Agency

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Employment Relationships
Should the We Fest be liable for an employees crime?
What factors would you consider? Why?
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Course and Scope Employment
Factors For Principal to Be Liable, Agents Act must have
occurred within the Course and Scope of Employment.
Employer
Liable
Employer NOT
Liable
Was Employees act authorized by Employer? Yes No
The Time place and purpose of act (factually based) ? ?
Was act commonly performed by Employees? Yes No
Did act advance Employers interests?
Yes No
Did Employer furnish instrumentality (tools)? Yes No
Did Employer have reason to know Employee would do the
act?
Yes No
Did the act involve a serious crime?
no yes 3
Examples
Start Job Early. Steve hires Joey to mow lawns for his lawn
mowing service and tells him not to start before 7:00 am. Joey
starts at 6:00 am and injures someone. Did Joey act within the
scope of employment.
Janitor Puts Glass Shards in Wall. Apartment manager hires
a new janitor to maintain building and kids bother him. He boss
tells him to let it go and he puts glass shards in the wall the kids
climb over to get into the apartment complex in an attempt to
keep them out. Did he act within scope of employment?
The janitor singles out one kid and beats him up.
Delivery Person Robs Bank. You hire a delivery person and
on the delivery persons way to a delivery, he stops and robs a
bank.
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Agency Relationships
Principal and Agent = Agency (most common legal
relationship)
Employee/Employer Relationship
Principal/Independent Contractor Relationship
Agent acts for principal. (Employee is an agent for the principal.)
Enables principal to operate in multiple
locations.
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Fiduciary Duty. Agent Owes Fiduciary Duty to Principal: Loyalty and
Care.
Duty of Loyalty and Care: an agent has a duty to act solely for the
benefit of his or her principal in all matters directly related with the agency
undertaking.
When is it an Agency? Sometimes it is not clear when an agency
relationship is created between and independent contractor and its
employer (client).
CASE 5.2 EBC 1, Inc. v. Goldman, Sachs & Co. (2005). Advice to a client by
underwriters on market conditions creates a fiduciary duty. Goldman helped set price at
$20 shares jumped to $85 and closed at $75 on the first day. Goldman got kickbacks
of profits made to initial buyers.
Case 5,1, Neinhard v. Salmon.

Fiduciary Duty
Employee vs. Independent
Contractor Relationship
Factors Courts Consider:
Eee I.C.
CONTROL? Does the Employer exercise a great degree of control over
the details of the work?
Yes No
Same Line of Business? Is the worker engaged in an occupation or
business distinct from Employer?
No Yes
Supervised? Is the work usually done under Employers supervision?
Yes No
Employer Tools? Does Employer provide the tools?
Yes No
Long Term Employment? Has the worker been employed a long
time?
Yes No
Paid at End? Is the worker paid at the end of the job?
No Yes
Degree of Skill? Is there a great degree of skill required?
No Yes
Control
Key
Factor
What are some other
advantages of being an
independent contractor?
What might be some
disadvantages?
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Cruise Ship Doctors
Independent Contractors?
Facts:
Hit Head on Cruise. Janice Sullivan slipped and hit
her head on a Royal Caribbean cruise celebrating her
wedding anniversary.
Doctor Failed to Treat. The ship doctor, wearing a
crew uniform, gave her over-the-counter pain
medicine but did not scan or X-ray her despite pain
over the next few days.
Serious Blood Clot. When she got home she went
to the emergency room and discovered the truth.
Issue: Is Royal Caribbean Liable for the doctors
negligence?

Issue: Should Royal Caribbean have to pay for the
doctors negligence? Royal Caribbean compares its
practice to renting space.

Different Story - Mr. Goodwille. Pronounced dead by
ships doctor.
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Employer
Employee
Independent
Contractor
Facts:
Graham Sells freeware Software. Richard Graham marketed CD-ROM disks
containing compilations of shareware, freeware, and public domain software.
James wrote a software program for Graham. Larry James agreed to create a
program for him in exchange for credit on the final product. James built into the program
a notice attributing authorship and copyright to himself.
James wanted credit - Graham removed the notice., claiming that the program was
a work for hire and the copyright was his.
James sold the program to another CD-ROM publisher.

