent Relationship
-An agency relationship is always consensual because the agent must
agree to act for the principal.
-The agency relationship is fiduciary because the agent and principal
trust each other
Employer-Employee Relationship
-The legal principles governing the relationship of principal and agent
and of employer and employee are very similar.
-The main distinction between the two relationships is that agent–
employees have the authority to deal with third parties on behalf of
the principal.
-Scope of employment: Involves the range of activities for which the
servant is engaged
Master and Servant
-a person who has the right to control the activities of another person.
-the person whose activities are controlled
Independent contractor
-a party who agrees to do a job and retains complete control over the
methods employed to obtain final completion
-Independent contractors are not subject to the control of the
proprietor.
-They maintain all required business licenses and permits and pay all
job-related expenses; they are obligated only to get the job done
Proprietor
-The party for which an independent contractor works
Disclosed principal
one whose identity is known by third parties dealing with that
principal’s agent
Undisclosed principal
When an agent does not reveal the existence of an agency
relationship but appears to act on his or her own behalf rather than
for another
Partially disclosed principal
exists when the agent, in dealing with third parties, reveals the
existence of an agency relationship but does not identify the
principal
General agent
a person who is given broad authority to act on behalf of the
principal in conducting the bulk of the principal’s business activity on
a daily basis
Special agent
a person who is authorized to conduct only a particular transaction,
conduct a series of related transactions, or perform only a specified
act for the principal.
-Examples are real estate brokers, lawyers, and accountants who are
retained to do a specific job and whose authority is restricted to
those acts necessary to accomplish it.
Liability
The principal is liable for all contracts that a general or
special agent may enter into with third parties, as long as the
agent acts within the authority conferred by the principal
Scope of Agent’s Authority
Agents may perform only acts that have been authorized by
the principal.
-Unauthorized actions do not bind the principal unless those
actions can be reasonably assumed by a third party to be
within the scope of the agent’s authority
Scope
an agency relationship is generally created by the
following methods:
1.By appointment and implication
2.By necessity and operation of law
3.By estoppel and ratification
Ratification
-occurs when the principal approves the unauthorized act
performed by an agent or by one who has no authority to act as
an agent
-In an agency by ratification, the principal makes an agreement to
fit circumstances that already exist.
Agency by appointment
-occurs when the principal either orally or in writing creates the agency
relationship
- agent’s express authority is created at the same time that the principal
appoints the agent and creates the agency relationship
Implied authority
-The agent’s authority to perform acts that are necessary or customary to
carry out expressly authorized duties
-Incidental authority or customary authority
Apparent authority
When a principal, by words or actions, leads a third party to believe that a non-agent is an agent
Tort Liability
In some jurisdictions, if an employer is negligent in checking an employee’s
qualifications and consequently hires someone who is incompetent,
dangerous, or even aggressive.
- The employer may be held liable should an innocent third party be injured by the actions of the incompetent, dangerous, or aggressive employee
Criminal Liability
The principal or employer ordinarily is not liable for an agent’s or employee’s crimes, unless the principal or employer actually aids or participates in their commission
Independent Contractors
-Any tort committed by an independent contractor is the responsibility of the
independent contractor, not the proprietor
- Proprietors can be held liable if they are not careful enough in hiring, training,
supervising, and/or retaining an independent contractor
