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Agency Outline: Part 2 (Part one to be posted)

 
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PostPosted: Thu Feb 12, 2015 8:28 am    Post subject: Agency Outline: Part 2 (Part one to be posted) Reply with quote

AGENCY RELATIONSHIP WITH THIRD PARTIES

LIABILITY OF PRINCIPAL FOR AGENT'S CONTRACTS

Liable to third persons on contracts made by the agent for the principal w/in scope of agent's authority.

AUTHORITY OF THE AGENT MAY BE EITHER ACTUAL OR APPARENT

ACTUAL AUTHORITY:

Express or implied authority the principal intentionally confers on agent.

EXPRESS AUTHORITY: Actual authority given agent in words—oral or written.

IMPLIED AUTHORITY: Actual authority of agent which is inferred from words or conduct of the principal.

(a) INCIDENTAL AUTHORITY: That reasonably necessary to
carry out the express authority. EXAMPLE: Principal
expressly employs and authorizes agent to manage
apartment building for stated salary; implied
authority may be inferred to hire needed help, make
repairs, purchase heating fuel, and arrange for
rubbish pick-up.

(b) CUSTOMARY AUTHORITY: According to custom of community,
normally given agents to conduct their business. EXAMPLE: Authority to advertise carries customary
incidental authority to contract for television time.

APPARENT OR OSTENSIBLE AUTHORITY:

That which principal either intentionally or negligently allows third person to believe agent possesses.

ACTS OF PRINCIPAL:

Leading third person to believe that agent had authority is the test of apparent or ostensible authority.

GOOD FAITH REQUIREMENT:

If third persons reasonably and in good faith rely upon the apparent or ostensible authority of an agent, principal is bound by the agreement. EXAMPLE: Store manager had actual authority to receive checks but not to endorse and cash. However, where he had done so for some time without complaint from principal, he had apparent authority to continue.

NO AUTHORITY:

Agent contracts w/o actual or apparent authority, principal not bound.

EXAMPLE GIVEN IN CLASS (SEBASTIAN CASE)

EXAMPLE GIVEN IN CLASS (SULLIVAN CASE)

RATIFICATION:

Principal subsequently ratifies unauthorized action of the agent it becomes authorized.

DISCLOSED PRINCIPAL AND UNDISCLOSED PRINCIPAL:

Where principal is named in the contract and not excluded by its terms, and the existence of the agency appears, the authorized contract made by the agent is that of the disclosed principal. Cf.:

Agent enters into contract on behalf of his principal w/o disclosing to third party acting as an agent, the transaction is for an undisclosed principal; and since contract is really made for the principal, even though undisclosed, the principal has the right to enforce it against the third party.

RIGHT OF THE THIRD PARTY IN UNDISCLOSED PRINCIPAL SITUATION:

When discovers identity may enforce contract against either the agent or the principal, but not against both.

RATIONALE:

Originally believed agent was principal, so he may continue to hold him as such, but, in reality contract was that of the undisclosed principal. Since there can only be one principal, the third party must elect which party he intends to hold responsible.

EXAMPLE GIVEN IN CLASS (MOHR CASE)

SEE P. 513 CASE # 30.5 (GRINDER)


PERSONAL LIABILITY


EXAMPLE GIVEN IN CLASS (BEHLMAN CASE)


PARTIALLY DISCLOSED PRINCIPAL:

Agent makes contract with third person and reveals he is acting as an agent but does not disclose the identity of the principal, most courts treat it as an undisclosed principal. EXAMPLE: Agent advises acting as agent, signs the agreement, "John Doe, agent," but does not identify the principal. Unless parties intended to bind only the principal, not the agent, the transaction will usually be treated as that of an undisclosed principal.

WHEN NO AGENCY REALLY EXISTING AT ALL:



EXAMPLE GIVEN IN CLASS (GOLDEN SPIKE CASE)


LIABILITY OF PRINCIPAL FOR AGENT'S TORTS

Vicarious Liability

DOCTRINE OF RESPONDEAT SUPERIOR: LET THE SUPERIOR RESPOND:

Principal, or employer, liable for torts and wrongful acts of agent or employee committed w/in scope of agency or employment.

FAULT:

Immaterial on theory that principal or employer can spread the risk of loss through business overhead or insurance.

AUTHORITY:

Majority rule: Immaterial that agent acted in excess of his authority or even contrary to instructions as long as the act done in the scope of employment.

SCOPE OF EMPLOYMENT:

Wrongful act done in the course of agency by virtue of the authority of agency and in carrying out the principal's business.

TORT LIABILITY

SEE: PAGE 513 CASE # 30.6


ACTS FOR PERSONAL CONVENIENCE OR PLEASURE:

Acts necessary for the comfort, health, convenience, and welfare of the agent {e.g., coffee breaks, drinking, smoking, warming, and similar acts} are incidents of employment and do not take the agent out of the scope of employment.

