Ventoruzzo – Corporation Law – Fall 2009
Principles of Agency Law: Definition of Agency and Fiduciary duty
Saturday, December 12, 2009
2:36 AM
1. Defining Agency Law
a. Agent can bind his principal for tort, contract, and in some case even criminal liability
i. Agency is the fiduciary duty that arises when the principal manifests assent to the agent that the agent shall act on behalf of the principle and under the control of the principal; and the agent manifests or otherwise consents to it.
b. Thayer v. Pacific
i. Agency relationship doesn’t have to be expressly stated: it is a question of fact that may be implied from the surrounding circumstances
c. Fiduciary duty
i. A Fiduciary owes to the beneficiary a duty to act on behalf of the beneficiary with care and loyalty
d. Dual agency rule
i. An agent cannot have two masters: cant act on behalf or in the interest of an adverse party absent full disclosure and consent
ii. If the other principal knowingly and secretly employs the agent of another principle, the original principle can rescind the contract and seek damages from the sneaky principle
e. Can act for both parties when they both know and have given consent
Principles of Agency Law: Agent binding the principle to a Contract
Saturday, December 12, 2009
2:50 AM
1. The resolution of when an agent may bind a principle to a contract centers around whether the agent had authority to do so.
a. Two sources for agents authority
i. Agent has actual authority when the manifestations of the principle lead him to believe that the principle wishes an agent to act in a certain way.
1. Express authority
a. King v, Bankerd
i. power of attorney to sell doesn’t grant a broad power of attorney to gift
1. A power that is potentially hazardous to the interest of the principle will not be lightly inferred
2. Agent must act for the benefit of the principle and avoid all detriment unless expressly ordered not to
3. Even if general discretion is vested it is not said to be unlimited: al of the aforesaid applies
1. A general power must be reasonably carried out and cannot justify acts which the principal cannot b presumed to have wanted
ii. Apparent authority exists on the theory that the agent appears to have certain authority to bind the principle. This is used to protect third parties who enter into contracts with the principle who, because of her actions and surrounding circumstances, they believe has the authority to bind the agent.
1. ( the third party cannot have actual notice of the disparity)
2. Smith v. Hansen, Hansen & Johnson
a. Both actual and apparent authority depend on objective manifestations:
i. With actual they are made to the agent
ii. With the apparent they are made to the principal
1. These manifestations can be made to a third party by anyone who has authority from the principal to do so (ads, newspapers, etc…)
iii. The third party must actually believe and it the belief must be objectively reasonable
iv. Note that the scope could be narrow or large
1. General manger as opposed to Sales Manager
b. Powers of position example:
i. Granting a person a certain title may clothes him with apparent authority to conduct the duties of that title
ii. An agent cannot simply by his own words invest himself with apparent authority
iii. Industry wide practices as to positions may create apparent authority
c. There might be a duty to inspect if the party knows or has reason to know that the agent isn’t an agent or doesn’t have specific power
d. Agent can be liable for breach of the warranty when they present themselves to have agency power but really dont
b. Other sources of Agent authority created by the courts:
i. Implied and Incidental authority
1. Authority incident to actual authority
a. In essence, it is implied that the agent has the authority do to that which is reasonably necessary in exercising his actual authority
b. Incident: authorizes whatever needs to be done in the ordinary course of performing his actual authority unless the principle directs other wise
2. Inherent authority
a. Authority derived solely from the agency relationship
c. Estoppel
i. Courts have estopped certain people who have given consent to others to act as their agent only to argue that they lacked the authority to do so
ii. A person who has not made a manifestation that someone is their agent may nevertheless be liable to a third party for the actions of the agent when the third party has relied detrimentally on the fact that the “agent” was working o
e is an employee
iii. Other factors pertinent to control
1. Was he doing something other than the occupation he was sent to do
2. The skill required to complete the operation
3. Who supplies the instruments to finish the work
4. Length of time for which the person is employed
5. Method of payment: by individual job or salary
6. The belief of the parties as to the creation of a master-servant relationship
b. The agent is acting within the scope of his employment
i. Employee must be about the employer’s business and the duties assigned by the employer as opposed to being wholly involved in a personal endeavor
ii. Occur substantially within the temporal and spatial restraints of his employment
iii. Actions must be motivated at least in part by the purpose of serving employers interest
iv. Dual purpose doctrine
1. if actions are motivated by serving his employee and serving his own interest the actions will usually be considered within the scope of the employment
a. However , if it is primarily personal then it will be considered without the scope of his employment
i. Relevant test when the employer sends someone on a trip:
1. Is the trip one which would have required the employer to send another employee had the plaintiff not been there. Does it necessitate travel by one of the employees? If yes, then it is within
2. Usually, travel to and from work is outside the scope of employment
Principles of Agency Law: Vicarious Liability for Intentional misconduct
Saturday, December 12, 2009
4:05 AM
1. Vicarious liability for negligence is premised on belief that the principal can and should anticipate negligence on behalf of the employees.
2. The employer should be held to expect risks to the public that arise out of and in the course of business.
a. Usually not liable for punitive damages unless he authorized or consented to the behavior
3. Restatement: if the employee was not motivated by serving his employer, the employer is not liable
