Chapter 19 relationship of principal and agent

chapter 19 relationship of principal and agent

Start studying Chapter 19 Relationship of Principal and Agent. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Chapter 19—Relationship of Principal and Agent TRUE/FALSE 1. A gratuitous agent has a duty of loyalty and is liable for any harm caused by his careless. Study 19 Chapter 19 Relationship of Principal and Agent flashcards from irais v. on StudyBlue.

He does so and sends the bill to Perry. Abe might argue that he needs the suit to impress properly prospective buyers. Pierre told Theresa to come to his jewelry store at 9 A. Amy sold Theresa a unique diamond ring. When Pierre returned and found the ring gone, he became very upset because he had promised that ring to another customer. He called Theresa, who refused to give the ring back. Theresa was within her rights because Pierre had created a situation in which she could reasonably believe that Amy had the authority to sell the ring.

Pellas gives Andrew very explicit instructions against purchasing anything for the newspaper while he is gone. First, he instructs Andrew not to purchase anything. Andrew is liable for the loss of that money.

Tom is a former employee of Mr. Pellas asked for the money, Tom not only refused to give it to him, but also kept the fax machine and then resold it to the newspaper by defrauding Andrew. Tom violated his duty of loyalty to Mr. As we saw in the last example, Mr.

Tom clearly obviously violated his duty to account. And there is no question that he owes Mr. Avery decided to invest in the Meader Chemical Company, a new corporation that was clearly one of the best investment opportunities at the time.

See Section 4, Cockrell v. Special Cases of Vicarious Liability Vicarious liability is not limited to harm caused in the course of an agency relationship. It may also be imposed in other areas, including torts of family members, and other torts governed by statute or regulation. We will examine each in turn. Use of Automobiles A problem commonly arises when an automobile owner lends his vehicle to a personal friend, someone who is not an agent, and the borrower injures a third person.

Principal Agent Relationship in Contract

Is the owner liable? In many states, the owner is not liable; in other states, however, two approaches impose liability on the owner. The first approach is legislative: The second approach to placing liability on the owner is judicial and known as the family purpose doctrine A doctrine under which an owner of an automobile is liable for damages to others incurred while members of his family are driving the vehicle, under the theory that the vehicle is owned for family purposes.

chapter 19 relationship of principal and agent

Under this doctrine, a family member who negligently injures someone with the car subjects the owner to liability if the family member was furthering family purposes. These are loosely defined to include virtually every use to which a child, for example, might put a car. In a Georgia case, Dixon v. Phillips, the father allowed his minor son to drive the car but expressly forbade him from letting anyone else do so.

Nevertheless, the son gave the wheel to a friend and a collision occurred while both were in the car. The court held the father liable because he made the car available for the pleasure and convenience of his son and other family members.

Torts of Family Members At common law, the husband was liable for the torts of his wife, not because she was considered an agent but because she was considered to be an extension of him. Holmes, Agency, 4 Harvard Law Rev. However, they can be held liable for failing to control children known to be dangerous. Most states have statutorily changed the common-law rule, making parents responsible for willful or malicious tortious acts of their children whether or not they are known to be mischief-makers.

Thus the Illinois Parental Responsibility Law provides the following: Several other states impose a monetary limit on such liability. Other Torts Governed by Statute or Regulation There are certain types of conduct that statutes or regulation attempt to control by placing the burden of liability on those presumably in a position to prevent the unwanted conduct.

Another example involves the sale of adulterated or short-weight foodstuffs: A principal will, however, be liable if the principal directed, approved, or participated in the crime. There is a narrow exception to the broad policy of immunity. These include pure food and drug acts, speeding ordinances, building regulations, child labor rules, and minimum wage and maximum hour legislation.

Misdemeanor criminal liability may be imposed upon corporations and individual employees for the sale or shipment of adulterated food in interstate commerce, notwithstanding the fact that the defendant may have had no actual knowledge that the food was adulterated at the time the sale or shipment was made.

This is the master-servant doctrine or respondeat superior. It imposes vicarious liability on the employer: Special cases of vicarious liability arise in several circumstances. For example, the owner of an automobile may be liable for torts committed by one who borrows it, or if it is—even if indirectly—used for family purposes.

Similarly by statute, the sellers and employers of sellers of alcohol or adulterated or short-weight foodstuffs may be liable. The employer of one who commits a crime is not usually liable unless the employer put the employee up to the crime or knew that a crime was being committed. Exercises What is the difference between direct and vicarious employer tort liability? Under what circumstances will an employer be liable for intentional torts of the employee? Recognize the ways the agency relationship is terminated.

