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To create an agency relationship, there must be:
- • A principal and
- • An agent
- • Who mutually consent that the agent will act on behalf of the principal and
- • Be subject to the principal’s control
- • Thereby creating a fiduciary relationship.
In an agency relationship, the person for whom an agent is acting.
In an agency relationship, the person who is acting on behalf of a principal.
How does one establish "consent?"
To establish consent, the principal must ask the agent to do something, and the agent must agree.
What is a FIDUCIARY RELATIONSHIP?
A fiduciary relationship is a special relationship, with high standards. The beneficiary places special confidence in the fiduciary who, in turn, is obligated to act in good faith and candor, putting his own needs second. The purpose of a fiduciary relationship is for one person to benefit another.Agents have a fiduciary duty to their principals.
What are the DUTIES OF AGENTS TO PRINCIPALS?
- DUTY OF LOYALTY
- Duty to Obey Instructions
- Duty of Care
- Duty to Provide Information
What major factors play a roll in DUTY OF LOYALTY?
- Outside Benefits
- Confidential Information
- Competition with the Principal
- Conflict of Interest between Two Principals
- Secretly Dealing with the Principal
- Appropriate Behavior
What does "outside benefits" mean?
An agent may not receive profits unless the principal knows and approves.
What is "Confidential Information?"
Agents can neither disclose nor use for their own benefit any confidential information they acquire during their agency.
What does "Competition with the Principal" mean?
Agents are not allowed to compete with their principal in any matter within the scope of the agency business.
What is a Conflict of Interest between Two Principals?
Unless otherwise agreed, an agent may not act for two principals whose interests conflict.
what does "Secretly Dealing with the Principal" mean?
If a principal hires an agent to arrange a transaction, the agent may not become a party to the transaction without the principal’s permission.
what does "Duty to Obey Instructions" mean?
An agent must obey her principal’s instructions unless the principal directs her to behave illegally or unethically.
- An agent has a duty to act with reasonable care.
- An agent has a duty to provide the principal with all information in her possession that she has reason to believe the principal wants to know.
A principal has three potential remedies when an agent breaches her duty:
- The principal can recover from the agent any damagesIf an agent breaches the duty of loyalty, he must turn over to the principal any profitsIf the agent has violated her duty of loyalty, the principal may rescind
DUTIES OF PRINCIPALS TO AGENTS
- reimburse the agent for reasonable expenses and
- cooperate with the agent in performing agency tasks.
Duties of Agents to Principals
- Duty of loyalty
- Duty to obey instructions
- Duty of care
- Duty to provide information
- Duty to reimburse the agent
TERMINATING AN AGENCY RELATIONSHIP
Either the agent or the principal can terminate the agency relationship at any time. Here are their options:
- Term Agreement
- Achieving a Purpose
- Mutual Agreement
- Agency at Will
- Wrongful Termination
The principal and agent can agree in advance how long their relationship will last.
Achieving a purpose
The principal and agent can agree that the agency relationship will terminate when the principal’s goals have been achieved.
No matter what the principal and agent agree at the start, they can always change their minds later on, as long as the change is mutual.
Agency at will
If they make no agreement in advance about the term of the agreement, either principal or agent can terminate at any time.
Either party always has the power to walk out. They may not, however, have the right.
Another way to terminate the agency relationship
The agency agreement also terminates if either the principal or the agent becomes unable to perform his required duties.
PRINCIPAL’S LIABILITY FOR CONTRACTS
- Express Authority
- Implied Authority
- Apparent Authority
Either by words or conduct, the principal grants an agent permission to act.
The agent has authority to perform acts that are reasonably necessary to accomplish an authorized transaction, even if the principal does not specify them.
A principal does something to make an innocent third party believe that an agent is acting with the principal’s authority, even though the agent is not authorized.
AGENT’S LIABILITY FOR CONTRACTS
The agent’s liability on a contract depends upon how much the third party knows about the principal.Disclosure is the agent’s best protection against liability.
- Fully Disclosed Principal
- Unidentified Principal
- Undisclosed Principal
Fully Disclosed Principal
An agent is not liable for any contracts she makes on behalf of a fully disclosed principal.
