LSBA 3243 Midterm Exam Part 3 (32, 33)

What is the definition of agency?

The fiduciary relationship resulting from one person allowing another to act on his or her behalf.

What is the definition of fiduciary?

A person in a position of trust and confidence who acts for the benefit of another.

How does agency law appy employer-employee relationships?

Since employees are considered agents of an employer (principal), goods sold or statements made by an employee are binding on the employer.

What is the definition of an independent contractor?

Someone who works for and is paid by an employer but is not controlled by the employer.

What criteria do courts use to determine if a worker is an employee or an independant contractor?

Control over details, worker has distinct occupation, employer supervision, supply of tools, length of employment, method of payment, and level of skill.

What criteria does the IRS use to determine if a worker is an employee or an independent contractor?

The degree of control the business exercises over the worker.

Regarding copyright infringement, how is copyright handled differently for creators who are employees and creators who are independent contractors?

Typically he employer owns the work created by the employee, while the contractor owns their own work (unless it is a work for hire contract).

What are the requirements for agency formation?

The relationship is normally consensual and a person must have contractual capacity to be a principal. Agents do not need capacity, however.

For which purpose can an agency relationship be created?

Any legal purpose. Illegal agency is unenforceable.

In which ways can an agency relationship arise?

By ageement of the parties, ratification, estoppel, and operation of law.

How can agency by agreement occur?

Using express or implied agreement either in a written, oral or conduct agreement.

How can agency by ratification occur?

A person who is not an agent or acting outside the scope of his duties forms a contract on behalf of a principal who affirms the contract by word or action.

How can agency by estoppel occur?

When a principal causes a third person to believe a person is their agent, creating the appearance of an agency.

What must a third party prove in an agency by estoppel situation?

He or she reasonably believed that an agency relationship existed.

How can agency by operation of law occur?

A family relationship or in the case of an emergency situation where the agent cannot contact the principal.

What are the primary duties of an agent to a principal?

Performance, Notification, Loyalty, Obedience, and Accounting.

What is an agent's primary duty of performance?

An agent is to use reasonable diligence and skill in performing work.

What is a gratuitous agent?

Agents who act on behalf of a principal without receiving compensation.

What is an agent's primary duty of notification?

An agent is to notify the principal of all matters that come to his or her attention. Thus, the law assumes the principal knows what the agent knows.

What is an agent's primary duty of loyalty?

An agent is to act solely for the benefit of his or her principal and not their own or others, unless the principals know about it.

What is an agent's primary duty of obedience?

An agent must follow all lawful and clearly stated instructions of the principal. The exception is during emergencies when the principal can't be reached.

What is an agent's primary duty of accounting?

The agent must keep the principal's funds separate, available, and recorded.

What are the primary duties of a principal to an agent?

Compensation, Reimbursement/Indemnification, Cooperation, and Safe Working Conditions.

What is a principal's primary duty of compensation?

A principal must pay an agent for services rendered.

What is a principal's primary duty of reimbursement/indemnification?

A principal must reimburse an agent for necessary expenses incurred or for liabilities incurred as a result of lawful acts and transactions.

What is a principal's primary duty of cooperation?

A principal must cooperate with the agent and assist them in performing their duties.

What is exclusive agency?

The principal grants an agent an exclusive territory and does not allow another agent to compete in that territory.

What is a principal's primary duty of providing safe working conditions?

A principal must provide a safe work environment for their employee and inspect working areas.

The remedies of an agent for breach of duty by a principal follow which law?

Normal contract and tort law.

If an agent and a principal disagree over commission for the agent, what remedies does the agent have?

An agent can withhold performance and demand an accounting from the principal.

If an agent receives anything by virtue of their relationship to a principal, what should be done to avoid committing a breach of their fiduciary duty?

Place the property in a constructive trust for the principal.

If an agent breaches the agency agreement or agency duties under a contract, what remedy does the principal have?

The principal can avoid any contract entered into with the agent.

If a principal is sued by a third party for the agent's misconduct, what remedy does the principal have?

The principal can sue to indemnify the agent for an equal amount of damages.

What determines whether a principal is liable to third parties with whom an agent contracts?

Whether the agent's authority was actual (express or implied) or apparent.

What is express authority?

Authority given orally or in writing that is declared in clear, direct, and definite terms.

