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Agency Law

Agency Law

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  • 1. CHAPTER 17 Agency
  • 2.
    • What is the difference between an employee and an independent contractor?
    • How do agency relationships arise?
    • When is a principle liable for the agent’s actions? When is the agent liable?
    • What are some of the ways in which the agency relationship can be terminated?
    Learning Objectives
  • 3. Introduction
    • Agency= Principal and Agent.
    • Understanding agency is crucial to understanding the legal environment of business.
    • Principals use agents to be able to conduct multiple business operations simultaneously in various locations.
    • The principal has the right to control the agent in matters entrusted to the agent.
  • 4.
    • Agency is a “fiduciary” relationship based on trust and confidence.
    • Distinguish Employee vs. Independent Contractor Relationships.
    Agency Relationships Employer Employee Independent Contractor
  • 5. Employee vs. Independent Contractor Analysis x Is there a great degree of skill required? x Does the Employer exercise a great degree of control over the details of the work? I.C. E’ee Factors Courts Consider: (“X” = Yes) x Is the worker engaged in an occupation or business distinct from Employer? x Is the work usually done under Employer’s supervision? x Does Employer provide the tools? ? How is the worker paid and how long has he been employed?
  • 6. Employer Liability
    • Determining whether the worker is an employee or an independent contract affects liability of Principal/Employer.
      • Tax Liability: Employer liable if employee.
      • Contract Liability: Employer not necessarily liable.
      • Tort Liability: Employer liable for torts of employee within scope of employment.
      • “ Works for Hire”: Graham v. James (1998).
  • 7. How Agency Relationships Are Formed
    • Consensual Agreement.
    • No consideration required.
    • Principal needs contractual capacity, Agent does not.
    • Can be for any legal purpose.
  • 8. Types of Agencies
    • Agency by Agreement.
      • Formed through express consent (oral or written) or implied by conduct.
    • Agency by Ratification.
      • Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent.
  • 9. Types of Agencies
    • Agency by Estoppel.
      • Principal causes a third person to believe that another person is the Principal’s Agent, and
      • The third person acts to her detriment in reasonable reliance on that belief.
  • 10. Types of Agencies
    • Agency by Operation of Law.
      • Agency based on social duty is formed in certain situations when the Agent is unable to contact the Principal.
      • Necessaries for family.
      • Emergency.
  • 11. Duties of Agents and Principals
    • Performance: reasonable diligence and skill (special skills).
    • Notification to P.
    • Loyalty (no conflict of interest).
      • American Express v. Topel (1999).
    • Obedience.
    • Accounting.
  • 12. Principal’s Duties to Agent
    • Compensation (Express or Implied).
    • Reimbursement and Indemnification.
    • Cooperation.
    • Provide safe working conditions.
  • 13. Agent’s Authority
    • Principal is liable for acts entered into by Agent when she gives Agent either actual or apparent authority:
      • Actual Authority: express or implied.
      • Apparent Authority: estoppel, emergency and ratification.
  • 14. Express Authority
    • Can be oral or written.
      • “Equal Dignity Rule”: if law requires written contract, Agent’s authority must be in writing. Failure to comply with the rule renders contract voidable. Exceptions:
        • Officer acting for Corporation.
        • Agent acts in Principal’s presence.
    • Power of Attorney (ordinary v durable).
  • 15. Implied Authority
    • Inferred or conferred by custom, Agent’s position or what is reasonably necessary to carry out Agent’s express authority.
    • What the Agent reasonably thinks the Principal means.
  • 16. Apparent Authority
    • Principal, by either word or act, causes 3rd party to reasonably believe that Agent has authority to act for Principal.
    • If 3rd party changes legal position by relying on Principal’s representations, Principal is estopped from denying Agent had authority to contract.
  • 17. Ratification Authority
    • 1. Agent must act on behalf of Principal.
    • 2. Principal must affirm entire deal.
    • 3. Principal must affirm before 3rd party withdraws from transaction.
    • 4.Principal and 3rd party must have legal capacity to contract when Agent made the deal.
