DUTIES OF THE AGENT AND THE PRINCIPAL TO EACH OTHER & LIABILITY OF PRINCIPAL FOR TORTS OF AGENT (RESPONDEAT SUPERIOR OR VICARIOUS LIABILITY)

Question 1

THE AGENT’S DUTIES TO THE PRINCIPAL

Answer 1

FIDUCIARY DUTIES:

1. DUTY OF CARE:
2. DUTY OF LOYALTY
3. DUTY OF OBEDIENCE

Question 2

Fiduciary Duty

Answer 2

An agent (even an unpaid one) is a fiduciary of its
principal, and owes corresponding fiduciary duties to its
principal.

Question 3

DUTY OF CARE:

Answer 3

An agent owes a duty to her principal to carry out her agency with reasonable care (a “sliding scale” depending on any special skills that the agent may have).

Question 4

DUTY OF LOYALTY:

Answer 4

The Duty of Loyalty is all about treating your principal fairly

Question 5

The agent owes a duty of undivided loyalty to the principal. This includes the following obligations:

Answer 5

1. an agent must account to the principal for any profits made while carrying out the principal’s instructions;
2. an agent must act solely for the benefit of the principal and not to benefit himself or a third party;
3. an agent must refrain from dealing with his principal as an adverse party or from acting on behalf of an adverse party;
4. an agent may not compete with his principal concerning the subject matter of the agency; and
5. an agent may not use the principal’s property (including confidential information) for the agent’s own purposes or a third party’s purposes.

Question 6

Priscilla authorizes Agnes to buy diamonds. Agnes spots choice diamonds and secretly buys them for herself for $1 million. Agnes then resells the diamonds to Priscilla for $2 million. Has Agnes done anything wrong?

What remedies does Priscilla have against Agnes?

Answer 6

Yes - she acted unfairly and actd adversely to the principal

Principal may sue for damages caused by the breach, as well as disgorgement of the profits made by the agent

Question 7

DUTY OF OBEDIENCE:

Answer 7

An agent must obey all reasonable directions of his principal. While the principal may well be liable for the agent’s acts in violation of directions (apparent authority),
the agent will be liable to the principal for any loss that the principal suffers.

Question 8

THE PRINCIPAL’S DUTIES TO THE AGENT:

Answer 8

A principal’s duties to an agent are not fiduciary in nature as fiduciary responsibilities run only from the
agent to the principal.

Nevertheless, a principal has several obligations to an agent. For example, if an agent incurs expenses or suffers other losses in carrying out the principal’s
instructions, the principal has a duty to indemnify the agent. Perhaps most importantly, unless the circumstances indicate otherwise, it will be inferred
that the principal agreed to compensate the agent for his services.

Question 9

LIABILITY OF PRINCIPAL FOR TORTS OF AGENT (RESPONDEAT SUPERIOR OR VICARIOUS LIABILITY)
A. VOCABULARY:

1. MASTER:
2. SERVANT
3. INDPENDENT CONTRACTOR

Answer 9

1. MASTER:
   * A master (i.e., an employer) is a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.
2. SERVANT:
   * A servant (i.e., an employee) is an agent so employed by a master.
3. INDEPENDENT CONTRACTOR:
   * An independent contractor is a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.

Question 10

Tests for LIABILITY OF PRINCIPAL FOR TORTS OF AGENT (RESPONDEAT SUPERIOR OR VICARIOUS LIABILITY)

Answer 10

A master is liable for torts committed by a servant within the scope of the servant’s employment. The master and the servant are both jointly and severally liable.

On the other hand, a principal is generally not liable for torts committed by an independent contractor in connection with his work.

Thus, the determination of whether a person is a servant or an independent contractor can be outcome-determinative in a particular dispute.

Question 11

SERVANT OR INDEPENDENT CONTRACTOR:

Answer 11

In general, if a person is subject to the control of another as to the means used to achieve a particular result, he is a servant. By contrast, if a person is subject to the control
of another as to his results only (but not over how to achieve those results), he is an independent contractor.

Question 12

It is often difficult to determine whether a person is a servant or an independent contractor. The
single overriding factor is whether the principal has the
right to control the manner and method by which the person performs his tasks.

Factors to consider in determining the right to control include:

Answer 12

1. skill required—where great skill is required, more likely to be an independent contractor;
2. tools and facilities—if the principal supplies the tools and facilities used to perform the job, more likely to be an employee (servant);
3. period of employment—if the period is indefinite and/or long, more likely to be an employee;
4. basis of compensation—if compensation is on the basis of time, more likely to be an employee; if compensation is paid based on the job, more likely to be an independent contractor;
5. business purpose—if the person was hired to
   perform an act in furtherance of the principal’s business, more likely to be an employee; and
6. distinct business—a person who has her own business or occupation is more likely to be an
   independent contractor.

Question 13

SCOPE OF EMPLOYMENT:

Answer 13

A master is not automatically liable for a servant’s
torts. A master is only liable if the servant was acting within the scope of his employment.

Question 14

Three factors are helpful in making this scope of employment assessment:

Answer 14

1. Was conduct “of the kind” that the agent was hired to perform?
2. Did the tort occur “on the job” (i.e., within the time and space limits of the employment)?

A minor deviation from the employer’s directions is usually within the scope. This is called a detour. A substantial deviation is usually outside of the scope. This is called a frolic.
3. Was the conduct actuated at least in part to benefit the principal?

Question 15

INTENTIONAL TORTS:
1. RULE:

Answer 15

The general rule is that the employer is not liable for the
intentional torts of an employee (e.g., battery or assault). Intentional torts are typically viewed as outside the scope of employment.

Question 16

Exception for Intentional Torts

Intentional torts will be viewed as within the scope of
employment if the conduct is:

Answer 16

1. natural from the nature of the job;
2. motivated to serve the employer; or
3. specifically authorized or ratified by the employer.

Question 17

BORROWED SERVANT:

Answer 17

An employer may lend the services of an employee to another. If the employee commits a tort in the loaned role, who is liable—i.e., who is the employer? The key issue is who has the primary right of control over the employee—the loaning principal or the borrowing principal?

That employer is liable.

Question 18

DIRECT LIABILITY:

Answer 18

Every person is liable for his own torts. Thus, a master
is liable for his own negligence if he fails to properly train or supervise employees, or fails to check an employee’s criminal record or job history.

Question 19

Mini Review

1. K Libility
2. Tort Liability

Answer 19

CONTRACT LIABILITY: Is a principal liable to a third party on a contract entered into by an agent?

1. Did the agent have actual or apparent authority at the time of the contract, or did the principal ratify the contract later?
2. If so, the principal is liable on the contract (but usually the agent is not).

TORT LIABILITY: Is an employer liable for a tort committed by an employee?

1. Was the tort committed by a servant in the scope of employment?
2. If so, the master and the servant are jointly and severally liable to the third party.