MH Agency Outline 2016 PDF

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AGENCY OUTLINE

I.

AGENCY RELATIONSHIP a. Creation of Agency – An agency relationship is created when a principal gives authority to another to act on his or her behalf and the agent consents to do so. The granting of authority and consent to act need not to be written, but may be implied from the parties’ conduct or other evidence of intent

i. EX: Carrier v. McLlarky – Agency relationship created when the heater technician said that he would take the plaintiffs heater to try to get the warranty for it.

b. Agency Definition – Agency is the fiduciary relationship that arise when one person manifest assent to another that the agent shall act o the principal’s behalf ad subject the principal’s control and the agent manifest assent or otherwise consents so to act. i. Scope of Agency – what a person can lawfully do himself, he can do through an agent.

c. Elements of Agency i. On behalf of - distinction between acting on own behalf and on behalf another. For example a commercial landlord/tenant relationship where the landlord receives a portion of the tenant’s profit is NOT an agency relationship 1. EX: US v. GE – Case demonstrates a straight up agency relationship because the consignment deal with the distributor. The consignment business was responsible for giving GE all of the net profits minus their compensation. The vendors were simply a conduit for GE to the customers.

ii. Control – different meaning when focus is contract liability or tort liability. On behalf of can be overshadowed by the concept of control. Also, said to contain an element of “subservience.” 1. CAVEAT: Just because there is a contractual relationship inhering an element of control does not mean that the control element of the agency relationship is present.

iii. Consent – requires mutual agreement. If the existence of an alleged agency relationship is unknown to the agent, the agent’s authority is without scope or definition, inviting abuse and far-reaching legal ramifications. Consent can be established expressly or implicitly This can exist even if the parties don’t know it.

d. Non-Agency Relationships – The following relationships are not agency relationships: i. Franchisor/Franchisee; ii. Marriage Relationship, iii. Co- Tenancy; iv. Corporate Directors e. Determining the Agency Relationship: i. Agency or Sale?- Typically vendors are not necessarily agent’s for the principal. Some key things to look for are whether the vendor purchases the product form the manufacturer up front. If so, then it is likely a franchisee relationship, or a dealer relationship (credit purchase of the goods or language indicating that the goods have been insured etc. indicates dealer relationship rather than agent).

ii. Agency or Debtor Creditor – Agency relationship is not typically a debtor creditor relationship. However, if the creditor exercise substantial control or the debtor begins to act on behalf od the creditor, an agency relationship may be present. See Carghill. However, efforts by a creditor to ensure that the debtor is exercising sound business judgment, and efforts to protect the creditors investment do not necessarily constitute control.

iii. Agency or Bailment – bailment for hire is missing the on behalf of element of the agency relationship, as well as the control to a certain extent. See Jones v. Taylor (Finding no Agency relationship where the

owner of the vehicle rented the vehicle to the defendant on a daily basis, where the defendant kept all his profits while using the car and owed the owner no money after his use of the cab)

iv. Agency or Trustee – key distinctions between an agent and a trustee are that the trustee has title to the property while an agent does not; Trustee is not controlled by the beneficiary, rather they must act for the benefit of the trustee; trustee cannot be subject to liability to the beneficiary; trustee does not consent of the beneficiary

v. Agent or Escrow Holder – an escrow holder is not an agent because it does not consent to the control of the principals during the contract. The escrow holder operates and acts on the occurrence of condition preceden 1. NOTE: An agent may be liable for failure to perform a contract intended to benefit a third person. The third person is justified in relying upon the contract and the contract may not be changed without their consent.

f. The ambiguous Principle Problem -

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II.

1.The Dual Agency Rule – The dual agency rule is that an agent cannot act on behalf of the adverse party to a transaction connected with the agency without the permission of the principal. o EX: Thayer Pacific – the railhead agent become an agent of the Plaintiff because he wrote that there was damage on the shipment in order to ensure that the plaintiff was able to recover later. o

Grounds for Rescission: “If one principal secretly employs the agent to act on its account knowing the other principal is unaware of the double employment, the defrauded principal can rescind or choose to affirm the transaction and recover damages from the other principle or knowing agent.”

o

Agent for two principals – When he is requested and performs duties for each of the parties, with the knowledge and consent of both, he may very well be considered as an agent for each for the particular services he renders that principal.

Subagency – A subagent is an agent of both the principle and the agent. A subagent is an agent hired by the agent. The principle is liable for the acts of the subagent, so long as the principle knew or had reason to know that the agent would hire a subagent, and impliedly or expressly consented. o NOTE: Agent is also liable for the wrongful acts of the subagents

DUTIES & RIGHTS

Duties of P to A a. The Principal has a fiduciary duty to the agent. These duties are contractual, thus it is common that the principal has a duty to pay the A because the A has a right to reasonable compensation; P has a duty to act in good faith; duty not to bring disrepute to the A; and P has a duty to disclose all of the material information to A, especially the information needed for A to complete A’s job.

