Corporations
AGENTS AND EMPLOYEES
EMPLOYEE v. INDEPENDENT CONTRACTOR
Look a § 2 of Res. 2nd of Agency for definitions of Master; Servant; Independent Contractor.
v Master / Servant Relationship – A master (employer) is liable for the torts of his servant (employee).
o What is a servant? – Someone who works on behalf of the employer and over whom the employer has control.
o Master/Servant is a subset of Principal/Agent.
o The servant is an agent of the master, BUT
§ The distinguishing thing between principal/agent and master/servant is that the master has physical control over the servant. (That’s where the liability comes from).
v Principal / Agent Relationship – A principal IS NOT liable for the torts of his agent.
o How is the relationship between Principal and Agent formed?
§ Consent that agent will do something on behalf of the principal (will you be my agent? yes).
§ Don’t need a contract.
§ If there is a principal/agent relationship, the principal can be liable in contract, but for the principal to be liable in tort, there must be a master/servant relationship
v Factors to help determine if someone is an Employee or an Independent Contractor
o Look at Control – Servant doesn’t have much control over his job. An independent contractor does have control.
o How is the profit allocated?
§ Servant wouldn’t get much profit (he gets salary or wage).
§ Independent Contractor gets much of the profit.
§ Independent Contractor bears more risk of the business than the servant does.
Humble Oil & Refining Co. v. Martin (p. 12)
Humble owned gas station operated by Schneider. Humble agreed to lease equipment to Schneider. Love left her car at the station for repairs, and didn’t set the hand break. Car rolls into the Martin family. Martin sues Humble claiming Humble is liable under respondeat superior because Schneider was Humble’s servant.
Holding: Humble is liable because it is the master of Schneider
Hoover v. Sun Oil Co. (p. 14)
Gas station attendant, Smilyk, causes fire in P’s car. Smilyk works for Barone, who leases the station from Sun Oil.
Holding: Sun Oil is not liable because Barone is an independent contractor
v Distinguishing the above cases
o In Humble, the amount of rent paid varied based on profit, that means that risk was shared between Humble and Schneider. Looks like master/servant.
o Also, Humble had at-will termination ability over Schneider which shows control over Schneider.
o Barone had minimum rent to pay regardless of profit. Indicative of Independent Contractor.
o Barone’s lease could be terminated at 30 days notice.
FRANCHISES
v Franchise – a system for the selective distribution of goods and/or services under a brand name through outlets owned by independent b
btors operations rather than simply a financier – Cargill)
o It becomes an agency relationship at that point.
A. Gay Jenson Farms Co. v. Cargill, Inc. (p. 26)
Plaintiffs were farmers who sold their grain crops to Warren. Warren was a local firm that operated a grain elevator. Cargill is a large dealer in grain. On Cargill’s view of the facts, Warren bought grain from the farmers and sold it to Cargill. Warren became insolvent without having paid the farmers for their grain and they sued Cargill.
Court held that Cargill was liable because of the amount of control it exercised over the Warren, the debtor.
Notes:
– This is an actual authority case because we’re looking at what the actual relationship of control was
– Agency Cost – when an agent rips off the principal because the agent’s utility functions aren’t the same as the principal’s.
APPARENT AUTHORITY AND APPARENT AGENCY
v Five Concepts of Agency Law
o 1) Actual express authority
§ Manifestations made by the principal that makes it reasonable for the agent to believe he has authority.
The authority is expressed (go get some widgets for me).
