The Agency Relationship and Third Parties

Question 1

What is the authority of the agent?

Answer 1

The general rule is that an agent acting within the scope of his authority may bind his principal in contract.

Generally, a principal may be bound to contracts executed by the an agent if it is within the agent’s authority to contract on behalf of that principal.

An agent’s authority may be actual or apparent.

Question 2

What is actual authority?

Answer 2

It is created by the manifestation of the principal to the agent of the principal’s request that the agent act for the benefit of the principal in a particular way, and that the principal agrees to be bound by the actions of the agent.

The consent for actual authority may be written, oral, or through any other method of communication.

An agent has actual authority to take actions designated or implied in the principal’s manifestations and acts that are necessary or incidental to achieving the principal’s objectives, as the agent reasonably understands them when the agent determines how to act.

Question 3

What is express actual authority?

Answer 3

Express authority arises when the principal directly requests the agent to act on the principal’s behalf in a specific matter.

Inherent in a grant of express authority is the principal’s consent to any actions that are incidental to the agent’s carrying out of his primary grant of authority.

Consent to the authority need not be written and may be demonstrated by merely completing the task.

The equal dignities rule holds that if a contract must be in writing, the grant of authority to an agent to enter into such contract on behalf of the principal must also be in writing.

Question 4

What is implied actual authority?

Answer 4

Implied authority includes the authority to do:

1. anything necessary to accomplish the principal’s express request of his agent; or
2. those things the agent believes the principal wishes him to do based on his reasonable understanding of the principal’s expressed request.

Question 5

What is apparent authority?

Answer 5

It arises based on the principal’s representations made not directly to the agent, but to a third party. Because of these representations, the third party is led to believe the agent is acting with the principal’s authority.

Under the doctrine of apparent authority, a principal is accountable for the results of third party beliefs about an actor’s authority to act as an agent when the belief is reasonable and is traceable to a manifestation of the principal. The third party must reasonably rely to his detriment upon the authority of the purported agent in order to bring suit against the principal.

A principal may be liable to a third party for knowingly or negligently allowing a purported agent to assume authority or to overextend his legitimate authority. Also, the over-reaching agent will still be held liable to the principal for his unauthorized acts.

Only the principal has the ability through his actions to create apparent authority of an agent with respect to third parties; the agent cannot create his own apparent authority with respect to third parties.

Apparent authority requires some overt action by the principal.

Question 6

What is agency by estoppel?

Answer 6

A principal may properly deny the existence of an agency relationship, including apparent authority, if there is a lack of a manifestation by the principal that the purported agent holds authority to complete the transaction in question.

A third party may fight an estoppel claim by showing justifiable inducement under the circumstances because;

1. the principal intentionally or carelessly caused such belief; or
2. having notice of such belief and that it may induce others to change their positions, the principal did not take reasonable steps to notify them of the facts.

Question 7

What is agency by ratification?

Answer 7

Ratification allows a principal to grant retroactive authority for his agent’s earlier unauthorized actions.

The ratified act must be one that the principal could have authorized at the time of the act, meaning the principal must have been in existence. Ratification will only grant authority. it does not legitimatize an otherwise illegitimate transaction, nor will it grant authority to a nondelegable act.

A person ratifies an act by:

1. manifesting assent that the act will affect the person’s legal relations; or
2. performing some conduct that is justifiable only on the assumption that the person so consents.

Any act done on behalf of the principal or purported to be done for the principal may be ratified. Once an act has been ratified it has the effect as if it were originally done by the agent with actual authority.

Question 8

What are the limitations of ratification?

Answer 8

A principal may not partly ratify an act. Ratification of any part of the act or contract is deemed to constitute ratification of the whole.

The following conditions are necessary for ratification to be effective:

1. the act the principal is seeking to ratify must have been otherwise valid at the time it was performed;
2. the principal must have been in existence when the act was performed and must be legally competent when he attempts to ratify;
3. the act must have been performed on behalf of the principal;
4. the ratification must have the same formalities that would have been required to give authorization initially and, by extension, any formalities that the original act itself would have required; and
5. at the time of ratification, the principal must know of all material facts concerning the transaction.