What is the equal dignity rule?

If a contract being executed must be written, so should the agent's authority.

What are the exceptions to the equal dignity rule?

An executive of a business conducting ordinary business transactions without written authority, when the agent is in the principal's presence, or the act of signing is a formality.

What is a power of attorney?

A written and notarized document that conveys express authority.

What are the types of power of attorney?

General and special.

What is a special power of attorney?

An agent can perform specific acts only.

What is a general power of attorney?

An agent can transact all business for the principal.

What is implied authority?

Authority that an agent can do what is reasonably necessary to carry out express authority and accomplish the agency objectives. Can be implied by custom or inferred by position.

What does implied authority not allow?

The agent to contradict his or her express authority.

What is apparent authority?

A principal, by word or action, makes a third party think an agent has authority to act when no authority exists.

What is apparent authority by estoppel?

If a third party honestly relies on the principal's representations to his or her detriment, the principal may be estopped from denying the agent had the authority.

What are emergency powers?

When an unforeseen emergency demands an agent protect the property and rights of a principal without communication ability.

What are the requirements for ratification of unauthorized acts by an agent?

The agent acts on behalf of the principal, the principal knows all facts, principal affirms agent's entire act, the principal has legal capacity, ratification accurs before any third party withdrawal, the principal observes same formalities as initially.

What are the types of principals?

Disclosed, partially disclosed, and undisclosed.

If a principal is disclosed, which parties are liable?

The principal only.

If a principal is partially disclosed or undisclosed, which parties are liable?

The principal and agent.

When a principal's identity is undisclosed and the agent is forced to pay the third party, what remedy does the agent have?

The agent can be compensated by the principal.

An undisclosed principal can require a third party to fulfill a contract unless what is true?

The undisclosed principal was expressly excluded from the contract, the agent signed with no indication of representing another, or the agent's performance is personal to the contract.

Who is liable if an agent has no authority but contracts with a third party anyway?

The agent only.

What is the implied warranty of authority?

An agent impliedly warrants that he or she can enter into a contract on behalf of the principal.

If a third party knows or is unsure of an agent's authority, who is liable if a contract is breached?

Nobody.

When is a principal acting through an agent liable for harm by the agent?

If the harm results from the principals improper instructions, the use of improper materials or tools, or improper rules.

What are the implications of a principal authorizing an agent to commit a tort?

The principal may be liable along with the agent, even if he or she didn't know it was wrong.

When is a principal exposed to tort liability for an agent's misrepresentation?

If the agent was actually or apparently authorized to make representations within the scope of the agency.

When is a principal exposed to tort liability for an agent's fraud?

If the principal placed an agent in a position of apparent authority.

Why is a principal still liable if an agent makes an innocent misrepresentation?

The principal should correct an agent or third party in the event of such a situation.

Why might a principal be liable for the negligent acts of an agent?

Under respondeat superior, the principal is liable for harm caused to a third party in the course or scope of employment.

What is the difference between a detour and a frolic?

A detour is a minor departure still considered within the scope of employment, while a frolic is a major departure and outside the scope of employment.

If dangerous conditions are discovered by an employee, what is expected?

The employer is also aware.

When will a principal be held liable for the intentional torts of an agent?

When the tort is committed within the course and scope of employment.

Why is an employer not liable for torts committed by independent contractors?

The employer does not have the right to control the details of an independent contractor's performance.

What is the exception to the rule of liability between employers and independent contractors?

If the contract involves highly hazardous activities.

What are the bases for agency termination by act of the parties?

Lapse of time, achievement of purpose, occurrence of a specific event, mutual agreement, and at the option of one party.

What is agency termination called when done by the principal?

Revocation.

What is agency termination when done by the agent?

Renunciation.

What may happen if a party terminates an agency agreement while it does not have the right to do so?

The canceling party may be subject to a breach of contract lawsuit.

What is an agency coupled with an interest?

The agent has a legal interest in the property in the agreement. Thus, the agreement is for the agent's benefit and irrevocable.

What are the requirements for termination of an agency agreement?

The principal must notify any third parties who know of the agency agreement. Additionally, the principal can personally notify the agent or through other means.

How might an agency agreement be terminated by operation of law?

Death or insanity, impossibility, changed circumstances, bankruptcy, or war.