Agency (Chapter 16) Flashcards
Agency
The fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act in his or her behalf and subject to his or her control and consent by the other so to act.
What is a principal-agent relationship? What is agreed upon?
The agent agrees to represent the principal. The agent will act on behalf of and instead of the principal when doing business with others. The agent can perform acts that bind the principal.
Why is agency law necessary to the existence and operation of a corporation or business?
A corporation can only function and act through its agents; the agents represent the company and perform acts that bind them. (Most employees are agents of their employer, so some employment law applies).
What are agency relationships based on? What does agency law overlap with? What has to be distinguished?
A fiduciary relationship; it is based on care and loyalty. Agents act on principal’s behalf and relationship is both legal and ethical. Agency and employment law overlaps, could have an independent contractor (outside employment relationship). Must distinguish if independent contractor or employee.
How is an agency relationship formed?
1) By Agreement: Formed through express oral or written consent or implied by conduct.
2) By Ratification: Principal by act or agreement ratifies the conduct of a person who is not an agent. What is the principal’s intent?
3) By Estoppel: Principal causes a 3rd person to believe that another person is principal’s agent, and the 3rd person acts to his or her detriment in reasonable reliance on that belief.
4) By Operation of Law: Formed in emergency situations where agent is unable to contact principal and failure to act outside scope of agent’s authority would cause the principal substantial loss; based on a social or legal duty where.
What duties does an agent have to their principal?
1) Performance: Agent must use reasonable diligence and skill in performing duties, if they fail to do so they may be liable or breaching duty. Degree or skill is that which would be expected of a reasonable person under similar circumstances.
2) Notification to Principal: Concerning subject matter of agency.
3) Loyalty: No conflict of interest, agent must act solely for the benefit of the principal. No secret profit for the agent and the issue is confidential.
4) Obedience: Agent must follow all lawful and clearly stated instructions of the principal.
5) Accounting: Agent has a duty to keep and make available to principal an account of all property and funds received and paid out on principal’s behalf.
What are the principal’s duties to the agent?
1) Compensation: Principal’s duty to pay agent for services.
2) Reimbursement and Indemnification.
3) Cooperation: Principal has duty to cooperate with agent and to assist them in performing duties. Principal must not do anything to prevent performance.
4) Provide safe working conditions: Principal has duty to inspect working areas and warn agents about unsafe situations. (When agent is employee, OSHA applies and worker’s comp covers injuries).
What are the rights and remedies of agents and principals?
For every duty of one, the other generally has a corresponding right. An agent can perform any agency duties without principal’s interference. When one party violates their duty to the other, remedies available come from tort and contract law. (Monetary damages, termination of relationship, injunction, required accountings).
What is the scope of the agent’s authority?
Principal is liable for acts entered into by agent when agent is given actual or apparent authority.
Actual authority: “Express” or “implied” authority, authority in clear, direct, definite terms. Power to do what is reasonably necessary to carry out express authority and accomplish agency objectives. What would be all the things that come with a business manager who was to run a small business operation?
Apparent Authority: Arises from what a principal causes a third party to believe are the agent’s powers through their words/actions. (Estoppel, Emergency, Ratification).
When is the principal liable for the agent’s actions?
If an agent works within their scope of authority then the principal is usually obligated to perform whether the principal is disclosed, unidentified or undisclosed. If the agent has no authority but acts to bind the principal, principal can’t be liable on the contract. Principals are also responsible for agent’s negligence under doctrine of “Respondeat Superior.” Vicarious liability for employee’s negligent torts in course and scope of employemnt. (Look at Slide 16).
What is “within the course and scope of employment?” Is principal liable for agent torts committed within scope of employment?
Third party liability flows through agent to principal; when agent acts outside principal’s authority, liability is not clear. Distinction between detour and frolic. Yes, but there is generally no relation between intentional torts and employment. Liable for employee acts they knew or should have known about and employee had propensity to commit; exposed to tort liability whenever 3rd party sustains a loss due to agent’s misrepresentation if in scope of employment.
What is the liability for agent’s crimes?
Agent is liable for his or her own crimes committed within scope of employment, principal only is if they authorized or participated in crime.
If an agent is not an employee, what could they be? Is it necessarily an agency relationship?
An independent contractor. A person who contracts with another to do something for him but is not controlled by the other nor subject to their right to control with respect to physical conduct in performance of undertaking. Relationship may not involve an agency relationship.
How do you determine if a worker is an employee or independent contractor? (Slides 22-24). what does the court consider?
Does the Employer exercise a great deal of control over the details of the work?
Is the worker engaged in an occupation or business distinct from the Employer?
Is the work usually done under Employer’s supervision?
Does Employer provide the tools?
Has the worker been employed a long time?
Is the worker paid at the end of a job?
Is there a degree of skill required?
Review Slide 28, principal’s liability analysis. What is the flow?
A principal is generally not liable for the actions of an independent contractor unless strict liability is at hand. Principals are liable for actions committed in the course and scope of employment, but not for those that are not.
