1. Section 18.1

2. Creation and Types of Agents
Chapter 18
Creation of an Agency
Section 18.1
Agency Relationships
Section 18.2
Creation and Types of Agents

3. What You’ll Learn
How to explain the nature of an agency relationship (p. 392)
How to distinguish between a servant and an independent contractor (p. 394)

4. What You’ll Learn
How to explain the nature of contract liability (p. 396)
How to explain the legal doctrine of respondeat superior in relation to tort liability (p. 397)

5. Why It’s Important
Identifying the nature of an agency relationship will help you know your rights and duties in such a situation.

6. Why It’s Important
Understanding the doctrine of respondeat superior will help you protect yourself against tort liability in a variety of situations.

7. Legal Terms
agency (p. 392)
agent (p. 392)
principal (p. 392)
master (p. 394)

8. Legal Terms
servant (p. 394)
independent contractor (p. 394)
respondeat superior (p. 397)

9. Section Outline Agency and Similar Relationships
Principal-Agent Relationship
Master-Servant Relationship
Proprietor-Independent Contractor Relationship

10. Section Outline Why Are These Distinctions Important?
Contractual Liability
Tort Liability

11. Pre-Learning Question
What is an agency relationship?

12. Agency and Similar Relationships
An agency relationship lets us act through other people to accomplish tasks that might be difficult or impossible to do on our own.

13. Agency and Similar Relationships
The term agency describes a relationship in which one person, called an agent, represents another person, called a principal, in some sort of business transaction with a third party.

14. Principal-Agent Relationship
18.1
Principal-Agent Relationship

15. Principal-Agent Relationship
The principal-agent relationship is a true agency relationship.
Legally, we distinguish an agent from other types of representatives by noting that the agent has the power to transact business for the principal.

16. Master-Servant Relationship
A master is a person who has the right to control the conduct of another who is performing a task for the benefit of the master.

17. Master-Servant Relationship
A servant is a person whose conduct in the performance of a task is subject to the control of another.

18. Proprietor-Independent Contractor
An independent contractor works for but is not under the control of a proprietor.

19. Proprietor-Independent Contractor
The proprietor is a person who chooses to have someone perform a task on his or her behalf but has no control over the way that task is carried out.

20. True or False
An agent is a person who has the right to control the conduct of another who performs a task for the agent’s benefit.

21. A principal is someone represented by an agent.
An independent contractor works for but is not under the control of a proprietor.

22. A proprietor is someone who hires a servant.

23. ANSWER
False
True

24. Pre-Learning Question
Why is the true nature of the business relationship important?

25. Distinctions Important?
Why Are These
Distinctions Important?
Finding out the true nature of a relationship can be crucial in determining liability.

26. Contractual Liability
A principal is generally bound to the terms of a contract made by an agent unless the agent has no authority to enter the contract.

27. Contractual Liability
Unless a servant is also and agent, he or she has no authority to negotiate contracts for the master.

28. Contractual Liability
Likewise, a contractor has no power to bind the proprietor to a contract, unless expressly permitted to do so.

29. Tort Liability
All people are responsible for their own tortious conduct.
Sometimes, however, the person who hired the tortfeasor may also be held liable.

30. Tort Liability
This situation is known as vicarious liability, and it is founded on the principle of respondeat superior, or let the master respond.

31. Tort Liability
Typically, respondeat superior, applies to master-servant relationships because the master has the right to control the physical conduct of the servant. In contrast, a proprietor usually doesn’t have that right with an independent contractor.

32. Respondeat Superior 18.1 Was servant acting within scope of
authority or
course of
employment

33. Tort Liability
The court will ask many questions to determine whether there is a master-servant or proprietor-independent contractor a relationship in order to determine tort liability.

34. Questions the Court Asks
Does the hiring person supply the tools for the worker?
Does the hiring person set the worker’s hours?

35. Questions the Court Asks
Is the worker employed by the person responsible for the hiring?
Is the business of the worker the same as the business of the hiring person?

36. Questions the Court Asks
Does the worker lack authority to hire or fire other workers?
Does the worker perform his or her tasks in a highly supervised environment?

37. Questions the Court Asks
Is very little skill required to perform the worker’s job?

38. Questions the Court Asks
The more questions that require “yes” answers, the more likely it is that a master-servant relationship exists, and the master could be liable for the servant’s tortious conduct.

39. Tort Liability
A master may escape vicarious liability, if the servant was not acting within the scope of employment.
When the tort was committed, the worker must have been performing the task for which he or she was hired.

40. Reviewing What You Learned What is an agency relationship?
Section Assessment
Reviewing What You Learned
What is an agency relationship?

41. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
The term agency describes a relationship in which one person, the agent, represents another person, the principal, in some sort of business transaction with a third party.

42. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What is the difference between a servant and an independent contractor?

43. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
A master controls or has the right to control the activities of a servant. An independent contractor is not controlled by the proprietor who has hired that independent contractor.

44. Reviewing What You Learned What is the nature of contract liability?
Section Assessment
Reviewing What You Learned
What is the nature of contract liability?

45. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
When a principal appoints an agent to carry out business transactions that agent has the power to create contractual liability between the principal and a third party.

46. Reviewing What You Learned
Section Assessment
Reviewing What You Learned
What is the legal doctrine of respondeat superior?

47. Reviewing What You Learned Answer
Section Assessment
Reviewing What You Learned
Answer
The legal doctrine of respondeat superior will extend tort liability from the servant (employee) to the master (employer).

48. Critical Thinking Activity Tort Law
Section Assessment
Critical Thinking Activity
Tort Law
Why does the law permit an injured party to bring a tort law case against both an employee and his or her employer?

49. Critical Thinking Activity Answer Tort Law
Section Assessment
Critical Thinking Activity Answer
Tort Law
Because of the principle of respondeat superior. The master may be held liable for the tortious conduct of the servant if the servant was acting within the scope of authority or course of employment.

50. Legal Skills in Action Agency
Section Assessment
Legal Skills in Action
Agency
Your friend, Louis, has just hired Franco as his delivery driver. One afternoon while he is supposed to be making a delivery on the west side of town, Franco decides to take a 15-mile detour to the east side to pick up his dry cleaning.

51. Legal Skills in Action Agency
Section Assessment
Legal Skills in Action
Agency
While entering the parking lot of the dry cleaners, Franco makes an illegal turn and collides with a police car.

52. Legal Skills in Action Agency
Section Assessment
Legal Skills in Action
Agency
Louis fears he will be liable not only for Franco’s traffic ticket but also for all damages to the police cruiser.

53. Legal Skills in Action Agency
Section Assessment
Legal Skills in Action
Agency
Write a letter to Louis in which you explain why you think he won’t be liable for the traffic ticket or the damage to the police cruiser.

54. Legal Skills in Action Answer
Section Assessment
Legal Skills in Action Answer
Agency
Letters will vary but should include that Franco, the driver of the delivery truck, was off on personal business and was, therefore, not operating within the scope of his employment.

55. End of Section 18.1