    • 5. Principals must know all the material facts involved in the transaction.
  • 18. Liability for Contracts
    • Principal’s liability for Agent’s contract depends on whether Agent’s actions were authorized or unauthorized.
    • Principals are classified as:
      • Disclosed: identity known to 3rd party.
      • Partially Disclosed: 3rd party knows he is dealing with Agent, but doesn’t know Principal’s identity.
      • Undisclosed: 3rd party does not know he is dealing with an Agent, and Principal’s identity is totally unknown.
  • 19. Liability: Authorized Acts
    • Disclosed or partially disclosed Principal is liable to 3rd party if Agent acts within scope of authority.
    • Agent has no liability to 3rd P for disclosed Principal’s non-performance. (Agent may be liable if Principal is partially disclosed).
  • 20. Liability: Authorized Acts
    • If undisclosed Principal, no liability unless:
      • Principal expressly excluded.
      • Contract is a negotiable instrument.
      • Agent’s performance is personal.
      • 3rd party would have contracted if he knew the Principal’s identity.
      • McBride v. Taxman Corp (2002).
  • 21. Unauthorized Acts
    • Unauthorized acts outside of Agent’s express, implied or apparent authority.
    • If Agent has no authority, Principal is not liable, but Agent is liable.
  • 22. Principal’s Liability For Agent’s Torts
    • Agent is liable to 3rd party for his own torts.
    • Principal may be liable for Agent’s torts if they result from:
      • Principal’s own tort.
      • Principal’s authorization of tort.
      • Agent’s unauthorized but fraudulent conduct made within scope of agency.
      • Respondeat Superior 
  • 23. Liability for Agent’s Negligence
    • Applies only to Employer-Employee relationships.
    • Principal/Employer is vicariously liable for Agent/Employee’s negligent torts if committed within the Agent’s “course and scope of employment” ( respondeat superior ).
    • Distinction between Detour vs. Frolic .
  • 24. Scope of Employment X Did the act involved a serious crime? X Did Employer have reason to know Employee would do the act? X Did Employer furnish instrumentality (tools)? X Did act advance Employer’s interests? X Was act commonly performed by Employees? ? ? The Time place and purpose of act (factually based) X Was Employee’s act authorized by Employer? Employer NOT Liable Employer Liable Factors: For Principal to Be Liable, Agent’s Act must have occurred within the Course and Scope of Employment. (X = Yes)
  • 25. Liability for Agent’s Intentional Torts
    • Principal liable for intentional torts committed with the scope of employment.
    • Employee is a tortfeasor as well.
    • Employer is liable for Employee’s acts which Employer knew or should have known the Employee had a propensity to commit.
  • 26. Liability for Independent Contractor’s Torts
    • First determine whether worker is employee or independent contractor.
    • General rule: Employer is not liable for acts of independent contractors because Employer no right to control.
    • Exception: hazardous activities
    • Independent Contractor is liable for her own torts.
  • 27. Principal Liability: Review Worker P Generally Not Liable (unless strict liability) Outside CSE-P Not Liable Within CSE -P Liable “ Course and Scope of Employment” Independent Contractor Employee Factors
  • 28. Liability for Agent’s Crimes
    • General Rule: Agent is liable, Principal is not, unless:
      • Principal authorized or participated in crime.
      • Some jurisdictions hold Principal liable for violating statutes.
  • 29. How Agency Relationships Are Terminated
    • Agency can be terminated by:
      • An Act of the Parties; or
      • By Operation of Law.
    • Once agency terminated Agent has no actual authority to bind the Principal, but may have apparent authority to bind Principal.
  • 30. Termination By Act of the Parties
    • Lapse of Time.
    • Purpose Achieved.
    • Occurrence of a Specific Event.
    • Mutual Agreement.
    • Termination by One Party.
    • Notice of Termination.
  • 31. Termination By Operation of Law
    • Death or Insanity of either Principal or Agent: automatic.
    • Impossibility.
    • Changed Circumstances.
    • Bankruptcy.
    • War.