b. Indemnity – An agent has a right to be reimbursed by the P for expenses reasonably incurred in the performance of agency and to be indemnified for any losses suffered during the course of agency, but not for losses caused solely bu his or her fault. Consistent with the agent’s fault, the agent has a duty to notify the principle of any claims against the agent, with sufficient time for the principle to defend the claims.

i. Reasonable Inference – the right to indemnity, unless expressly agreed to, depends on reasonable inference drawn from the circumstances. Thus a real estate broker, who is paid by commission, ordinarily is expected to bear certain expenses. 1. “The principal bears the burdens to the extent that courts believe to be just, considering the customs of the business and the nature of the particular relation” Thus Principal shall

indemnify the agent and subagent, because if he receives the benefit and the profit he should deal with the losses.

ii. Standing – although the right to indemnity creates an interest for the principal, the principal has a right to demand of his agent the opportunity to defend the agent. HOWEVER, a principal has no standing to enter the lawsuit and assert defenses to third party’s claim against the agent is an action independent of that right.

c. Sub-agency – a person to whom the agent delegates, as his agent, the performance of an act for the principal which the agent has been empowered to perform through his own representative.

i. Creation – in order to establish a subagency, a principal must know or have reason to know that the agent will hire someone else to act on behalf of the principal and consent, expressly or impliedly, to such arrangement. Agent Duty – an agent has a duty to notify the principal of a claim against the agent and give the principal the opportunity to defend the claim. In sub agency relationship, A is a P to B, and B and A are agents of P Also, subagent does not have a right to payment against a remote principle (Unless Promised), however they do have the right to indemnity against a remote principal.

ii. Subcontractor – NOT A SUB-AGENT and therefore principal not liable. d. Duty of Care – an employer (principal) has a duty to provide reasonably safe working conditions. i. Non-Delegable Duty – although an employer is free to arrange for performance of the duty by someone else it cannot avoid liability for the fault worthy acts of the person to whom performance was delegated.

ii. Fellow Servant Doctrine – the general rule is that he who engages in the employment of another for the performance of specified duties for compensation, takes upon himself the natural and ordinarily risks and perils incident of the performance of such services. Each employee is an observer and give notice and leave if precaution is not taken. Safety will be more effectually secured than indemnifying the common employer. iii. Duty to Protect Agent’s Reputation and to disclose risks – Principal must not put agent in a position that will bring agent to disrepute and must let agent know about the risk of discharging the agent’s duties for the P.

e. Duties of Agent to Principal – the agent is a fiduciary, which means he who has a duty, created by his undertaking, to act primarily for the benefit of another in matters connected with his undertakings. i. Duty of Care - See Carrier. ii. Duty of Disclosure – 1. Pre-Agency – if it is one which the agent should realize would be likely to affect the judgment of the principal in giving his consent to the agent to enter into the particular transaction on the specified terms. Hence , the disclosure much include fact which he should realize have or likely to have a bearing upon the desirability of the transaction from the viewpoint of the principal. iii. Duty of Loyalty 1. Loyalty during relationship – incorporates a duty to disclose potential conflicts of interests or harm principal, such as communicating confidential information to a competitor, or interfering with business. Also a duty not to compete against Principal. READ Gelfand case and notes 2. Post-termination Competition – usually in employment scenarios, trade secrets, customer list, anti-competitive clauses, but must be reasonable, not too restrictive. Read Town & Country 3. Remedies- When the agent breaches the duty of loyalty the principle is not even required to prove loss. Further, the agent may be liable for any payment, as well as any profit that other beneficiaries gained by the breach of loyalty

iv. Duty of Good Conduct v. Duty to Indemnify Principal for Loss Caused by Misconduct - A principal has an action in tort or in contract against an agent who wrongfully causes it loss, as where the agent negligently damages the property of the principal, an account of money or other things, which he has received or paid out on behalf of the principal.

vi. Duty to Account – unless otherwise agreed, an agent is subject to a duty to keep, and render to his principal, an account of money or other things which he has received or paid out on behalf of the principal.

vii. Additional Informational Duties – Agent’s have a duty not to take trade secrets from their principles to be used in competition with the principal. If the agent attempts to take this information, the principal should be compensated. This duty also applies to misusing information, which prohibits the agent from disclosing any information that the agent could reasonably believe that the principal would not want disclosed.

1. Post Termination Competition – an agent may compete with its principal after termination, provided that the agent does not use trade secrets or confidential information against the principal. Further, the agent may not compete if he wrongfully terminates before his term, until that term is finished, and an agent may not prepare for competition by using the principal’s resources primary to the end of a term. An agent may, however, prepare for competition at the end of a term of agency

viii. NOTE: Non-Compete agreements are disfavored and can be invalidated for being too broad or unreasonabletr.

III.

VICARIOUS TORT LIABILITY A. Respondeat Superior – strict liability on master, whoever employs another, is answerable for him. I. Terms 1. Master – a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service 2. Servant – an agent employed by a master to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by master 3. Employee - an agent whose principal controls or has the right to control the manner and means of the agent’s work performance of work. The fact that work is performed gratuitously does not relieve principal of liability. II. Liability of Employee - where the agent fails to perform a duty owed to the principal, such a

failure to repair certain property, contrary to the principal’s instructions, and a person is injured as a result. Agent is NOT LIABLE, only principal. At “common law, an agent is personally responsible to third parties for doing something which he ought to not have done, but not for doing something which he ought have done, the agent in the latter case , being liable to the principal only. No man increase or diminishes his obligations to strangers by becoming an agent.”

