Agency lecture notes
1. Define agency.
2. Distinguish between employer/employee, principal/agent and independent contractor.
3. List and describe the duties of agents and principals to each other.
4. Define the concept respondent superior and explain employer/principle responsibility for the tortuous conduct of an employee, agent.
Employer-employee- employer has the right to control the physical conduct of the employee
Principal-agent- agent has authority to act on behalf of the principal as authorized by the principal and implied from the agency; an employee is often the agent of his or her employer
Principal- independent contractor- principal has no control over the details of the independent contractor's conduct; an independent contractor is usually not an agent of the principal
Definitions, classifications> expressed, implied, apparent, by ratification, gratuitous, coupled with an interest, subagents
Creation> agreement of parties, ratification, estoppel, operation of law
Constraints on Agency Relationships> contractual incapacity of principal, unlawful or nondelegable purpose
Principal's Duties to Agent> Cooperation, compensation, reimbursement, indemnification
Agent's Duties to principal- loyalty, obedience, performance, reasonable care, accounting, notification
Agent's Authority to Act- Actual, Apparent
Termination- By Act, by Agreement, by Operation of Law
Factors defining an Independent Contractor Relationship:
A person cannot really be considered an independent contractor unless:
-In addition to working for you, they provide services to the general public
-They perform more than de minimus services for many unrelated persons or firms at the same time
- They make a profit or suffer a loss as a result of their services
-They invest in facilities or equipment that are used by them in performing their services that are not typically maintained by an employee
- They determine the work flow, hours of work, and in what sequence their duties are to be performed
- There normally exists a written contract that defines what they are expected to do, the timeframe, and the amount of payment for the work to be performed
Factors Defining an Employee/Employer Relationship:
A person is most likely to be considered your EMPLOYEE if:
-You control when, where, and how the person performs the work
-Their services are integrated into your business operations
-They work substantially full-time for you and there is an ongoing relationship
- You establish hours of work, train them, and make regular payments to them by the hour, week, or month
- They are required to personally provide services to you and you train them to do the work
- They perform work in the order or sequence established by you
- You have the right to terminate them and they have the right to quit at any time
- You provide tools, materials, or equipment for them to use and pay other business or travel expenses
Liability of the Principal for Torts of the Agent
Respondeat Superior- the principal is vicariously liable (regardless of whether he or she is personally at fault) for the torts of an employee agent if they are committed within the scope (actual or apparent) of the agent's employment. The rule is the same for master and servant.
The act falls within the scope of the agent's employment if it is the type of act the agent is authorized to perform, if it takes place substantially within the time and place that it is authorized, and if it is intended to serve the principal in some way.
Even if the agent violated the principal's instructions in committing the tort, the rule of respondeat superior applies. However, if the agent or servant departs from the performance of his or her duties and acts on his or her own (frolic and detour), the principal is not liable.
An intentionally tortious act is not likely to be performed within the scope of employment. It is usually for the agent's own benefit.
The agent remains liable for his or her own tort and the injured third person can choose to hold the agent or the agent's principal liable (but only one recovery).
Liability of the Principal for the Crimes of the Agent
Ordinarily, a principal is not liable for his or her agent's crimes even when they are committed in the course of the agent's employment.
However, the principal is liable if the principal participated in the crime some way or if a statute makes the principal liable. A principal cannot ratify the crimes of the agent after their commission.
Contractual Liability of Agent to Third Parties
An agent who is authorized to act by a disclosed principal is personally liable to third parties if the agent contracts in his own name, the agent makes herself a party to the contract, the agent personally guarantees the principal's performance, or the agent signs a negotiable instrument on which the principal does not appear.
Contractual Liability of the Principal to Third Parties
Disclosed principal- if the third party dealing with the agent knows of the existence of the agency and the identity of the principal, then contracts made by the agent in the exercise of his or her actual or apparent authority will bind the principal only.
Partially Disclosed principal- If the third party dealing with the agent knows of the existence of the agency but not the identity of the principal, then contracts made by the agent bind both the agent and the principal
Undisclosed principal- If the third party dealing with the agent with the agent has no knowledge of either the existence of the agency or the identity of the principal, then contracts made by the agent bind the agent only.