A person is always liable for his or her own torts unless the person is insane, involuntarily intoxicated, or acting under extreme duress. The agent is personally liable for his wrongful acts and must reimburse the principal for any damages the principal was forced to pay, as long as the principal did not authorize the wrongful conduct. The agent directed to commit a tort remains liable for his own conduct but is not obliged to repay the principal. Liability as an agent can be burdensome, sometimes perhaps more burdensome than as a principal.

In the absence of insurance, an agent is at serious risk in this lawsuit-conscious age. The risk is not total. The agent is not liable for torts of other agents unless he is personally at fault—for example, by negligently supervising a junior or by giving faulty instructions.

For example, an agent, the general manager for a principal, hires Brown as a subordinate. Brown is competent to do the job but by failing to exercise proper control over a machine negligently injures Ted, a visitor to the premises. The principal and Brown are liable to Ted, but the agent is not. Contract Liability It makes sense that an agent should be liable for her own torts; it would be a bad social policy indeed if a person could escape tort liability based on her own fault merely because she acted in an agency capacity.

No public policy would be served by imposing liability, and in many cases it would not make sense. The agent personally could not reasonably perform such contract, and it is not intended by the parties that she should be liable. Although the rule is different in England, where an agent residing outside the country is liable even if it is clear that he is signing in an agency capacity. But there are three exceptions to this rule: We consider each situation.

Agent for Undisclosed or Partially Disclosed Principal An agent need not, and frequently will not, inform the person with whom he is negotiating that he is acting on behalf of a principal. A real estate developer known for building amusement parks wants to acquire several parcels of land to construct a new park. He wants to keep his identity secret to hold down the land cost. If the landowners realized that a major building project was about to be launched, their asking price would be quite high.

So the developer obtains two options to purchase land by using two secret agents—Betty and Clem. Betty does not mention to sellers that she is an agent; therefore, to those sellers the developer is an undisclosed principal. Thus the developer is, to the latter sellers, a partially disclosed principal. Suppose the sellers get wind of the impending construction and want to back out of the deal. Who may enforce the contracts against them?

  • Chapter 19 Agency Relationships & Their Termination.

The developer and the agents may sue to compel transfer of title. The undisclosed or partially disclosed principal may act to enforce his rights unless the contract specifically prohibits it or there is a representation that the signatories are not signing for an undisclosed principal. Now suppose the developer attempts to call off the deal. Whom may the sellers sue? Both the developer and the agents are liable.

If the sellers first sue agent Betty or Clemthey may still recover the purchase price from the developer as long as they had no knowledge of his identity prior to winning the first lawsuit. The developer is discharged from liability if, knowing his identity, the plaintiffs persist in a suit against the agents and recover a judgment against them anyway.

Similarly, if the seller sues the principal and recovers a judgment, the agents are relieved of liability. Lack of Authority in Agent An agent who purports to make a contract on behalf of a principal, but who in fact has no authority to do so, is liable to the other party. The theory is that the agent has warranted to the third party that he has the requisite authority.

Chapter 19 Agency Relationships & Their Termination. - ppt download

The principal is not liable in the absence of apparent authority or ratification. But the agent does not warrant that the principal has capacity. Thus an agent for a minor is not liable on a contract that the minor later disavows unless the agent expressly warranted that the principal had attained his majority. In short, the implied warranty is that the agent has authority to make a deal, not that the principal will necessarily comply with the contract once the deal is made.

Agent Acting on Own Account An agent will be liable on contracts made in a personal capacity—for instance, when the agent personally guarantees repayment of a debt. Generally, a person signing a contract can avoid personal liability only by showing that he was in fact signing as an agent. This can be troublesome to agents who routinely indorse checks and notes. Termination of Agency The agency relationship is not permanent.

chapter 19 relationship of principal and agent

Either by action of the parties or by law, the relationship will eventually terminate. By Act of the Parties Certainly the parties to an agency contract can terminate the agreement. As with the creation of the relationship, the agreement may be terminated either expressly or implicitly. Express Termination Many agreements contain specified circumstances whose occurrence signals the end of the agency.

Mutual consent between the parties will end the agency. Even a contract that states the agreement is irrevocable will not be binding, although it can be the basis for a damage suit against the one who breached the agreement by revoking or renouncing it.

As with any contract, a person has the power to breach, even in absence of the right to do so. If the agency is coupled with an interest, however, so that the authority to act is given to secure an interest that the agent has in the subject matter of the agency, then the principal lacks the power to revoke the agreement. Implied Termination There are a number of other circumstances that will spell the end of the relationship by implication.

Unspecified events or changes in business conditions or the value of the subject matter of the agency might lead to a reasonable inference that the agency should be terminated or suspended; for example, the principal desires the agent to buy silver but the silver market unexpectedly rises and silver doubles in price overnight.

