Liability of principals and agents

What is the consequence if a principal (P) makes it appear to a third party (3) that an agent (A) has authority?

P is liable for the contract made by A with the third party.

What is an 'undisclosed' principal?

A situation where the third party does not know the agent is acting on behalf of a principal.

In an undisclosed principal scenario, who can the third party bring contract claims against?

The third party can bring claims against either the principal or the agent.

What is a 'partially disclosed' principal?

A situation where the third party knows the agent is acting for a principal but does not know the identity of that principal.

Who is liable for a contract when the principal is fully disclosed?

Only the principal is liable for the contract.

List three ways an agent can ensure a third party is aware of the principal's identity.

Using company letterhead, listing the principal's name on business cards, and including the company name in signature blocks on contracts.

Is an agent personally liable for torts or crimes they commit while acting for a principal?

Yes, the agent is personally liable to the injured third party.

Under what circumstances is a principal liable for an agent's tort or crime?

When the principal commits the act, directs the agent to commit the act, or is negligent in hiring or supervising the agent.

Why is a principal generally not liable for the negligence of an independent contractor?

Because the principal typically lacks control over how the independent contractor performs their work.

Name two exceptions where a principal might be held liable for an independent contractor's negligence.

When the principal exercises substantial control over the contractor or when the contractor is engaged in inherently dangerous work.

What is the doctrine of 'respondeat superior'?

The rule that an employer is vicariously liable for the torts of an employee committed within the scope of employment.

What is a 'frolic' in the context of agency law?

An independent course of conduct by an employee not intended to further the employer's purpose, which exempts the employer from vicarious liability.

How does a 'detour' differ from a 'frolic' regarding employer liability?

A detour is a minor deviation from business and the employer remains liable, whereas a frolic is a major deviation that removes liability.

What is the 'going and coming rule'?

The principle that an employee is not acting within the scope of employment while commuting to or from work, so the employer is not liable for their negligence.

Under the 'intent to serve' theory, when is a principal vicariously liable for an agent's intentional tort?

When the agent was motivated by the principal's interests or was aided in accomplishing the tort by the existence of the agency relationship.

What is the risk of failing to notify third parties when an agency relationship is terminated?

It could lead to claims of apparent authority, making the principal liable for the former agent's actions.

Name three ways an agency relationship can be terminated by the act of the parties.

Mutual agreement, communication of termination by either party, or the expiration of a pre-decided time period.

What is a 'durable power of attorney'?

A legal arrangement where the agency relationship continues even after the principal becomes incompetent.

How does the destruction of the subject matter affect an agency relationship?

It terminates the agency relationship by operation of law.

What are two events that terminate an agency by operation of law?

The death or incapacity of a party and the bankruptcy of the principal.

What factor is most critical in distinguishing an employee from an independent contractor?

The degree of control the employer exercises over the details of the work.

What is the agent's right if they are held liable for a contract breach caused by the principal?

The agent can claim indemnification (reimbursement) from the principal.