MGMT 311 - Chapter 19

Agent definition?

A person who agrees to represent or act on behalf of another

Principal definition?

The person whom the agent represents or acts on behalf of

Fiduciary as a noun definition?

A person having a special duty created by his agreeing to act for the behalf of another

Fiduciary relationship as an adjective definition?

One that involves trust & confidence

Employer-Employee Relationships description?

- Most common relationship
- All employees that go out and interact with 3rd parties are agents
-Employers have liability for employees

Employer-Independent Contractor Relationship description

- Not considered employees because employer does not have control over details of their work

Questions to determining employee status?

1. How much control can the employer exercise over the details of the work? Most important question
- What is possible to control
2. Is the worker engaged in an occupation or business distinct from that of the employer?
3. Is the work usually done under the employer's direction or by a specialist without supervision?
4. Does the employer supply the tools at the place of work?
5. For how long is the person employed?
6. What is the method of payment - by time period or at completion of the job?
7. What degree of skill is required of the worker?

IRS criteria

-Different factors for employers to label individual contractors for tax purposes
1. Less liability
2. Less taxes to pay
-Tax liability if mischaracterized on audit

Works for hire description?

-Person owns what they create if copyrighted & is an individual contractor,
- So a works for hire contract states who actually owns copyright material

Cooley v. Penguin Group

Copyright infringement because sculptor (work for hire) had copyrightable stuff and photographer took photos and sold later on without an agreement

What are the different types of formation of agency relationship?

A. Agency by Agreement
B. Agency by Ratification
C. Agency by Estoppel
D. Agency by Operation of Law

Agency by Agreement description?

1. May be an expressed agreement (oral, written)
2. May be an implied agreement (inferred from conduct)

Agency by Ratification description?

- Agent did something not allowed to do but principal accepts
- Ratification - give legal effect to someone's actions

Agency by Estoppel description?

- To be barred or prevented from denying something
1. The principal's action creates the appearance of an agency that does not actually exist
2. A third person reasonably believed that the agency existed

Agency by Operation of Law description?

Example: medical emergency

Duties, Rights, and Remedies of Agents and Principals?

- The bottom line is the relationship is a fiduciary relationship based on trust and confidence. Both should engage in honest, good faith behavior with each other

What does the liability of the principal to 3rd parties depend on?

Principal's liability to 3rd parties depends on whether the agent had the authority to enter legally binding contracts on behalf of the principal

Types of Agent's Authority?

A. Express Authority
B. Implied Authority
C. Apparent Authority
D. Emergency Powers
E. Ratification

Express Authority description?

1. Can be either oral OR written
2. Authority is clear, direct, and in definite terms (has to be)
3. Equal Dignity Rule - in most states IF: the contract being executed is or must be in writing, then the agent's authority must be in writing, too

What are exceptions to Equal Dignity Rule?

1) Executive officer in a corporation when acting for the corporation in an ordinary business situation
2) When the agent acts in the principal's presence
3) When agent's act of signing is merely perfunctory (superficial), isn't legally required, ceremonial

What is the Power of Attorney?

- Can be special or general
- It gives an agent express authority
- Best evidence of express authority

Implied Authority description?

- Is reasonably necessary to carry out express authority; and can be conferred by custom or inferred from the agent's position

Apparent Authority description?

- When principal, by word or action, causes a 3rd party to believe that the agent has authority to act, even though agent has no expressed or implied authority
1. Pattern of Conduct
2. Apparent Authority and Estoppel
-Refer to Agency by Estoppel and Case in Point in 19.5

Emergency Powers description?

- Unforeseen emergency demands action by an agent to protect rights and/or property of the principal; agent is unable to communicate with principal; agent has emergency power

Ratification description?

- Principal accepts responsibility for agent's Unauthorized actions
-6 requirements (don't have to know the 6)

What are the different types of Liability for Contracts?

1. Disclosed principal
2. Partially disclosed principal
3. Undisclosed principal

Disclosed principal description?

- Principal's identity is known by the 3rd party at the time the contract is entered into with the agent

Partially disclosed principal description?

- The principal's identity is not known by the 3rd party, but the 3rd party knows that the agent is or may be acting for a principal at the time of the contract

Undisclosed principal?

