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1. Three Agency Problems a. Liability of Principal to Third-Parties for Torts of an Agent b. Liability of Principal to Third-Parties for Contracts entered by an Agent c. Duties which Agents owe to Principals
2. Liability of Principal for Torts of Agent -- Respondeat Superior or Vicarious Liability a. Issue - Whether the principal will be vicariously liable for torts committed by agent b. Two part test (1) Principal agent relationship (2) Within Scope i. Principal-Agent Relationship (A,B,C)
1. Assent - There must be an informal agreement between a principal with contractual capacity, and the agent a. Voluntary, informal agreement
2. Benefit - The agents conduct must be for the principals benefit
3. Control - The principal must have the right to control the agent by having the power to supervise the manner of the agents performance a. Sub-Agents - (When the agent gets help from a third party) i. There can be NO vicarious liability for a sub-agent's tort UNLESS there is assent, benefit, and right to control the sub-agent tortfeasor
1. Bar Tip: Usually will NOT find assent or control so no vicarious liability for a sub-agent's tort. b. Borrowed agents - (Employer #1 borrows Employer #2's agent) i. There can be NO vicarious liability for a borrowed agent's tort unless there is assent, benefit, and right to control the borrowed agent
1. Bar Tip: Usually will find assent, and some benefit, but will NOT find right to control so no vicarious liability c. Contrast w/ Independent Contractor i. Factors for liability - There is NO right to control an independent contractor, because there is NO power to supervise the manner of its performance. ii. Rule - NO vicarious liability for an independent contractors torts iii. Exceptions
1. Inherently Dangerous Activities - Not liable for tort's committed while engaged in an inherently dangerous activity. (i.e. failure to perform duty may result in death)
2. Non-Delegable Duties - i.e. building a fence around a construction site.
3. Estoppel - If you hold out your independent contractor as your employee and a third part relies, you will be estopped from denying vicarious liability, even for his torts. ii. SCOPE of Agency Relationship - The principal will be liable for its agents torts in the scope of agency. (4 factors to determine scope)
1. Similar to Authorized Conduct - look to whether the conduct of the kind the agent was hired to perform.
2. Within the Course and Scope of Employment 1
a. Frolic - NOT liable for Substantial Deviations in time or geographic area b. Detour - LIABLE for Minor Deviations from an assigned task
3. Intent to Benefit the Principal - If the agent, even in part, intended to benefit the principal, it is enough. (i.e. pick up dry cleaning for employer)
4. Intentional Torts - Intentional torts are generally outside the scope of agency a. Exceptions: Intentional torts are within the scope if the conduct was: i. Specifically authorized by the principal, ii. Natural from the nature of employment, OR iii. Motivated by a desire to serve the principal
1. i.e. Bouncer in the bar
3. Liability of Principal for Contracts entered into by Agents a. General Rule - Principal is ONLY liable for authorized contracts entered into by its agents. b. AUTHORITY (4 types) i. Actual Express Authority
1. Rule - May expressly grant oral or written authority. a. Oral - can be oral, unless it falls under equal dignities doctrine b. Private - can be whispered in private c. Narrow - will be construed narrowly to the words used
2. Exception a. Equal Dignities Doctrine: If the contract itself must be in writing to satisfy the SOF, the express authority must also be in writing i. i.e. contract to sell land must have been in writing,
3. Revocable by: a. Unilateral Act of Either party, OR i. i.e. either party may freely revoke b. Death or Incapacity of the Principal i. Automatic revocation c. Durable Power of Attorney Exception - Express authority cannot be revoked if the principal gives the agent a durable power of attorney. i. Power of Attorney - A written expression of authority to enter a contract. ii. Durable - Conspicuous language intending survival. ii. Actual Implied Authority - Authority which the agent reasonably believes the principal has given, because of:
1. Necessity - To do all tasks which are necessary to accomplish an expressly authorized task
2. Custom - To do all tasks customarily performed by the person with the agents same title or position.
3. Prior Acceptance - To do all tasks which the agent reasonably believes to have been authorized based on the prior acceptance of the principal. 2
iii. Apparent Authority
1. 2 Part Test a. Principal Cloaked the agent with the Appearance of Authority b. Third party Reasonably Relies on appearance of authority i. i.e. Secretly Limiting Authority - Agent appears to have actual authority, but principal has secretly limited that authority. Then the agent acts beyond the scope of the limitation.
1. Ex. Employee at antique store told not to sell a clock. ii. i.e. Lingering Authority - Actual authority has been terminated. Afterwards, the agent continues to act on the principal's behalf. Liable for all acts until notice is given to third parties.
1. Ex. Sales agent fired and continues to sell. iv. Ratification
1. Rule - Authority can be granted after the contract has been entered into if: a. Principal has Knowledge of ALL material facts regarding the contract, and b. Principal Accepts its Benefits
2. Cannot Alter Terms - Must accept ALL terms of the contract. Ratification is NOT valid if the principal attempts to alter the terms of the contract. a. i.e. - Principal gives agent power of attorney to buy 20 steel drums. A enters contract to purchase 20 wooden barrels. Principal tells A great job, I love wooden barrels c. Rules of Liability on the Contract i. General Rule
1. If NO authority a. Principal is NOT liable on the K. b. Agent is liable on the K.
2. If authority a. Principal is liable on the K. b. Agent is not liable on the K. ii. Undisclosed / Partially Disclosed Principal Exception
1. If Principal is only partially disclosed or undisclosed, the authorized agent may nonetheless be liable at the election of the third-party. a. Partially disclosed - only the identity of the principal is concealed b. Undisclosed - fact of principal concealed
4. Duties Agent Owes to Principal a. Duty to Exercise Reasonable Care b. Duty to Obey Reasonable Instructions (i.e. not lie or break the law) c. Duty of Loyalty i. Self-dealing - Agent cannot receive a benefit to the detriment of the principal ii. Usurping a principal's opportunity, OR iii. Secret profits
1. Hypo: P authorizes A to buy diamonds. A secretly buys choice diamonds for herself for $1M. A then resells for $2M. A breached the duty of loyalty by selfdealing, usurping the principal's opportunity, and secret profits. 3
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