SEE P. 491 CASE # 29.2

DEVIATION AND DEPARTURE:

Slight deviations or departures by the agent or employee to take care of personal business or pleasure, where the main
purpose of activity is the principal's business, will not take agent outside the scope of employment. EXAMPLE: Truck driver starts on direct route from employer's factory to railroad depot to deliver goods, but on the way, stops by his home, a few blocks off direct route. As he leaves home, has an accident due to his negligence. Employer would be liable since the deviation was slight.

EXAMPLE GIVEN IN CLASS (EDGEWATER CASE)

SUBSTANTIAL DEVIATION:

Deviaton or departure for personal business or pleasure is a substantial one, agent or employee may be held to be on a "frolic and detour" of his own; principal would not be liable.

COMING AND GOING RULE:

Applies to an employee or agent going to and from work, or to meals, and is considered a substantial departure outside the scope of the employment.

EXCEPTIONS TO THE COMING AND GOING RULE:

Several exceptions where such travel still considered within scope of the employment.
(a) BUNKHOUSE RULE: Agent/employee lives at his place of
work {e.g., a ranch hand in a bunkhouse), considered
within the scope of employment while going to and from his job.

(b) TRAVELING SALESPEOPLE: Generally considered in scope of their employment during their entire absence from
home, even when not actually at work.

(c) SPECIAL ERRAND OR DUAL PURPOSE: Going and coming has some additional business purpose, entire trip may be
considered within the scope of employment. EXAMPLE:
Night employee went home to get some tools and then
went to dinner. On return had an accident. Dual
purpose was to get needed tools and to eat, was in scope of his employment.

(d) EMPLOYER PROVIDES TRAVEL: Provides the travel,
compensates agent/employee for travel time, or defrays expenses, Courts have held exception to the coming and going rule.

(e) SPECIAL RISK: Teacher mugged in her car just outside of school grounds while driving home, Court applied a "special risk" exception since "but for" the employment,
worker would not have been at the location of the risk.
[Parks v. Workers' Compensation Appeals Board, 33 Cal.
3d 585 (1983)]

EXAMPLE GIVEN IN CLASS (MORGENSTERN CASE)

EXAMPLE GIVEN IN CLASS (LAPP CASE)

EXAMPLE GIVEN IN CLASS (JOHNSON WELDING CASE)

SEE P. 514 CASE #30.7

INTENTIONAL TORTS

EXAMPLE GIVEN IN CLASS (TAXI CASE)

SEE P. 505 CASE # 30.1

SEE P. 512 CASE # 30.1

EXAMPLE GIVEN IN CLASS (GREEN CASE)

CA. RULE RE: INTENTIONAL TORTS (GIVEN IN CLASS)




INDEPENDENT CONTRACTOR'S TORTS AND RESPONDEAT SUPERIOR RULE:

Because Principal has no right of control over independent contractor rule not apply. Principal generally not liable for torts of an independent contractor.

EXCEPTIONS:

1. HIGHLY DANGEROUS ACTS: Public policy theory.

2. NEGLIGENT SELECTION OF CONTRACTOR BY EMPLOYER:

3. INTENTIONAL TORTS: Principal or employer liable for malicious or intentional acts of the agent or employee done w/in scope of employment or connected with the employment.

MAINTAINING ORDER OR PROTECTING PROPERTY: Employment involves risk of force, and act connected with the employment, the employer is liable. EXAMPLE: The employer liable where a night club bouncer assaults a noisy customer. EXAMPLE: Security guard throws rock at trespasser on premises and causes an injury for which employer is liable. COMPARE: Bartender shot a customer who made advances to another patron: Held: Outside scope of his employment.


D. CRIMINAL LIABILITY:

Respondeat superior is rule of vicarious civil liability for damages in tort; does not apply in criminal law. Principal would be criminally responsible only if she participated in the criminal act or a criminal conspiracy. COMPARE: Corporation can be held criminally liable for the acts of its officers and employees on rationale that corporation can act only through them.

FRAUD:

Generally, principal liable for fraudulent representations of a type normally incident to the employment.

UNUSUAL AND EXCEPTIONAL MISREPRESENTATIONS:

Of the agent usually not binding on principal unless principal, with knowledge of the fraud, retains benefits of transactions. EXAMPLE: Owner of business employs broker to sell it and broker misrepresents to buyer net income and falsely states that an insurance company going to build a tract of homes nearby which will greatly increase the business. RATIONALE: The FIRST LIE one principal might expect agent to make, so principal would be liable. However, THE SECOND so unusual to sale of business that principal might not be responsible. BUT NOTE: Some states hold principal liable under respondeat superior regardless of unusual or extreme nature of fraudulent statement.

INNOCENT MISREPRESENTATION:

Agent generally not liable for deceit if he honestly believes representations supplied by his principal are true.

NOTICE OF FALSITY:

Agent becomes personally liable for his misrepresentations once he knows, or should have known, statements were false.


AUTOMOBILE STATUTES:

Many states statutes impose liability upon automobile owners and drivers by operation of law.

OWNER'S "PERMISSIVE USE" LIABILITY:

Some statutes on agency theory hold owner of a vehicle liable for limited amounts of damages caused by anyone driving the vehicle with the owner's permission. [Cal. Vehicle Code § 17150] $20K LIABLITY.