A ratification will not be effective if, prior to ratification, the ratification would have an adverse effect on third parties in the following circumstances:

1. manifestation of intention to withdraw form the transaction by the third party;
2. a material change in the circumstances that would make it inequitable to bind the third party, unless the third party chooses to be bound; and
3. a specific time that determines whether a third party is deprived of a right or subjected to a liability.

Manifestation of intent can be implied as well as express.

Question 9

What is the retroactive effect of ratification?

Answer 9

Generally, a ratified transaction is given retroactive effect, but ratification by a principal who did not have capacity when the transaction took place is effective only from the date of ratification.

Question 10

May an agent delegate his responsibilities as an agent?

Answer 10

In general, if the authority given involves the agent using his own judgment, he cannot delegate his responsibilities absent an emergency or explicit agreement of the principal.

An example of a responsibility that an agent may not delegate is a duty to perform personal services on behalf of the principal for another.

Delegation of such a duty would be a material change in understanding when a principal has hired a particular person to perform a particular act.

Question 11

When does a principal have liability for torts committed by agents?

Answer 11

Respondeat superior is the doctrine that imposes vicarious liability upon a principal for the torts his agents committed in the course of agency.

Liability attaches to the employer upon a showing that:

1. an employer-employee relationship existed at the time of the act; and
2. the tortious act was committed within the scope of employment.

A release of the agent’s liability operates to release the principal from liability as well.

Question 12

What is the scope of employment?

Answer 12

An employee acts within the scope of employment when performing tasks assigned by the employer or engaging in a course of conduct subject to the employer’s control.

Employee’s scope of employment also includes acts incidental to some service being performed for the employer as well as acts arising out of an emotional response to actions being undertaken for the employer.

An employee’s act is not within the scope of employment when it occurs within an independent course of conduct not intended by the employee o serve any purpose of the employer.

Any employee’s actions may still be within the scope of his employment even while disobeying his employer’s orders or acting beyond the scope of his assigned authority.

Unless only one reasonable conclusion can be drawn, whether an employee was acting within the scope of employment is a question to be determined by the trier of fact.

The P bears the burden of proving that the D employee was acting with the scope of employment when he committed the tortious act.

Question 13

What s a frolic and detour?

Answer 13

Torts committed by the employee on the way to or from work are generally considered outside the scope of employment, unless the employer places the employee’s travel to and from work within the scope of employment by providing the employee with a vehicle and exerting control over how the employee uses the vehicle so that the employee may more readily respond to the needs of the employer’s enterprise.

An employer will not be liable if the employee has substantially deviated from the authorized route (a frolic), but will be liable if the deviation is slight (a detour). However, an employee can return to the scope of employment after a frolic occurs. The extent of the deviation is a question of fact:

1. the advancement of the employer’s interests;
2. whether the accident occurred before or after the employer’s objective was served;
3. the scope of the deviation in terms of time and distance; and
4. whether the deviation was in keeping with the type of employment.

Question 14

What is the liability if the employee drives his own automobile?

Answer 14

An employer-employee relationship may still be found even if the negligent employee was using his own automobile and choosing his own route and speed at the time of the accident.

Question 15

What is the liability for negligently selecting an agent?

Answer 15

There is a cause of action for negligent hiring and retention of employees.

A principal is liable to a third party for harm caused by the principal’s negligence in selecting, training, retaining, supervising, or otherwise controlling the agent.

Question 16

What liability is there for intentional torts?

Answer 16

Employers will generally not be held liable for the intentional tort of an employee unless the tort occurred during an attempt to serve the interest of the employer.

An employer may be held liable for his employee’s intentional torts if the act was done in the course of doing the employer’s work, and for the purpose of accomplishing it.

A controlling factor is whether an employer-employee relationship existed with respect to the particular transaction from which the tort arose.

The modern trend is to extend an employer’s liability to situations where the type of employment provides a peculiar opportunity and incentive for the commission of an intentional tort. Where argument is likely to be part of the employee’s duties, and such conduct is wholly or partially in furtherance of the employer’s business, liability will be imposed on the employer for those intentional torts which arise from the argument.