Other circumstances that end the agency include disloyalty of the agent e. By Operation of Law Aside from the express termination by agreement of both or upon the insistence of oneor the necessary or reasonable inferences that can be drawn from their agreements, the law voids agencies under certain circumstances. The most frequent termination by operation of law is the death of a principal or an agent.

The death of an agent also terminates the authority of subagents he has appointed, unless the principal has expressly consented to the continuing validity of their appointment. Similarly, if the agent or principal loses capacity to enter into an agency relationship, it is suspended or terminated.

The agency terminates if its purpose becomes illegal. Even though authority has terminated, whether by action of the parties or operation of law, the principal may still be subject to liability. It is imperative for a principal on termination of authority to notify all those who may still be in a position to deal with the agent.

Key Takeaway A person is always liable for her own torts, so an agent who commits a tort is liable; if the tort was in the scope of employment the principal is liable too. Unless the principal put the agent up to committing the tort, the agent will have to reimburse the principal. An agent is not generally liable for contracts made; the principal is liable.

But the agent will be liable if he is undisclosed or partially disclosed, if the agent lacks authority or exceeds it, or, of course, if the agent entered into the contract in a personal capacity. Agencies terminate expressly or impliedly or by operation of law.

An agency terminates impliedly by any number of circumstances in which it is reasonable to assume one or both of the parties would not want the relationship to continue. An agency will terminate by operation of law when one or the other party dies or becomes incompetent, or if the object of the agency becomes illegal.

However, an agent may have apparent lingering authority, so the principal, upon termination of the agency, should notify those who might deal with the agent that the relationship is severed.

Exercises Pauline, the owner of a large bakery business, wishes to expand her facilities by purchasing the adjacent property. She engages Alice as an agent to negotiate the deal with the property owner but instructs her not to tell the property owner that she—Alice—is acting as an agent because Pauline is concerned that the property owner would demand a high price.

A reasonable contract is made. When the economy sours, Pauline decides not to expand and cancels the plan. Who is liable for the breach? Alice buys an antique bed set. Who is liable, Peter or Alice? What happens when Peter discovers he owes the seller for the set? Under what circumstances will the agency terminate expressly?

Chapter 19 Agency Relationships Flashcards by B Roope | Brainscape

Agent is hired by Principal to sell a new drug, Phobbot. Six months later, as it becomes apparent that Phobbot has nasty side effects including deaththe Food and Drug Administration orders the drug pulled from the shelves.

Principal engages Agent to buy lumber, and in that capacity Agent deals with several large timber owners. Who is liable and why? Upon review of the record we are of opinion that there was evidence which, if believed, warranted a finding that the bank officer had the requisite authority or that the bank officer had apparent authority to make the agreement in controversy.

We therefore reverse the judgment. Brown was also the chief loan officer for the Bank, which had fourteen or fifteen branches in addition to its head office.

Chapter 19 Agency Relationships Flashcards Preview

Often Brown would tell Kanavos that he had to check an aspect of a loan transaction with Kelley, but Kelley always backed Brown up on those occasions. That offer was contained in a writing, dated July 16,on bank letterhead, which read as follows: The basis of exclusion was that the plaintiff had not established the authority of Brown to make with Kanavos the arrangement memorialized in the July 16,letter.

Whether Brown had apparent authority to make the July 16,modification is a question of how, in the circumstances, a third person, e. Titles of office generally do not establish apparent authority.

Trappings of office, e. Apparent authority is drawn from a variety of circumstances. Thus in Federal Nat. In the instant case there was evidence of the following variety of circumstances: The modification agreement signed by Brown and dated July 16,should have been admitted in evidence, and a verdict should not have been directed.

What is the relationship between apparent authority and estoppel? Who is estopped to do what, and why? Scope of Employment Lyon v.

DC McMillan, J.: The suit for damages arose out of an assault, including rape, committed with a knife and other weapons upon the plaintiff on May 9,by Michael Carey, a nineteen-year-old deliveryman for Pep Line Trucking Company, Inc. Three months after the trial, Judge Parker set aside the verdict and rendered judgment for both defendants notwithstanding the verdict. Whether the assault in this case was the outgrowth of a job-related controversy or simply a personal adventure of the deliveryman, was a question for the jury.

The verdict as to Pep Line should not have been disturbed. The merchandise was to be delivered on May 9, Her description of what happened is sufficiently brief and unqualified that it will bear repeating in full. She testified, without objection, as follows: I went to the door, and I looked in the peephole, and I asked who was there.

So this went back and forwards and so he was getting angry, and I told him to wait right here while I go get the COD. I went to the bedroom to get the check, and I picked it up, and I turned around and he was right there.

And then he raped me. All of the physical injury other than the rape occurred after rather than before the rape had been accomplished. Michael Carey was in the employment of the defendant Pep Line as a deliveryman.