Book Notes for Exam 4 Chapter 20 Agency Formation and Duties Liability and Termination Agent Employee o Most common and most important legal relationship o Fiduciary relationship based on trust and confidence Principal Company in various locations o Use agents to be able to conduct multiple business operations simultaneously o Has the right to control the agent in matters entrusted to the agent Employer employer relationships Employer Independent Contractor Relationships o Employers have no control over the details of their work performance Not control of how but control of what Does not control day to day oversight Determination of Employee Status o IRS Employee status and works for hire any copyrighted work created during scope of employment is owned by employer As independent YOU own what you create o IRS wants everyone to be an employee because S S medicare tax doesn t always come off of independent contractors Guy who mows your lawn etc Unemployment government doesn t have to pay Practically the same except they didn t get stock options Microsoft Microsoft case o Independent contractors vs employees Physical trainer case didn t pay unemployment o Choice of entity o Create a corporation of renting space No longer in competition with other PTs Formation of the Agency Relationship o Agency relationships Consensual Requires no consideration Require principal to have contractual capacity Agent does not have to Can be created for any legal purpose Types of Agencies o Agency by Agreement Both sides consent Written oral or implied by conduct o Agency by Ratification Ratifies conduct of a person who is not originally an agent o Agency by Estoppel Leading a third party to believe that there is an agency and that if there was not an agency it would be harmful for the third party o Agency by Operation of Law Necessaries for family Food clothing shelter Emergency Duties of Agents and Principals o Agent s Duties to Principal as Fiduciary Performance Implied condition to use reasonable diligence and skill Gratuitous agent Only liable for torts Notification To principal of all matters concerning subject matter of agency Loyalty No conflict of interest Fundamental duty Obedience Accounting o Principal s Duties to Agent Compensation Express or implied Reimbursement Indemnification Cooperation Safe Working Conditions Rights and Remedies of Agents and Principals o Agent s Torts and contract remedies Demand for an Accounting No right to specific performance So unique that nothing can replace it Ex Real estate Would be creating a servitude o Principal s Constructive Trust Avoidance If agents does not do as told Indemnification Mistakes of agent breach of contract Scope of Agent s Authority o Principal liable for acts entered into by Agent when she gives Agent either actual or apparent authority Actual Authority Express or implied Express Oral or written o Equal dignity rule If law requires writing agent s contract must be in writing o Power of Attorney Gives agents express authority Written Special and general Implied Reasonably necessary actions to carry out authority o Inferred by custom Apparent Estoppel emergency and ratification Arises based on what a third party perceives believes Pattern of Conduct They ve always done it therefore they are see ppt Ratification o Principal must act on behalf of principal o Principal must act on entire deal o Principal must affirm before third party withdraws from transaction o Principal and third party must have capacity o Principal must know all material facts involved in transaction Liability for Contracts o Principals classified Disclosed Identity known to 3rd party Partially disclosed 3rd party knows he is dealing with an agent but doesn t know principal s identity Example Disney buying lots of land in Florida o Many agents for small companies who didn t disclose name to keep prices regular instead of skyrocketing when they heard the name Disney Undisclosed 3rd party does not know he is dealing with an agent or agent is the principal and therefore the principal s identity is totally unknown No liability unless o Principal is expressly excluded o Contract is a negotiable instrument o Agent s performance is personal o 3rd party would have contracted if they knew the principal s identity Authorized acts Disclosed or partially disclosed Liable to 3rd party Unauthorized acts Outside of agent E Agents Semi autonomous computer program PPT Liability o for Torts and Crimes Agent liable to 3rd party for own torts Principle may be liable for agents torts if they result from Principal s Tortious Conduct Principal s Authorization of Agent s Tortious Conduct Liability for Agent s Misrepresentation o Apparent Implied Authority o Innocent misrepresentation o for Negligence Respondeat Superior Determining Scope of Employment SEE PPT FOR CHART o for Agent s Negligence liable Distinction between Detour and a Frolic Frolic Accident while unreasonable trip Employee Travel Time To and from business related activities and stop for lunch Outside of work travel to get lunch not liable Borrowed Servants Depends on which employer had the primary right of control at the time of injury o for Agent s Intentional Torts Within the scope of employment Liable if employer knew it was an option o for Independent Contractor s Torts General rule Not liable Must determine whether worker or employee Exemptions Strict liability for unusually hazardous activities transportation of highly volatile chemicals or use of poisonous gases o for Agent s Crimes Agent liable for own crimes Unless Principal participated in crime Some states if the principal knew of the crime o See powerpoint for Liability Analysis Termination of Agency o Act of Parties Lapse of time Purpose achieved Occurrence of a special event Mutual agreement Termination of one part Notice of termination o Operation of Law Insanity by either Does agent know Impossibility Death by either Change of circumstances War o Must notify 3rd party of change Much like a contractual relationship Chapter 21 Employment Law Historically employment law was governed by the common law doctrine of employment at will where either employer or employee could terminate the relationship at an time for any reason Today employment law is heavily regulated by state and federal statutes Employee is always an agent Agent is not always an employee Employee is what makes all business work Employment at will o Employee or employer has option to terminate at any