It is no defense that the employer had previously instructed the employee not to use force in the performance of his duties.

Question 17

Are common carriers more likely to be held liable for intentional torts?

Answer 17

Yes.

Question 18

What is the liability of a principal when the agent is not liable?

Answer 18

Generally, a principal cannot be held vicariously liable for the acts of his agent if:

1. a court finds the agent not liable for the tort;
2. the agent is immune from liability under common law or by statute; or
3. the P agrees to a settlement with the agent.

A covenant not to sue the agent bars a P from suing the principal under a theory of vicarious liability.

Question 19

Who may enforce contracts entered into by an agent?

Answer 19

If the principal is disclosed, only the principal and not the agent may enforce the contract and hold a third party liable.

Generally, if the principal is partially disclosed or undisclosed, ether the principal or the agent may enforce the contract and hold a third party liable. However, if the agent has fraudulently concealed the principal’s identity, the principal may not enforce the contract and the third party is granted a right of rescission. There must have been some affirmative misrepresentation.

Question 20

What liability is there for independent contractors?

Answer 20

Generally, a principal is not responsible for the tortious conduct of an independent contractor.

Note that there is a middle ground, whereby the actor is a non-employee agent but some control is exerted over the actor. If the tort occurs within the scope of that limited control, the principal will be liable.

Contrary to the general rule set forth above, a principal may be held liable for the torts of an independent contractor in the following circumstances:

1. inherently dangerous activities (where the nature an circumstances of the work to be performed are such that injury to others will probably result unless precautions are taken);
2. nondelegable duties (certain relationships impose a duty of care which cannot be discharged even by the employment of a carefully selected independent contractor); and
3. the negligent selection of a contractor.

Question 21

What liability is there for police officers?

Answer 21

POs are often employed by a private person to perform such services as directive traffic or maintaining order.

Tort liability depends on the extent to which the private person has the right to control the activities of the officer.

If the tort arises from an activity for which the officer has been given instructions by the employer, then the employer may be liable.

Question 22

What liability is there for borrowed employees?

Answer 22

A person who is generally the employee of one employer may become the borrowed employee of another.

Typically, the borrowed employee is one who is doing the work of a third party, but is being paid by the original employer.

The right to control is the key test. If the employer who loaned the employee does not continue to exercise control over the employee, he will not be liable even though he continues to pay the employee.

Important factors in determining whether control has been completely transferred to the new employer include:

1. the manner of hiring;
2. the mode of payment;
3. the right to discharge; and
4. the manner of direction of services.

The presumption is that the original employer maintains the right to control the employee, but if the borrowed employee commits the tort at the bidding of the borrower, vicarious liability attaches to the borrower.

So long as the original employer relinquished control over the loaned employee, the original employer’s vicarious liability is suspended and transferred to the borrowing employer.

Question 23

What is apparent agency?

Answer 23

Another type of agency occurs when the circumstances are such that although the person committing the tort is an independent contractor, the doctrine of apparent agency will cause the person who appears to be the principal to be vicariously liable.

Proof of apparent agency generally requires:

1. that the apparent principal actually or negligently acquiesced in the agent’s exercise of authority;
2. the third person had knowledge of the facts and a good faith belief that the apparent agent possessed such authority; and
3. the third person relied on this apparent authority to his detriment.

Hospitals are not vicariously liable for independent contractor doctors who render independent medical opinions.

However, in certain circumstances, a hostipa may be held vicariously liable for the negligent acts of its independent contractor doctors under a theory of apparent agency.

To determine whether an independent contractor doctor may be deemed ostensible agent of the hospital, Oklahoma courts consider:

1. whether the patient, at the time of admittance, looks to the hospital solely for treatment, with no belief that the physicians were acting on their own behalf rather than as agents of the hospital;
2. whether there was a preexisting relationship between the patient and the doctor; and
3. whether the hospital plays the doctor a salary or bills for the doctor’s services.