I. What is Agency? – 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.
A. Elements of Agency:
1. Manifestation of principal to agent.
2. That the agent will act on behalf of the principal
3. Subject to the principal’s control
4. The agent consents by words or acts
B. Douglas v. Steele – A travel agent has a fiduciary duty to her client to make a reasonable inquiry and/or to timely disclose known material information to her clients.
1. It matters which party you think you are contracted with. Usually you think you are contracting with the principal, not the agent.
2. The fact that one party is paying does not make an agency relationship dispositive.
3. Look to the expectations and understandings of the parties which are entered into in light of the custom of the trade and the practices of our community to determine the fiduciary obligation/agency relationship.
a. You view a travel agent as a representative acting on your behalf.
C. Hunter Mining Labs, Inc. v. Management Assistance – In the relationship between a vendor and its distributors, no principal/agency relationship exists when the vendor does not have control over the “day to day” business activities of the distributor.
D. Edwards v. National Speleological Society, Inc. – “Right of control,” whether exercised or not, is required for a principal/agency relationship between a master and servant.
1. It is control of the relationship, not of the instrument the agent is using.
II. Vicarious Liability
A. Doctrine of Respondeat Superior – A master is subject to liability for the torts of his servants committed while acting in the scope of their employment.
1. DRS applies only to tort claims – not contract claims.
B. Analysis for Vicarious Liability:
1. Is there a master/servant relationship? If yes, then:
2. Did the servant’s tort occur within the scope of employment? If yes, then impose VL.
C. Rationales supporting Vicarious Liability:
1. Compensatory – VL ensures that the victim will be compensated because the principal is more likely to be able to pay, more easily subject to service of process, and less likely to flee.
2. Fairness – since the master benefits from the servant’s activity, the master should bear the loss. Also, a certain amount of tortious conduct is a foreseeable result of doing business, and so should be viewed as a business expense borne by the master.
3. Loss spreading – the master is in the best position to insure itself against losses from tortious conduct, and so should bear the loss.
4. Efficiency – VL avoids costly analysis into whether the employer was negligent in hiring, etc. and encourages careful choice in selecting and supervising employees.
D. Employee vs. Independent Contractor
1. Santiago v. Phoenix Newspapers, Inc. – paper boy was an employee, not an independent contractor.
a. 7 factors to weigh in determining whether an employer-employee relationship exists:
i. extent of control exercised by the master over the details of the work
1. When, where, and how = master relationship (and VL)
ii. nature of the worker’s business
1. Employees do work that furthers the employee’s business
2. Independent contractors do work that furthers their own independent enterprise
iii. specialization or skilled required (less skilled = employee)
iv. materials and place of work
v. duration of employment
vi. method of payment
1. by the job = independent contractor
2. by the hour/salary
2. negligence and entrustment to a driver who the owner knows or should have known is a reckless or incompetent driver
3. negligence by the driver on the occasion in question
4. proximate causation of the occurrence by the driver’s negligence.
2. The Borrowed Servant Doctrine
a. Nepstad v. Lambert
i. 2 Tests to determine when a worker becomes a loaned servant:
1. The “whose business test” – at the time of the negligent act, which employer’s business was being done or furthered? (The answer to the question names the responsible employer)
2. The “right of control or direction” test – the employer having the right to control the actions of the negligent servant at the time the negligent act occurs is responsible.
ii. The absence of actual control at the time of the negligent act does not alter its liability.
3. The Peculiar Risk Doctrine
a. peculiar risk – a risk peculiar to the work to be done, and arising out of its character, or out of the place where it is to be done, against which a reasonable person would recognize the necessity of taking special precautions.
b. Wilson v. Good Humor Corporation – One who employs an IC to do work which the employer should recognize as likely to create a peculiar risk of physical harm to others, is subject to liability if the employer (a) fails to provide that the IC shall take appropriate precautions, or (b) fails to exercise reasonable care to provide such precautions.