Chapter 30 Business Law

Principals and agents

owe certain duties to each other and are liable to each other for breaching these duties

Agency law

establishes the liability of principals, agents, and independent contractors for such conduct

Duty of loyalty

Fiduciary duty owed by an agent, not to act adversely to the interests of the principal

A principal and an agent are each personally liable for their own

tortious conduct

Principal is liable for

tortious conduct of agent acting within the scope of authority

Sources of tort liability for principals and agents

Negligence
– Intentional torts
– Misrepresentation

Respondeat superior

Employer is liable for an agent’s tortious conduct, if:
 The agent is an employee
 The employee was acting within the scope of employment

Respondeat superior is a type of vicarious liability

Principal is liable for an agent’s tortious conduct because of the employment contract between the principal and agent

Frolic and detour

Situation in which an agent does something during the course of his or her employment to further his or her own interests rather than the principal’s

Coming and going rule (going and coming rule)

Principal is generally not liable for injuries caused by its agents and employees while they are on their way to or from work

Dual-purpose mission

Situation that occurs when a principal requests an employee or agent to run an errand or do another act for the principal while the agent is on his or her own personal business

Motivation test

Determines whether an agent’s motivation in committing an intentional tort is to promote the principal’s business

Work-related test

Determines whether an agent committed an intentional tort within a work-related time or space

Tests to determine whether an agent’s intentional torts were committed within the

scope of employment

Intentional misrepresentation

Agent makes statements that he or she knows are untrue

Innocent misrepresentation

Agent negligently makes misrepresentation to a third party

Agent’s signature

must indicate that he or she is acting as an agent for a specifically identified principal

Implied warranty of authority

Agent who enters into a contract on behalf of another party warrants that he or she has the authority to do so

Ratification of a contract

Situation in which a principal accepts an agent’s unauthorized contract

Person who contracts with another to do something for him who is not controlled by the other nor subject to the other’s

right to control with respect to his physical conduct in the performance of the undertaking

Principals cannot avoid liability for

inherently dangerous activities that they assign to independent contractors