- Principal's identity is totally unknown by the 3rd party, and the 3rd party has no knowledge that the agent is acting on the principal's behalf at the time of the contract
Case in point 19.20 guest example

For Authorized Acts who has Liability for Contracts?

1. Principal is obligated to perform the contract
2. Agent's Liability depends:
a. Disclosed principal - agent has no contractual liability for principal's nonperformance
b. Partially disclosed principal - agent is treated as a party to the contract
c. Undisclosed principal - agent is liable but is entitled to indemnification from principal

Who has liability for contracts for unauthorized acts?

- Principal is not liable but agent is

Liability for Torts description?

A. Employer's own negligence and negligent in hiring/retention of employees
B. Employer is also liable for torts committed by employees - wrongs harming 3rd parties (civil liability - 3rd sues employer for $$)

Doctrine of Respondent Superior?

- The employer (principal) is liable for any harm caused to a third party by an employee (agent) committed by the employee (agent) within the course and scope of employment
- 2 part analysis: The employer is liable for any harm caused to a third party by:
1. An employee
2. If harm is committed within the course and scope of employment

Harrison v. Tallahassee Furniture Co.

- Tallahassee hired furniture delivery guy with no interview, background check on nothing
- Employee attacked woman while delivering so Harrison sued and won because he has juvenile record, cut wife, and drug use and was fired from previous job

How to prove Negligence for Employers?

- Employers are directly liable for harm to third parties due to employer's own negligence in hiring/retention of employees
- Duty: Employer owes a duty of care in hiring/retaining employees
- Causation: Breach of duty is the factual and foreseeable cause of
- Damages: to third parties

What is course and scope of employment?

- 8 factors to determine course and scope:
1. Whether the employee's act was authorized by the employer
2. The time, place, and purpose of the act
3. Whether the act was one commonly performed by employees on behalf of their employers
4. The extent to which the employer's interest was advanced by the act
5. The extent to which the private interests of the employee were involved
6. Whether the employer furnished the means or instrumentality (such as a truck or machine) by which an injury was inflicted
7. Whether the employer had reason to know that the employee would perform the act in question and whether the employee had done it before
8. Whether the act involved the commission of a serious crime

What are the additional basic rules applicable to course and scope?

1. Going and Coming Rule
2.Special Errand Exception
3. Distinction between Detour/Frolic

What is the Going and Coming Rule?

- Employee traveling to and from work is NOT acting in course and scope of employment
- Traveling salespersons don't apply since traveling time is considered within scope of employment

What is the Special Errand Exception?

- If employee is on a special errand for employer at time of accident, employer IS liable
- If special errand is within employee is going to and from work then employer is still liable however there are exceptions

Distinction between Detour/Frolic?

a. Detour - a personal errand that remains in course and scope
b. Frolic - employee is outside course and scope
- turned back on employer, doesn't seem to care

Studebaker v. Netties Flower Shop

- Helps with identifying an Employee vs. Independent Contractor and then also with detour v. frolic
- Proved employee by having control over dress, vehicle requirements, paid regardless if actually delivering
- Proved detour because the detour was within course and scope of employment while on way back to shop and detour didn't deviate enough fro regular route

Bryant v. Livigni and National

- Demonstrates an employer being sued for both Negligent Retention AND Respondeat Superior

General rule for liability for Independent contractor's torts?

- Person who hires an independent contractor is not liable if a 3rd party is injured by the acts of the independent contractor in performing the contract

Exceptions to the general rule of liability for independent contractor's torts?

1. Right to control - doesn't matter title of employee or contractor
2. Inherently dangerous (or Hazardous) Activities - explosives truck drivers as example

Liability for Agent's crimes?

- Agent does crime responsible for it in criminal case
- "Do the crime do the time"

Termination of an Agency description?

- Once relationship between principal and agent ends, agent no longer has right (actual authority) to bind the principal
- For agent's apparent authority to be terminated, 3rd parties may need to be notified

Acts to terminate agency?

1) Lapse of time
2) Achievement of purpose
3) Occurrence of a specific event
4) Mutual agreement
5) Option of one party