Bài giảng Business Law (13th edition) - Chapter 36: Third-Party Relations of the Principal and the Agent

Agency LawThe Agency RelationshipThird-Party Relations of thePrincipal and the Agent8McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Third-Party Relations of thePrincipal and the AgentPAETRHC36“We cannot all be masters.”William Shakespeare, Othello, Act 1, Scene 1Learning ObjectivesContract liability of the principalContract liability of the agentContract suits against principal and agentTort liability of the principalTort liability of the agentTort suits against principal and agent36 - *Generally, a principal is liable on a contract made by agent if agent had express, implied, or apparent authority to make the contractAgent’s liability to third parties for a contract made on behalf of a principal depends on whether principal was disclosed (not liable) or undisclosed (liable)Contract Liability36 - *If agent contracts for an existing, competent principal but lacks authority, principal is not bound, but it’s unfair to third partyThus, agent bound on theory of an implied warranty of authority to contractSee Reed v. National Foundation Life Insurance Co. If agent lacks authority, principal may bind to the contract by ratificationImplied Warranty of Authority 36 - *A principal may incur direct liability for an agent’s torts because principal is at faultUnder doctrine of respondeat superior (let the master answer), a principal is liable for torts committed by agents (1) who are principal’s employees and (2) who commit the tort while acting within the scope of their employmentPrincipal liable for employee’s negligent and intentional tortsPrincipal’s Tort Liability 36 - *Employee’s conduct is within the scope of employment if conduct:Was what employee was employed to performOccurred within authorized time periodOccurred within authorized locationMotivated by purpose of serving employerScope of Employment36 - *Principal does not control independent contractor’s work, thus principal not liable for an independent contractor’s tortsPrincipal may be directly liable for negligent hiring or contractor’s negligent performance of nondelegable duty or dangerous activityPrincipal may be liable, vicariously or directly, for agent’s misrepresentationsPrincipal’s Tort Liability 36 - *Agents are liable for their torts except when:Agent exercises a privilege of the principal Agent takes privileged action to defend his or her person or principal’s propertyAgent unknowingly makes a false statement in conduct of principal’s businessThird parties are injured by defective tools or instrumentalities furnished by principalTort Liability of Agent36 - *Test Your KnowledgeTrue=A, False = BAn agent is always liable for his own torts.The doctrine of respondeat superior means that a principal is liable for torts committed by employees acting within the course and scope of employment.If an agent contracts for a legally existing and competent principal but lacks authority to enter contracts, the principal is not bound.36 - *Test Your KnowledgeTrue=A, False = BA principal is never liable for an independent contractor’s torts. Apparent authority arises if communications by principal to third party creates reasonable appearance of authority in the agent.If a principal fails to inform the agent about a defect in the product, the principal will be directly liable for an agent’s torts.36 - *Test Your KnowledgeMultiple ChoiceCarl owned a a pizza business and employed Zip to deliver pizzas. Carl knew that Zip occasionally drank beer while driving, but didn’t fire Zip. Zip injured Dan while delivering pizzas and driving drunk. Is Carl liable to Dan for Zip’s conduct? (a) No, only Zip is liable. Drunk driving was not within the scope of employment(b) Yes, since Carl knew about Zip’s drinking and negligently retained Zip36 - *Test Your KnowledgeMultiple ChoiceCarl’s Pizza hired Miller to be general manager. Miller hired Sam for pizza prep work. In general, would Carl’s Pizza be obligated to honor the contract with Sam? (a) No; only the owner of Carl’s Pizza can hire Sam, thus Sam’s contract is void(b) Yes; Miller acted with implied authority since he is general manager and Carl’s Pizza must honor Sam’s employment contract 36 - *Thought QuestionsDo you think the doctrine of respondeat superior is good policy? Why or why not?36 - *