In the case of an unidentified principal, the third party can recover from either the agent or the principal. (An unidentified principal is also sometimes called a partially disclosed principal.) A principal is unidentified if the third party knew of his existence but not his identity.
In the case of an undisclosed principal, the third party can recover from either the agent or the principal.
Jointly and severally liable
All members of a group are liable.They can be sued as a group, or any one of them can be sued individually for the full amount owing.
PRINCIPAL’S LIABILITY FOR TORTS
An employer is liable for a tort committed by his employee acting within the scope of employment or acting with apparent authority.
The principle that an employer is liable for a tort committed by an employee acting within the scope of employment or acting with apparent authority.
- There are two kinds of agents:
- employees and
- independent contractors.
- A principal may be liable for the torts of an employee but generally is not liable for the torts of an independent contractor.
What will the courts consider when deciding if an agent is an employee or independent contractor?
- The principal controls details of the work.
- The principal supplies the tools and place of work
- The agents work full-time for the principal.
- The agents are paid by time, not by the job.
- The work is part of the regular business of the principal.
- The principal and agents believe they have an employer-employee relationship.
- The principal is in business.
As a general rule, principals are not liable for the torts of an independent contractor. There is, however, one exception to this rule: The principal is liable for the torts of an independent contractor if the principal has been negligent in hiring or supervising her.
Scope of Employment
Principals are only liable for torts that an employee commits within the scope of employment.
An employee is acting within the scope of employment if the act:
- Is one that employees are generally responsible for
- Takes place during hours that the employee is generally employed
- Is part of the principal’s business
- Is similar to the one the principal authorized
- Is one for which the principal supplied the tools; and
- Is not seriously criminal
An act is within the scope of employment, even if expressly forbidden, if it is of the same general nature as that authorized or if it is incidental to the conduct authorized.
The principal is liable for the actions of the employee that occur while the employee is at work, but not for actions that occur after the employee has abandoned the principal’s business.
Negligent and Intentional Torts
- The principal is liable if the employee commits a negligent tort that causes physical harm to a person or property.
- A principal is not liable for the intentional torts of the employee unless the employee intended to serve some purpose of the employer.
CREATING AN AGENCY RELATIONSHIP
A principal and an agent mutually consent that the agent will act on behalf of the principal and be subject to the principal’s control,thereby creating a fiduciary relationship.
AN AGENT’S DUTIES TO THE PRINCIPAL
An agent owes these duties to the principal: duty of loyalty, duty to obey instructions, duty of care, and duty to provide information.
THE PRINCIPAL’S REMEDIES IN THE EVENT OF A BREACH
The principal has three potential remedies when the agent breaches her duty: recovery of damages the breach has caused, recovery of any profits earned by the agent from the breach, and rescission of any transaction with the agent.
TRADITIONAL COMMON LAW RULE
Traditionally, an employee at will could be fired for a good reason, a bad reason, or no reason at all. Th is right is now modified by common law and by statute.
Employers may be liable for defamation if they give false and unfavorable references. More than half of the states, however, recognize a qualified privilege for employers who give references about former employees.
An employer may not violate a worker’s reasonable expectation of privacy. However, unless a state has passed a statute to the contrary, employers may monitor many types of off -duty conduct (even legal activities such as smoking).
EQUAL PAY ACT
Under the Equal Pay Act, an employee may not be paid for equal work at a lesser rate than employees of the opposite sex.
Employers must make reasonable accommodation for a worker’s religious beliefs unless the request would cause undue hardship for the business.
BONA FIDE OCCUPATIONAL QUALIFICATION (BFOQ)
An employer is permitted to establish discriminatory job requirements if they are essential to the position in question.
Sexual harassment involves unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature.
Under the Pregnancy Discrimination Act of 1978,an employer may not fire or refuse to hire a woman because she is pregnant.
Th e Age Discrimination in Employment Act (ADEA) of 1967 prohibits age discrimination against employees or job applicants who are at least 40 years old.
AMERICANS WITH DISABILITIES ACT
Under the Americans with Disabilities Act an employer may not refuse to hire or promote a disabled person as long as she can, with reasonable accommodation, perform the essential functions of the job. A disabled person is someone with a physical or mental impairment that substantially limits a major life activity. An accommodation is not reasonable if it would create undue hardship for the employer.