CHAPTER 31 AGENCY: LIABILITY FOR TORTS AND CRIMES DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8 th Ed.)

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 2 SERVANT’S LIABILITY Servants engage in physical activities/labor on master’s behalf. Servants engage in physical activities/labor on master’s behalf. Servant’s behavior on behalf of master is negligent, resulting in injury to others. Servant’s behavior on behalf of master is negligent, resulting in injury to others. Servant has committed a tort and is personally liable for their torts. Servant has committed a tort and is personally liable for their torts.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 3 MASTER’S LIABILITY: RESPONDEAT SUPERIOR Master held liable for conduct of servant. Master held liable for conduct of servant. Liability is joint and several. Liability is joint and several. Respondeat superior is theory under which masters are held liable for torts of their servants even though masters are not personally at fault. Respondeat superior is theory under which masters are held liable for torts of their servants even though masters are not personally at fault. Belief that master’s pockets have more money than servants. Belief that master’s pockets have more money than servants.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 4 MASTER’S LIABILITY: RESPONDEAT SUPERIOR Respondeat superior involves special application of doctrine of strict liability. Respondeat superior involves special application of doctrine of strict liability. – Master hired servant – Servant did something wrong – Master should pay Respondeat superior requires a wrongful act by servant for which master can be held liable. Respondeat superior requires a wrongful act by servant for which master can be held liable.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 5 Principal’s right to control distinguishes between servants and nonservants. Principal’s right to control distinguishes between servants and nonservants. Respondeat superior applies to servants. Respondeat superior applies to servants. Servant acting within course and scope of employment when tort committed. Servant acting within course and scope of employment when tort committed. MASTER’S LIABILITY: RESPONDEAT SUPERIOR

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 6 Factors Listed in the Restatement of Agency: Factors Listed in the Restatement of Agency: – Factors that should affect determination of whether servant was within scope of employment. – Was conduct similar to authorized conduct and within scope of employment. – Acts within course of employment depend on facts of particular situations. MASTER’S LIABILITY: RESPONDEAT SUPERIOR

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 7 Time and Place of Occurrence. Time and Place of Occurrence. – Two factors analyzed in determining the course and scope of employment are: Tort occurred at work premises. Tort occurred at work premises. Tort occurred during work hours. Tort occurred during work hours. Failure to Follow Instructions. Failure to Follow Instructions. – Master can be held liable for servant’s torts even though master forbade servant to commit torts. MASTER’S LIABILITY: RESPONDEAT SUPERIOR

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 8 Failure to Act. Failure to Act. – Master can be held liable under respondeat superior if servant fails to act as instructed. Identifying the Master. Identifying the Master. – Masters lends or borrows servants. Important factors are course of employment and ability to control servant. Important factors are course of employment and ability to control servant. – Servant appoints sub-servant. If servant had authority to appoint master is liable, but if lacked authority servant and master liable. If servant had authority to appoint master is liable, but if lacked authority servant and master liable. MASTER’S LIABILITY: RESPONDEAT SUPERIOR

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 9 Crimes and Intentional Torts. Crimes and Intentional Torts. – Modern trend is to hold masters liable for intentional acts of servants if actions were intended to further master’s interests. – Master may sometimes be held civilly liable for criminal acts under respondeat superior. MASTER’S LIABILITY: RESPONDEAT SUPERIOR

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 10 DIRECT LIABILITY OF THE PRINCIPAL Principal directly responsible for wrongs committed by their agents, even if agents are not servants. Principal directly responsible for wrongs committed by their agents, even if agents are not servants. Principal liable if: Principal liable if: – Instructed agent to commit wrong. – Did not supervise agent properly. – Ratified/approved agent’s tort. – Negligent in the selection of agent.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 11 DIRECT LIABILITY OF THE PRINCIPAL Criminal law applies to principal when agent commits a crime. Criminal law applies to principal when agent commits a crime. Principal criminally liable if: Principal criminally liable if: – Based on principal’s fault. – Directs/encourages agent to engage in criminal activity. Negligent Hiring. Negligent Hiring. – Employers can be held liable for the intentional torts of an employee if she is careless in the hiring process.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 12 INDEMNIFICATIONINDEMNIFICATION Master pays third person for injuries caused by servant’s unauthorized acts, master has right to be repaid from servant. Master pays third person for injuries caused by servant’s unauthorized acts, master has right to be repaid from servant. Agent has right to indemnification from principal if agent paid third person injured by agent’s tort. Agent has right to indemnification from principal if agent paid third person injured by agent’s tort. Agent can obtain indemnification from principal if principal directed to tort act and agent believes is not tortious. Agent can obtain indemnification from principal if principal directed to tort act and agent believes is not tortious.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 13 ANALYSIS OF A SERVANT’S TORTS Characterize a tort situation answer: Characterize a tort situation answer: – Was person acting as a servant for hiring party? – Did the servant commit a tort? – Was servant acting within the course and scope of the job? – Is master entitled to indemnification from servant? Is servant entitled to indemnification from master?

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 14 INJURY ON THE JOB At common law, employee who is injured on job cannot recover from employer if: At common law, employee who is injured on job cannot recover from employer if: – Employee negligent. – Employee assumed the risk. – Employee injured by another employee of same employer.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 15 INJURY ON THE JOB Workers’ compensation statutes allow employee to recover benefits for work- related injuries. Workers’ compensation statutes allow employee to recover benefits for work- related injuries. Workers’ compensation statutes vary: Workers’ compensation statutes vary: – Some cover only major industrial occupations. – Some exclude small shops with few employees. – Some exclude injuries caused intentionally by employer or other workers.