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NIU MGMT 217 - LIABILITY TO THIRD PARTIES

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I. AGENCY LAW OVERVIEWA. Agency Relationship1. Partiesa) Principal(1) Acts on behalf of the principal(2) Is a fiduciary2. Nature of the relationshipa) Voluntaryb) Most common example: Employer/Employee relationshipc) Distinguish between an agent and an independent contractor(1) What the employer calls the relationship means very little(2) Factors(a) Control(b) Method of payment(c) Tools suppliedB. Creating the Agency Relationship1. Agreement2. EstoppelC. Duties1. Agent’s duties to the principala) Loyalty(1) Conflicts of interest(2) Secret profitsb) Obediencec) Reasonable care2. Principal’s duties to the agenta) Compensationb) Reimbursementc) Indemnificationd) Reasonably safe work environmentII. LIABILITY TO THIRD PARTIESA. Who is Responsible to Third Parties for Their Injury?1. Principal2. Agent3. BothB. What was the Cause of the Injury?1. Breach of Contract2. TortC. Contract Liability1. What authority did the agent have to enter into the contract?a) Actual authority(1) Express(2) Impliedb) Apparent authority(1) Comes from the third party(2) Third party must have reasonable belief of agent’s authority(3) Reasonable belief usually comes from(a) The principal’s actions(b) The failure of the principal to act(c) Previous dealings between the agent and third partyc) No authority(1) Agent has neither actual nor apparent authority(2) Principal may elect to ratify the contract(a) Principal must know all the material facts(b) Principal must ratify entire contract2. Was the principal disclosed at the time of the contracta) Disclosed principalb) Partially disclosed principalc) Undisclosed principal3. Principal’s liability to third partiesa) Agent’s authority(1) Actual authority(2) Apparent authority(3) No authority4. Agent’s liability to third partiesa) Principal’s disclosure status(1) Disclosed(a) Agent had authority (actual or apparent)(b) Agent lacked authority(2) Partially disclosed(3) UndisclosedD. Tort Liability1. Agents are always liable for their own tortious acts.2. Principal’s liability for agent’s tortious acts (respondeat superior)a) Principal/agent relationship must exist, andb) Agent’s tortious actions took place in the scope of employment3. Scope of Employmenta) Negligent torts(1) At place of work(2) During work time(3) Advancing the principal’s interests(4) Generally, driving to and from work is outside the scope.(5) Frolic v. Detour(a) Time away from work(b) Distance away from work(c) Nature of the activity reasonably foreseeable?b) Intentional torts(1) Normally outside the scope of employment(2) May be in the scope if(a) The conduct is foreseeable, and/or(b) Arguably is advancing the employer interestsLecture:MGMT 217 1st Edition Lecture 16Last Lecture Outline:I. AGENCY LAW OVERVIEWA. Agency Relationship1. Partiesa) Principal-the person/business organization that controls the agents conduct b)Agent(1) Acts on behalf of the principal(2) Is a fiduciary2. Nature of the relationshipa) Voluntaryb) Most common example: Employer/Employee relationshipc) Distinguish between an agent and an independent contractor(1) What the employer calls the relationship means very little(2) Factors(a) Control(b) Method of payment(c) Tools suppliedB. Creating the Agency RelationshipThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.1. Agreement2. EstoppelC. Duties1. Agent’s duties to the principal-agent is a fiduciarya) Loyalty-agent must put the principal’s interests first.(1) Conflicts of interest(2) Secret profitsb) Obediencec) Reasonable care2. Principal’s duties to the agent-primarily these duties are based in contract; the principal is not a fiduciary to the agent.a) Compensationb) Reimbursementc) Indemnificationd) Reasonably safe work environmentLecture Outline: II. LIABILITY TO THIRD PARTIESA. Who is Responsible to Third Parties for Their Injury?1. Principal2. Agent3. BothB. What was the Cause of the Injury?1. Breach of Contract 2. TortC. Contract Liability1. What authority did the agent have to enter into the contract?a) Actual authority-comes from the principal(1) Express(2) Impliedb) Apparent authority(1) Comes from the third party(2) Third party must have reasonable belief of agent’s authority(3) Reasonable belief usually comes from (a) The principal’s actions-secret limitation example(b) The failure of the principal to act-furniture store “salesman”(c) Previous dealings between the agent and third partyc) No authority(1) Agent has neither actual nor apparent authority(2) Principal may elect to ratify the contract(a) Principal must know all the material facts(b) Principal must ratify entire contract2. Was the principal disclosed at the time of the contracta) Disclosed principal-third party know the identity of the principalb) Partially disclosed principal-third party does not know the identity of the principalc) Undisclosed principal-third party is unaware that a principal exists3. Principal’s liability to third partiesa) Agent’s authority(1) Actual authority(2) Apparent authority(3) No authority-exception: Ratification4. Agent’s liability to third partiesa) Principal’s disclosure status(1) Disclosed(a) Agent had authority (actual or apparent)(b) Agent lacked authority(2) Partially disclosed(3) UndisclosedContract Liability to Third Parties SummaryAgent hasActual AuthorityAgent hasApparent AuthorityAgent hasNo AuthorityPrincipal disclosedP only P only A onlyPrincipal partiallydisclosedP or A P or A A onlyPrincipal undisclosedP or A Not possible A onlyD. Tort Liability1. Agents are always liable for their own tortious acts.2. Principal’s liability for agent’s tortious acts (respondeat superior)a) Principal/agent relationship must exist, and-principals are generally not liable for the tortious actions of their independent contractors.b) Agent’s tortious actions took place in the scope of employment3. Scope of Employment a) Negligent torts(1) At place of work(2) During work time(3) Advancing the principal’s interests(4) Generally, driving to and from work is outside the scope.(5) Frolic v. Detour(a) Time away from work(b) Distance away from work(c) Nature of the activity reasonably foreseeable?b) Intentional torts(1) Normally outside the scope of employment(2) May be in the scope if(a) The conduct is foreseeable, and/or(b) Arguably is advancing the employer interestsLecture:If the agent is acting on the principal’s


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