Agency – applies in torts and contracts. Under what circumstances who was not involved in the tort be held vicariously liable? Under what circumstances can one be bound by a contract entered into by another on his behalf?
What is an agency relationship? When will it be deemed by the law an agency relationship?
Introduction to Agency
Transaction specific – in that very context, is the relationship an agency relationship
Deals with the legal significance within which the parties have chosen to do business
Evolved in the middle ages in England. Simplest relationship: sole proprietorship. Master and servant relationships were more rare, but still persist today.
Agency is one who authorizes another to act on his or her behalf, subject to that person’s control, and the agreement by the other to do so. It can be express, implied, or apparent authority.
Doctrine of vicarious liability – respondet superior – liability imposed on the master of the tort committed by the servant
Restatement Second. Agency is (1) the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act (2) the one for whom action is to be taken is the principal, and (3) the one who is to act is the agent.
The fiduciary duty – honesty, good faith, on behalf of the principal. Does not always imply agency, but agent always has fiduciary duty.
Manifestation of consent – Written words, deeds, spoken words, silence, reasonably interpreted.
Control – the higher the level of control between master and servant, the more likely there is an agency. Someone can be an agent, and someone can be a servant. An general agent is only subject to control some of the time… a servant has very little control over his performance.
Douglas v. Steele
Facts: Douglas’ bought travel package from agent. Travel company goes bankrupt. Court finds agent could have known that tour company was going bankrupt and probably did know. The tour company paid the kickback to the agent from the cost of the package. Agent says she was not acting on behalf of the Douglas’, but on behalf of the tour company, so that she had no relationship to the Douglas’.
Issue: Whether a travel agent can be held personally liable for non-delivery of a promised vacation by a nonparty tour company? Whether an individual can be sued when doing her job as a travel agent for a bigger company?
Duty to act with skill, care, and diligence rending that service that would be reasonably expected.
Due diligence to use reasonable inquiry into financial security of company
Even though the kickback was from the tour company, the Douglas’ had the control so she was an agent of the Douglas’.
Duty of due diligence is not complete… it’s only know or should have known, but does not cover all eventualities.
Holding: The Douglas’ could have picked a place at random, but they employed her services and created that agency relationship, creating a fiduciary relationship and requiring her to use good faith, good communication, and reasonable care. Agent was not under the control of the tour company. She was under the control of the Douglas’ as a “special agent” (single transaction as opposed to general agent). Who paid the agent doesn’t change the relationship of agent – payment doesn’t not define agency. She was required to make a timely investigation as to why the company wasn’t issuing the tickets. She was required to look into the health of the company. She was required to not release the check to the company until after she was confirmed.
How could the agent have changed the result of this? She could have told them that she was under the control of the tour company, not the defendants. (A corporation only exists through its own agents.)
Hunter Mining Laboratories, Inc. v. Management Assistance
Facts: Plaintiffs bought computers from MAI and also software and programming assistance through agents. The computers came. The programming was not delivered by Hubco and Data Doctors. MAI was not part of the contracts between Hunter and the two companies. MAI required certain things from these two companies.
Procedural: Jury found there was agency, but trial judge set aside the verdict.
Issue: Is MAI liable for their sales agents, Hobco and Data Doctors? Did MAI have control over these companies in selling their products? Did MAI render consent to be bound by their contracts?
Holding: This was a manufacturer/distributor relationship with minimal controls. There was no day to day control over the two companies. Controls related to product’s reputation, not the transactions of the sales. So control was irrelevant to this transaction. Additionally, there was no apparent authority present shown between principal to the third party (different from actual authority, where authority flows from principal to agent). Affirmed trial judge’s decision.
Edwards v. National Speleological Society, Inc. (NSS)
Facts: Woman dies by falling down well that was poorly fenced by local NSS group. Estate sues national NSS group.
Issue: Are the local groups under the control of the national society so as to make them an agent?
Holding: Constitutions and bylaws of corporations give complete freedom, only withholding their ability to not hurt conservation values. No control, no agency.
Having the right to control, whether or not exerting it, is enough to create agency.
Agent Liability in Tort Law
Respondant Superior – no fault by the employer, but because he profits from that conduct, he should be liable for the mistakes. The tort-feasor remains liable.
Existence of master servant relationship
The conduct was done in the scope of employment
Jones v. Hart – “The act of a servant is the act of his master, where he acts by authority of the master.” “Whoever employs another, is answerable for him, and undertakes for his care to all that make use of him.”
This court was overly broad, so subsequent courts had to narrow what makes someone an employee.
This could did not address whether the master was negligent in hiring or supervising the servant to do this task. He is liable as a function of the relationship, not by an act or omission by the master.
Rationale for vicarious liability (public policy that supports the law)
Compensatory – the master has deeper pockets and the victim has more options
Fairness – since the servant is furthering the business of the master, and since the master is benefiting and profiting, it is only fair that he should be liable
Loss spreading – the master is in the best position to insure against liability
Efficiency – imposing vicarious liability rids the court of the time to decide if the master was in some way negligent in employing the servant or making him so something
Types of relationships between master and…
Servants – likely to trigger vicarious liability (a.k.a., employee)
Independent contractors – do not trigger vicarious liability because there is a differing degree of control; there does not need to be a contract or an agreement that says that someone is an independent contractor
There are independent contractors who have enough authority to be an agent, but not enough to be a servant (employee). All agents are either servants or independent contractors.
Example: Real Estate agent: They are an independent contractor, but they are also your agent. Builder contractor: Some contractors are so independent, that they are not even agents.