EMPLOYER NOT LIABLE FOR UNAUTHORIZED OPERATION OF AUTOMOBILE:

Unless statute imposing liability or personal fault on part of owner, employer not liable for negligent use of a motor vehicle under the following circumstances: (i) An employee who was not authorized to use the vehicle; (ii) An employee who was not subject to control of the operation of the vehicle; (iii) An employee who without authorization invites a person to ride with him; (iv) An employee who permits another to drive the vehicle without authority; and (v) A non-employee bailee.

LIABILITY OF THIRD PERSON TO PRINCIPAL

Can be liable to principal in contract or in tort.

LIABILITY IN CONTRACT:

Contracting with agent for disclosed principal liable on contract to principal as though made directly with principal.

UNAUTHORIZED CONTRACTS:

Not binding on third person until ratified by the principal.

UNDISCLOSED PRINCIPAL:

Liable to principal on contracts made by an agent even though the principal was undisclosed.

EXPRESS EXCEPTION:

If terms of contract expressly bar any undisclosed principal, there is no third party liability.

FRAUD EXCEPTION:

Where third person would not contract with particular principal and is known to both principal and agent, fraud not to disclose principal's identity.

LIABILITY IN TORT:

Liable in tort to principal for injuries committed by them to a principal's property or interest in the hands of an agent just as if they were dealing directly with the principal whether known or undisclosed.

INDUCING FIDUCIARY BREACH:

Knowingly induces or aids agent in breaching fiduciary duty owed to the principal liable to the principal. EXAMPLE: Third person bribes agent to obtain confidential information belonging to the principal.

FRAUD AND COLLUSION:

Colludes with agent to represent third person rather than principal: liable for fraud. EXCEPTION: Where third person acts under reasonable belief principal has knowledge of facts and consents: no fraud.

INDUCING BREACH OF CONTRACT:

Induces agent to fail in performance of contract with principal liable to the principal for damages.

LIABILITY OF AGENT TO THIRD PERSON

Certain circumstances agent may become personally liable to third person.

TORTS: [§1463]

Like any other tortfeasor, personally responsible for any wrongful act committed by him, regardless of respondeat superior liability of his principal. Even if tort has been committed pursuant to instructions of principal agent is still responsible for his intentional wrongful acts. COMPARE: When innocent agent commits tort pursuant to principal's instructions and agent is required to pay damages; agent is entitled to reimbursement.

2. CONTRACT MADE IN THE NAME OF AGENT

UNDISCLOSED AGENCY AND UNDISCLOSED PRINCIPAL:

Agent's name appears alone on contract w/o identity of principal or statement of fact of agency, agent is personally liable.

DISCLOSED AGENCY AND PARTIALLY DISCLOSED PRINCIPAL:

Most states hold when agent signs contract as an agent, but does not identify principal, agent becomes liable on contract unless otherwise agreed.

MINORITY RULE: California and some other states hold: Agent liable even if the fact of agency is disclosed unless it appears on the face of the instrument that only the principal is to be bound.

ELECTION BY THIRD PERSON:

When third discovers identity of undisclosed or partially disclosed principal, choice of holding either agent or principal to the contract, but not both. NOTE: Once election made to hold either agent or undisclosed principal, bound by choice and cannot hold the other.

WARRANTY OF AUTHORITY:

Every agent warrants authorized by principal to do what doing. If act unauthorized, agent personally liable unless later ratified by principal.

INCOMPETENCY OF PRINCIPAL

Most states: Agent does not warrant the competency of the principal to make contracts.

HOWEVER:

A. DUTY TO INFORM:

When the agent knows principal lacks capacity to contract; duty to advise third persons, failure to disclose may constitute fraud.

LIABILITY OF THIRD PERSON TO AGENT

Contract Liability:

When agent makes contract with third person on behalf of disclosed principal, usually neither agent nor third person has action against the other on the agreement.

UNDISCLOSED AND PARTIALLY DISCLOSED PRINCIPAL:

Agent may hold third liable on contract until such time as principal asserts rights under the contract.

AGENT INTENDS TO BE BOUND:

If parties intended agent be bound on contract, even though agency known, agent may bring action against third person for breach of contract.

TORT LIABILITY:

Third person liable for fraudulent or other wrongful acts causing injury to agent. EXAMPLE: Third person lies to principal about agent's conduct, causing discharge of agent.

AGENT AS ASSIGNEE:

Principal assigns or otherwise transfers rights or claims to agent, agent then acquires rights of principal to bring action against the third person. EXAMPLE: Principal assigns agent some outstanding debts for collection; agent may then sue third person for the debts.

AGENT'S ACTION FOR INJURY TO PRINCIPAL'S PROPERTY:

Agent in possession of principal s property has interest in such property and may maintain an action against a third who disturbs his possession or unlawfully injures the property.
AND: EXTENT OF THIRD PERSON'S LIABILITY: Not limited to agent's interest, but covers entire amount involved. Agent is required to account to the principal for any recovery in excess of the agent's interest
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