1. Rationale – The master has a right of indemnification against the wrongdoing agent for losses sustained through vicarious liability. Based on the principle restitution that the party actually at fault in causing the loss should be the one who ultimately to bear the loss. III. Imputed Contributory Negligence

1. Widely Adopted Rule - a master is barred from recovery against a third person who negligently caused a loss to the master if the servant also was negligent in the accident giving rise to the loss 2. Minnesota Rule – rejected ICN because it relies on the implausible fiction that the owner has control over the operator’s conduct, in a case where negligent driver and owner was copassenger with agent who was contributory negligent IV. Employer Direct Tort Liability – an employer is chargeable with a duty to inquire into the background of

an employee and failure to do so can constitute negligent hiring. If the agent is working inside of someone’s home, the master is required to use a very high standard of care in evaluating the employee. higher duty of care inside of the home.

B. Independent Contractor Exception – a principal is not vicariously liable for an independent contractor tort I. Determining Servant(agent ) from IC – the extent of control; employee is engaged in distinct

occupation; whether the work is done under the direction of employer or specialist without supervision; the skill required; who supplies the tools and place of work; length of employment; method of payment; whether the work is regular business of employer; belief of parties in creation of relationship; whether principal is in the business 1. Factors outside Restatement – W-2 and other tax forms II. “Investigate, Inspect and supervise” – The employer of an independent contractor may, without changing the statues, exercise such control as is necessary to assure performance of the contract in accordance with its terms

1. When I.C.E is N/A despite No Control – executive chef; jobs requiring specialized license, i.e. doctor and attorneys. Within these specific factual situations, an independent contractor will be treated as an agent due to the outward appearance of the IC. See below: A. Apparent Agency “Liability imputed when P allows IC to perform

services for another an allowing IC to perform under circumstances that leas the person who accepted the services to reasonably believe that it is rendered on behalf of the principle.” I. EX: Cordero v. Christ – Anesthesiologist was an IC but he

appeared to be a worker for the hospital. The woman died, and the hospital was liable under apparent agency theory. C.

Exceptions to I.C.E. I. Inherently Dangerous Activities – work which, in its nature, will create some peculiar risk of injury to

to others unless special precautions are taken – for example, excavation by public highway II. Negligent Hire of Independent Contractor III. Non-Delegable Duties – requires the person upon whom it is imposed to answer for it that care is

exercised by anyone, even though he be an independent contractor, to who the performance of the duty is entrusted. “The responsibility is so important to the community and should not be permitted to transfer it to another.

iv. Liability for a Borrowed Servant – When an employee of one employer goes to work for another employer, the second employer may be held liable for tortious acts of the employee. This typically applies to employees in very specialized businesses, such as crane operators etc.

1. TEST: The focus for many courts is which employer had the right to control the employee’s conduct at the time of the negligent act, on the rationale that such employer was in the best position to prevent the injury. In order dor the temporary master to be liable he must be in full control (control must be surrendered).

v. Three Test: 1. Allegiance Test – “So long as employee is furthering the business of the general employer in rendering service to another, he will not be considered an employee of the other, unless command over the activities of the employee is surrendered.”

2. Spot-On Control Test – Who did all of the controlling. Looks at who has control over the physical actions of the employees at the time of the accident.”

3. Dual liability Test – The dual liability test presupposes that the two employers were in a joint venture and therefore should share the liability. D.

ACTIVITY (SCOPE OF EMPLOYMENT)

I. Respondeat Superior Liability – an employee acts within the scope of employment when performing

work assigned by the employer or engaging in a course of conduct subject to the employer’s control. An employee’s conduct is not within the scope when it occurs within an independent course of conduct not intended by the employee to serve any purpose for the employer II. Conduct – a servant is within the scope of employment, if, but only if A. It is of the kind he is employed to perform B. It occurs substantially within the authorized time/space limits C. It is activated, at least in part, by the purpose to serve the master AND D. If force is intentionally used by the servant against another , the use of force is not expected by

the master III. Negligence A. Frolic (Substantial Deviation) – outside the scope of employment, no vicarious liability, i.e.

horseplay, lunch hour and depending on circumstances work parties iv. Re-Entry – An agent has re-entered the scope of employment until he is again reasonably near the authorized space and time limits and is acting with the intention of serving his master’s business. A. Detour (Slight Deviation) – a deviation within the scope of employment I. Traveling – if the work of the employee creates necessity of travel, he in in the course

of his employment, though he is serving at the same time some purpose of his own. To establish liability, the inference must be permissible that the trip would have been made even if the private errand was cancelled E. Employee Trip – Whether the trip is one which would have required the employer to send

another employee over the same route to performed the same function if the trip ha...