Chapter II: Agency: Definition and Basic Categories
A. Agency: What is an Agent?
– Defines agency as “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.”
– “The one for whom action is to be taken is the principal.”
– “The one who is to act is the agent.”
– Agency has two subparts – agency in contracts and agency in tort. The language master/servant is used in tort law. Whereas, principal/agent is used in contract law. An agency relationship can be very formal or very informal.
– Agency deals with relationships. The court looks to these relationships and determines whether liability can be imposed on you. In other words, does our relationship make you answerable?
– The issue of agency is determined by whether there is a relationship containing four essential elements: 1) consent by the agent to act 2) consent by the principal to have the agent act 3) control and 4) acting on behalf of the principal.
Douglas v. Steele: TRAVEL AGENT
– A travel agent, as a fiduciary, has a duty to discover and disclose to his principal material information which is reasonably obtainable unless the information is clearly obvious and apparent to the principle. CUSTOM IN THE TRADE!!
– The expectations and the understandings of the parties that are entered into in the custom of the trade.
Hunter Mining Laboratories, Inc. v. Management Assistance: COMPUTER PRODUCTS
– An agency relationship does not exist when a manufacturer does not control the day to day activities of the dealer’s business. There is not enough control to establish an agency relationship.
– Another essential element of agency did not exist: a fiduciary obligation on the part of the alleged agents to “act primarily for the benefit of MAI in matters connected with their undertaking.” This was only a buyer/seller relationship.
Edwards v. NSS: FELL IN THE HOLE DUE TO FENCE
– To establish a sufficiently close relationship in which it is fair to establish vicarious liability, control must be shown. An agency relationship will NOT exist without CONTROL. It is the control of the relationship and not the control of the instrument that is being used, which establishes an agency relationship.
Chapter III – Vicarious Liability
Restatement: “A master is subject to liability for the torts of his servants committed while acting in the scope of their employment.”
– Respondeat superior imposes vicarious liability.
– The amount of control is essential in determining whether one can be held vicariously liable.
– It does not say that the master is negligent in hiring, supervising, etc. the servant. These are NOT elements of vicarious liability. All you have to do is show the existence of a relationship that is so close that the public will hold one vicariously liable. You DO NOT have to show wrongdoing. One can be completely diligent in the hiring and still be held liable.
Jones v. Hart: PAWN SHOP
– The act of a servant is the act of his master, where he acts by authority of the master. It is as though the master is doing the work himself. REMEMBER: You must be within the scope of your employer.
MUST FIND TO ESTABLISH A RELATIONSHIP:
1) Is the relationship so close that it can be characterized as a master/servant relationship? If yes..then
2) Was the servant’s tort within the scope of the employment?
Rationales for vicarious liability: public policy reasons for vicarious liability
1) Compensatory: Ensures that the victim ill be fully compensated for the harm resulting. The master is more likely to be in a better financial situation.
2) Fairness: Only fair that the party who is benefiting economically bear the loss.
3) Loss Spreading: The employer is in the best position to ensure itself against the losses. For instance, insurance, etc.
4) Efficiency: Avoids judicial analysis into whether the employer was negligent in hiring, supervising, and educating its employees. Encourages careful choice.
Employee Versus Independent Contractor
Santiago v. Phoenix Newspapers: PAPER BOY
– Contract language does not determine the relationship of the parties, rather the “objective nature of the relationship is determined by the totality of the circumstances.” Remember that there is not bright line, however.
– The fact finder must evaluate:
1) The extent of control exercised by the master over the details of the work.
A worker who must comply with another’s instructions about when, where, and how to work is an employee. Also, a strong indication is an employer’s power to give specific instructions.
2) The distinct nature of the worker’s business.
Whether the worker’s tasks are efforts to promote his own independent enterprise or to further his employer’s business will aid the fact finder in ascertaining the existence of an employer-employee relationship. Also, where the worker purchases the product and then sells it at a profit or loss, the worker is more likely to be found an independent contractor.
3) Specialization or sk
identity of a particular physician and where as a matter of fact the patient is relying upon the hospital to deliver the desired health care and treatment, the doctrine of respondeat superior applies and the hospital is vicariously liable for damages proximately resulting from the negligence, if any, of such physicians.
– The application of hornbook agency to the hospital physician relationship leads to unrealistic and unsatisfactory results, at least from the standpoint of the injured party.
– Here, the doctors were found to be independent contractors because there is a lack of control. However, DO NOT look to this as vicarious liability. Instead, we are imposing liability simply as a function of the relationship.
Limitations on the Independent Contractor Exception
Park North General Hospital v. Hickman: INCOMPETENT DOCTOR
– A hospital has a duty to exercise reasonable care in the selection of its medical staff and in granting specialized privileges to them.
– Liability is imposed NOT because of a relationship. Rather, it is imposed because hospitals have a duty to patients to be diligent in hiring (credentials) and supervision.
The Borrowed Servant Doctrine
Nepstad v. Lambert: CRANE HIT ELECTRICAL LINE
– When the servant of one company has the authority to ask the servant of another company to do something = borrowed servant doctrine.
– There are two tests: 1) whose business is being performed? 2) Who had the right of control? The second prong solves this case. Morris had the right to control the crane driver, Pasma. Therefore, Pasma was a borrowed servant.
– Restatement: Since the question of liability is always raised because of some specific act done, the important question is not whether or not he remains the servant of the general employer as to matters generally, but whether or not, as to the act in question, he is acting in the business of and under the direction of one or the other.
Wilson v. Good Humor Corp.: CHILD KILLED WHILE CROSSING ROAD