Issue: Graham filed a suit against James, alleging copyright infringement. WHO
SHOULD WIN?


Larry James
Employee v. Independent Contractor
Ownership of Intellectual Property
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End-of-Chapter Question 2, p. 180

IBM working through a licensed re-seller
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There are four ways in which an agency relationship can arise:


Agency Formation
By Agreement
By Estoppel By Operation of Law
By Ratification
Coin sale by friend
Gaffrey - Supposed Buyer
Winter Gaffreys friend
Borge Coin Seller
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Group Presentation Ethical Consideration p. 449
Group 4 On side of hiring contract employees
Group 5 On side of its not ethical to hire contract employees
Agents Duties to the Principal
Performance - The agent must use reasonable diligence and skill in
performing his or her duties.
Notification - The agent is required to notify the principal of all matters that
come to his or her attention concerning the subject matter of the agency.
Loyalty - The agent has a duty to act solely for the benefit of his or her
principal and not in the interest of the agent or a third party.
Obedience - The agent must follow all lawful and clearly stated instructions of
the principal.
Accounting - The agent has a duty to make available to the principal records
of all property and money received and paid out on behalf of the principal.
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Principals Duties to the Agent
Compensation - Except in a gratuitous agency relationship, the
principal must pay the agreed-on value for an agents services.
Reimbursement and indemnification - This principal must
reimburse the agent for all sums of money disbursed at the request
of the principal and for all sums of money the agent disburses for
necessary expenses in the course of reasonable performance of his
or her agency duties.
Cooperation - A principal must cooperate with and assist an agent in
performing his or her duties.
Safe working conditions - A principal must provide safe working
conditions for the agent-employee.
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Actual Authority: principal gives consent for
the agent to act for and bind the principal.
Consent is express or implied.
Apparent Authority: when a third party
reasonably believes the agent has authority
to act for and bind the principal.
CASE 5.3 Powell v. MVE Holdings, Inc. (2001). CEO has apparent authority to
enter into contracts with former employee. - told Powell, former president, that
company would buy back his shares at same price others got ($125/share now
worth $5/share).
Agents Ability To
Bind The Principal to Contracts
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End-of-Chapter Question 8, p. 182

Is Wells Fargo Guard Service liable for unauthorized acts of its agents?

End-of-Chapter Question 5, p. 181

Car accident in company vehicle
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OShea v. Welch, p. 169.
Turning into a service station to get estimate for repair
on a personal car what was the result in this case?
Liability for Employees
Intentional Torts and Crimes
Principal Liable if Scope of Employment.
Principal liable for intentional torts committed with the scope of
employment.
Principals authorization of the tort

Employee also Liable. Employee is a tortfeasor as well.

Employer Knew or Should Have Known. Employer is liable for
Employees acts which Employer knew or should have known the
Employee had a propensity to commit.
Did Employee have Employers authorization to act?
To what extent were the Employers interests advanced?
Did the Employer provide the instrumentality that caused the injury?
Did the Employer have knowledge that the Employee would perform the act?

Crimes. General Rule: Agent is liable, Principal is not, unless:
Principal authorized or participated in crime.
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Smith v. Sears Roebuck & Co. p. 173
Sears employee used job in credit department to run credit checks on her
former husband who was behind on support payments.
OShea v. Welch, p.
169
Employee made a
left hand turn to do a
personal errand
while otherwise
working. Is the
employer liable?
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Liability for Torts of Agent
Liability for Torts Outside the Scope of
Employment.
Respondeat superior generally only
applies to actions of employees not
independent contractors.

Torts by Independent Contractors
As a general rule, an employer is not liable for
the torts committed by the independent
contractor. This rule is riddled with many
exceptions, and these exceptions come in many
forms, such as hazardous activities.
Have the exceptions become the rule?
What policy interest is furthered by imposing
liability on employers for the torts of their
independent contractors?
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Liability for
Authorized Acts
Disclosed or Partially Disclosed.
Disclosed or partially disclosed Principal is liable
to 3rd party if Agent acts within scope of authority.
Agent has no liability to 3rd P for disclosed
Principals non-performance. (Agent may be liable
if Principal is partially disclosed).
Undisclosed Principal,
Agent is liable
Principal also liable
Principal can enforce contract against the third
party.

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