Agency Chapter 17

Agency Relationship between two parties in which one party (agent) agrees to represent or act on behalf of another party (principal) Examples: –employer-employee –independent contractor

Agency A fiduciary relationship that results when principal authorizes or consents to allow an agent to act on his or her behalf. fiduciary – a person acting for the benefit of another, a duty of trust and confidence

Formation of Agency Written Agreement Oral Agreement (if performable in one year) Implied by conduct Estoppel- “apparent authority” –actions of principal must imply authority –(not actions of agent) –reasonable person must believe agency exists. Implied by operation of law By ratification

Agency Relationships Employee –One who works for, and receives payment from, an employer. –Whose working conditions and methods are controlled by the employer. –For whose acts and omissions occurring in the scope of employment the employer is liable.

Agency Relationships Independent Contractor –One who does work for, and receives payment from, an employer. –Whose working conditions and methods are not controlled by the employer. –For whose acts and omissions the employer is not liable.

Employer-Employee Relationships Determine whether an employee or independent contractor by the following: –Direction and control the employer exercises over the details of work –Who supplies tools used at workplace –Degree of skill is required of the worker –Duration of employment –Method of payment

Employer-Employee Relationships Primary factor the IRS uses to determine whether an employee or independent contractor: –Direction and control the employer exercises over the details of work

Agent’s Duties to Principal Performance Notification Loyalty Obedience Accounting

Principal’s Duties to Agent Compensation Reimbursement Indemnification Cooperation Safe Working Conditions

Liabilities in Agency Principal is liable for agent’s contracts, if agency is disclosed Principal is liable for agent’s torts if agent in “course and scope of employment”

Liabilities in Agency Respondeat Superior -- t he doctrine by which an employer or other principal is liable, along with the agent or employee, for any tort committed by the agent or employee while acting within the scope of their agency or employment. Does not apply if agent is on a “frolic” of his own

Liabilities in Agency Principal not liable for most criminal acts unless criminal activity was directed by principal (but are liable for intentional torts committed in scope of employment)

Termination of Agency Lapse of Time Purpose Achieved Occurrence of Event Mutual Agreement Revocation (unless coupled with interest)

Termination of Agency By Operation of Law Death or insanity (Statutory Durable Power of Attorney –Authority continues after principal becomes disabled) Impossibility Materially changed circumstances Bankruptcy War

Agency End of Chapter 17