Agency Rules 2

  1. Basic rule for principal's liability for agent's actions
    Contract: Agent must have acted with authority

    Tort: There must have been a servant or employee relationship with the agent, and the agent must have acted within the scope of his authority
  2. Contract Liability
    Must act with authority (actual, apparent, or inherent)

    Actual authority - created by manifestation of a principal's intent:

    • Express - oral or written; clear, direct, and definite; or specific instructions or terms. Agent must reasonably believe he is doing what principal wants. Silence from principal can constitute assent, but intent must be communicated to the agent to create actual authority. Terminated by revocation, agreement, change of circumstances, passage of time, principal or agent's death . . .
    • Implied - authority to act within accepted business customs or general trade usage. May aslo be formed by principal's acquiescence to agent's actions, by emergency situation, or by authority to delegate.

    Apparent authority - derived from principal's manifestations that cause reasonable belief that third party (not an agent) has actual authority to act. Factors - past dealings, trade customs, industry standards, principal's written statemetns of authority, transactions not benefiting principal, extraordinary transactions for principal.

    Inherent Authority - examples: employer liable for torts by employee during scope of employment; unauthorized actions that are similar to past authorized actions; and lending of goods with an indicia of ownership (allows agent to sell the goods, and for buyer to take good title)

    Ratification: even if no authority, principal will be liable if he has ratified agent's actions. Express or implied, no consideration required. Elements - Principal ratifies ENTIRE act; principal has legal capacity to raatify at time act occurs; principal's ratification is timely; and principal has knowledge of material facts of the act.

    Estoppel - Principal liable for imposter's acts if principal negligently allows the imposter to have appearance of authority and to act on principal's behalf.
  3. Tort Liability
    Respondeat superior: applies where there is employee/employer or servant/master relationship, and tort committed within the scope of employment.

    Scope of employment: while performing work assigned by employer, engaging in conduct subject to employer's control. Specific factors - conneciton btwn time place and occasion for the act, history of employer/employee relationship, whether act commonly done by such employees, extent of departure from normal performance, whether employer could have reasonably anticipated the act.

    Intentional torts and criominal action Intentional torts are not automatically excluded from the scope of employment. They may fall within the scope of employment depending on the employee’s duties and the nature of the tort.

    Principal's ratification, negligence, or wrongful delegation: Principal is liable for harm to third party caused by agent where principal fails to exercise reasonable care in selection and hiring of the agent.

    Independent Contractors: principal not liable for torts of independent contractors, except for inherently dangerous activities, knowing hiring of incompetent independent contractor (liable for resulting negligence), or negligently hires incompetent independent contractor (liable for the negligent hiring).
Card Set
Agency Rules 2
Principal Liability