Chapter 14

1. Agency Relationships

  • Definition: An agency relationship is formed when an agent agrees to represent a principal and act under their control.

    • Binding Contracts: The agent can bind the principal to contracts with third parties.

    • Purpose of Agents: Allows principals to expand business activities without direct involvement.

    • Creation: No formal procedure required; must show mutual agreement where the principal indicates a desire for the agent to act on their behalf.

1.1 Types of Agents

  • Universal Agent: Has extensive authority to conduct all transactions legally permitted by the principal.

  • General Agent: Authorized to act for the principal in all matters relating to a specific business or employment.

  • Special Agent: Assigned to perform a specific transaction or act, not intended for continuous relationship.

  • Gratuitous Agent: Offers services voluntarily without expectation of compensation.

  • Subagent: Authorized by an agent to assist in performing agency duties.

1.2 Establishment of Agency Relationships

  • Methods:

    • Agreements between parties.

    • Ratification of agent’s activities by the principal.

    • Doctrine of estoppel.

    • Operation of law.

2. Agent's Authority

  • Scope of Authority: The extent of the agent's ability to act is determined by the authority granted by the principal.

    • Actual Authority: Explicitly given by the principal.

    • Apparent Authority: Created by the principal's conduct, leading others to believe the agent has authority.

2.1 Responsibilities

  • Parties must share information and act in good faith.

    • Principal's Duties to Agent:

      • Cooperate.

      • Compensate.

      • Reimburse for expenses.

      • Indemnify for damages.

    • Agent's Duties to Principal:

      • Loyalty.

      • Obedience and Performance.

      • Reasonable Care.

      • Accounting.

      • Notification.

3. Legal Implications

  • Liability: The principal is typically liable for contracts entered into by an agent with actual or apparent authority.

  • Indemnification: Agents may have to indemnify the principal for losses incurred through actions taken under apparent authority.

3.1 Termination of Agency Relationships

  • Agency relationships can end by:

    • Actions of the parties.

    • Operation of law.

  • Notification to Third Parties: Important to inform them about the termination to cease the agent's authority.

  • Differences: Agency is different from employer-employee and independent contractor relationships.

4. Employment Relationships

  • At-Will Employment: Employment is generally at-will unless stated otherwise by contract or employment handbooks.

  • Social Media Control: Employers can regulate employee use of social media to protect their interests.

  • Liability:

    • Independent Contractors: Employers usually not liable for their torts.

    • Employees/Agents: Employers may be liable if torts occur during the scope of business.

5. Agency Terminology

5.1 Types of Agents

  • Universal Agent: Authorized for all transactions.

  • General Agent: Acts in a particular business context.

  • Special Agent: Conducts specific transactions.

5.2 Agency Concepts

  • Power of Attorney: Document granting agency powers.

  • Ratification:

    • Express Ratification: Clear acceptance of agency responsibilities.

    • Implied Ratification: Acceptance presumed from principal's actions.

  • Agency by Estoppel: Created by the principal's inaction in supervising the agent.

  • Operation of Law: Agency consequences imposed in emergencies.

6. Responsibilities and Duties

6.1 Principal's Duties

  • Duty to cooperate.

  • Duty to compensate, reimburse, and indemnify.

6.2 Agent's Duties

  • Duty of loyalty—prioritize principal's interests.

  • Duty of obedience—act according to principal's instructions.

  • Duty of care—perform obligations competently.

7. Independent Contractor vs. Employee

  • Independent Contractor: Service provided with control over methods and procedures.

  • Servant: Works under employer's control, duties outlined.

  • Employment-at-will: Could be terminated without notice unless otherwise stated.

7.1 Vicarious Liability

  • Liability arising from employer-employee relations.

    • Respondeat Superior: Employer liable for employee wrongful acts in the course of duty.

    • Negligent Hiring: Employer liability for failing to screen employees adequately.