Agency Principles

• Who is liable in a K Claim brought by 3rd party?

o Is the principle liable for acts of the agent? (Contract Case)
 Is the person an agent of the principle?
• Agency is:
o Fiduciary duty
o The manifestation of consent by the principle that the agent act on his behalf and
under his control
o Consent by the agent to act on behalf of the principle
• Principle is a person for whom the act is being preformed
• Agent is the person who is performing the act
 Did the agent have authority to perform the act?
• Agent must have authority from principle in order for the principle to be liable
o 2 types of authority:
 Actual authority—created by manifestations from the principle to the
agent
• Express—direct command that the agent actually do the work.
• Implied—recognizes that the agent has the authority to do what
is reasonably necessary to get the job done. (no need to spell out
every detail)
 Apparent authority—created by a manifestation by the principle to the
third party
• Requirements:
o The manifestation must be attributable to P
o Must get to the third party
o Must lead 3rd party to reasonably conclude that A is an
agent for P
o NOTE—detrimental reliance is not required.
 Did the agent act within the scope of his authority?
• If Yes, P is liable because A can bind P to the extent that A acts within the scope of his
authority
• If No, the A could be liable to P for breach of K for failing to perform a service in
accordance with the parties agreement.
o Is P liable to A?
 Did A act within the scope of actual authority?
• Yes, P must indemnify A regardless whether there was expressed or implied authority
o Is A liable to 3rd party?
 Was the P disclosed?
• Disclosed P—A not liable unless otherwise agreed
• Partially disclosed P—A is liable unless otherwise agreed
o Partially disclosed P—3rd party knows that the A is acting on behalf of “a”
principle but does not know the principles identity.
• Undisclosed P—Agent is liable, however, if acting within his authority P still liable.
• NOTE—P must be disclosed at the time that the K is entered into.
o Is A liable to P?
 Did A act with actual authority?
• No, did A act with apparent authority?
o Yes, A is liable to indemnify P
• Who is liable for a Tort claim brought by a 3rd party?
o Is P liable? (start with agency analysis)
 Is this a master-servant relationship? (respondeat superior)
• Master—the P who employs and controls A in performing the service
• Servant—the A who is employed and controlled by P in performing the service
• YES—Was A performing within the scope of his employment?
 o A’s conduct must be the kind that is authorized or incidental to the conduct
authorized by P
 Conduct is within the scope of employment if:
• The kind that A is employed to perform
• Occurs substantially w/in the authorized time and space limits
• Done with the purpose to serve the master, AND
• If A intentionally uses force, force is expected by the allowed by
the P/master
 NOTE—Intentional Torts are generally not w/in the scope of the
employment unless the circumstances indicate otherwise.
 Detour—significant deviation, not w/in the scope of employment
 Frolic—minor deviation, w/in the scope of employment
o YES, P is liable for the Torts of A
o NO, P is not liable for the torts of A, UNLESS:
 P intended the conduct or consequences OR
 P was negligent or reckless OR
 The conduct violated a non delegable duty of the P OR
 The Tort was accomplished by actual or apparent authority
 Is A an Independent Contractor(IC)?
• GR—Vicarious liability does not apply to IC’s, unless IC is engaged in inherently
dangerous activity
o IC—someone who contracts w/ another to do something but is not controlled by
that person
 Agent IC—P is NOT liable in tort, but IS Liable in K for the acts or
omissions of AIC
 Non-Agent IC—P is not liable in tort OR K for the acts or omissions of a
NAIC
o Is A liable?
 GR—A may be liable for torts committed, although he acted on behalf of the principle
• What if there is an attorney-client relationship?
o The attorney is the A of the client (P)
 P controls A subject to 2 limitations:
• A does not have to follow P’s instructions if they interfere w/ the accomplishment of P’s
goals AND
• A may decline to engage in wrong doing
• What if there is a franchisor-franchisee relationship?
o Did the franchisor have an agency disclaimer?
 Yes, may avoid liability, however this is not determinative
o Is the franchisor liable?
 Estoppel—If there is detrimental reliance franchisor will be liable
 Agency—If there is an agency relationship franchisor will be liable
• Actual Agency—(right of control test) Franchisor has the right to exercise control over the
daily operations of the franchisee an agency relationship exists.
• Apparent Agency—In order to have apparent agency there must be:
o a representation of central uniformity AND
o justifiable reliance on the franchisor name
o
o NOTE—to avoid apparent agency the franchisor must take away the thing that
created reliance