Santiago v. Phoenix Newspapers, Inc.
Facts: Delivery man was in car crash. He was under contract explicitly as a contractor, but the newspaper gave him his route, specific instructions, paid his salary and gave health and disability insurance
Issue: Whether the trial court correctly found as a matter of law that PNI was not vicariously liable for the injuries Santiago sustained in a collision with a PNI delivery agent. Was the delivery man a contractor or an employee?
Procedural: The trial and appeals court gave summary judgement saying that there was no question of fact and that the delivery man was an independent contractor and PNI couldn’t be held vicariously liable.
Contract language is not determinative of relationship, but rather the “objective nature of the relationship” determines the legal relationship
The right to control is the fundamental variable in determining whether someone is an independent contractor or an employee
The major factors that determine an employee-employer relationship are:
The extent of control exercised by the master over the details of the work – the when, where, and how. A strong indication is whether the employer has the power to give specific instructions with the expectation that they will be followed.
The distinct in nature of the worker’s business are considered… are the worker’s tasks promoting his own independent business or the employers? Does the worker’s job performance result in a profit or a loss for the employer?
Is the work highly skilled? (The higher the skill requirement, the more likely it is an employee). Also, an agreement that the work could be delegate to another indicates an independent contractor.
If the employer supplies the tools for the work, it is more likely an employee-employer relationship.
How long is the work contracted for? The longer the contract, the more likely it is an employee-employer relationship. The length of time usually increases the level of control the employer has over the employee. Also, the right to fire someone, whether someone is offered health insurance, and the ways in which someone’s job performance are measured also are factors.
How is someone paid? Hourly or for the whole task? Hourly implies employee-employer relationship.
Is the work a regular part of the employer’s business? Is the work intertwined with the function of the business?
The parties belief of their relationship isn’t important except as it indicates that there is an assumption and submission of/to control. Also, if the community assumes that there is a employee-employer relationship, that also is a factor.
Holding: The lower court was wrong to grant summary judgment as there is a question of fact as to whether the delivery man was an employee or an independent contractor. Remanded to lower court.
Home Design, Inc. v. Kansas Department of Human Resources
Facts: The State Department wanted Home Designs to pay more worker compensation taxes. But state law says you o
ed as she ran after a Good Humor truck. Before 1980, the ice cream salesmen were employees and they were given special risk training because GH knew that children were at risk. Then in 1980, GH tells their employees that they can work on their own. They become independent contractors. There was no defined route, no set price, the trucks were owned by the drivers, and it didn’t provide safety training. They entered into vendor agreements.
Rules: Generally, if they are independent contractors, there is no liability for the superior company. But if it involves a peculiar risk or an inherent danger, then liability can be extended.
Inherent danger – one who employs an independent contractor o do work involving a special danger to others which the employer knows or has reason to know to be inherent in or normal to the work, or which he contemplates or has reason to contemplate when making the contract, is subject to liability for the physical harm caused o such others by the contractor’s failure to take reasonable precautions. (this usually applies to things like blasting, explosions, fires, etc.)
Peculiar risk – depends on the fact that the employer knew or had special reason to know that, absent special precautions, an independent contractor’s activities were likely to create a peculiar risk to others in the specific circumstances under which the work is normally done. (this rule applies here)
Holding: Because Good Humor knew of the dangers and did not thing to minimize that danger, then they can be liable under the peculiar risk doctrine. The employer has particular knowledge of the risk that independent contractors may be less aware of. This is a case where GH has a non-delegable duty. They still have a duty to caution against a certain risk.
Fiocco v. Carver
Facts: A driver was told to come back with the company truck to the garage. He instead went out of his way to visit his mother and to stop at a pool hall and found himself in a street carnival. He let people climb on the truck for fun. Then he tried to leave to go back to the garage and ended up running over a kid.
Issue: Is the employer liable for his employee’s accident when the employee was driving his car coming home from a job but on a personal detour? Was the driver acting in the scope of the employment? And had he reentered the scope of employment?
Who is benefiting? What was the task approved and the task done?
If there is a departure so manifest that it counts as an abandonment of duty, he cannot be said to be under the employer’s bidding—he is on a “frolic.”
Location, time, and space guide the courts decision.
The frolic cannot be reentered until your dominant purpose is to serve the master. (Varies from state to state, but this is the rule Furlow wants us to cite.)
Holding: The employee was not doing the employers bidding. The employer cannot be held liable. He did not have a dominant purpose of being under control of the servant yet when he started to leave.
Frolic vs. detour. Detour is a minor deviation. You are still doing the master’s work, the purpose is still to serve the master. You are still in the scope of employment if you have a partial purpose to serve the master. But to reenter, it’s a higher standard.
Restatement section 228. Scope of Employment. If you are doing the kind of work that you are hired to do, and within time and space limits imposed by the employer and you are actuated at least in part by a desire/intent to serve the master’s purpose, then you are in the scope of employment.
When there is the use of physical force, is it under scope of employment? You ask, is it anticipatable? E.g., bouncer, yes, librarian, no.
Meyers v. National Detective Agency
Facts: A man is in his Agency car and it has the words “K-9 unit” on the side. But the company didn’t authorize and told him to not have a dog. A man comes up and the driver wants to show off his dog and the dog bites the man and hurts the driver.
Issue: Can you impose liability on a servant when the servant does something specifically forbidden by the master? (Different than “against authorization”)
Rules: Under scope of business: What is the act, time, and place meeting the scope of employment