Business Associations: There is a spectrum of business associations ranging from single and discreet contracts to very relational contracts.
1. Within the Firms
a. Agent’s Fiduciary Duty: An agent owes his principal a fiduciary duty of loyalty. This requires the agent to act in the best interest of his principal and refrain from self-interested behavior.–CCS v. Reilly (4th Cir. 1963): An employee owes his employer a FD. Reilly violated his duty as a sales rep for CCS because he solicited clients for his future business while still employed by CCS.
b. Employment At-Will: If an employee is employed at will, the employer does not owe a fiduciary duty to the employee. There does not need to be good cause.–Foley v. Interactive Data (CA SC 1988): If the employment relationship changes over time, there may be an implied K because new K expectations can be created overtime. Foley claimed that his employment K started out as at-will but changed over time such that he could only be fired for good cause.
2. OUTSIDE THE FIRM
a. Vicarious Liability: Principles are liable for the actions of their princip
ii. Apparent Authority: Principal either intentionally or negligently causes or allowed third party to reasonably believe the agent possesses the authority.
b. Blackburn v. Witter (CA Ct. App. 1962): Dean Witter is vicariously liable for its employee, Long, who sold non-existent stock to B so that he could use it personally. Dean Witter had apparent authority because they knew he was a bad apple even if they didn’t know about particular scam – they knew Long was drinking, gambling, fiddling w/ customer’s accounts, etc.
c. Is this fair?
i. Yes, because this balances out the fiduciary duty the agent owes the principal.
ii. Yes, because principal profits from agent’s actions.
Yes, because principal is best cost avoider; can prevent this from happening next time.
