Question & Answer: What can agents do to protect themselves from liability for the acts of the principal. Consider and…

What can agents do to protect themselves from liability for the acts of the principal. Consider and discuss the alternatives and possibilities. bussiness law class

Expert Answer

Agency Overview

Defined: An agency is a legal relationship where an agent is authorized to act on behalf of another (called the Principal) to create a legal relationship with a Third Party. Agency Requirements All that is required to form an agency is consent and a principal with capacity. is not required to create an agency relationship. Exception: When buying or selling interest in land, states require written agency agreement. In which case, power of attorney indicates a written agency agreement.

Actual Authority

where the principal’s words or conduct reasonably cause the agent to believe that he or she has been authorized to act. Authority Exists where the principal’st would lead a reasonable person in the third party’s position to believe that the agent was authorized to act

Implied Authority

Implied authority considered held by the agent by desirable quality of being reasonably necessary to carry out his express authority. As such, it can be secondary by virtue of a position held by an agent.Legal Principals

Liability Between Agent, and Principal,

Both agent and principal liable – When the agency is undisclosed or partially disclosed

Agent liable  Where the principal is not bound because the agent has no actual or apparent authority, agent is liable to the third party for breach of the implied warranty of authority.

. Agent NOT liable – If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope of such authority, so long as the relationship of the agency and the identity of the principal have been disclosed.
Agent Liability to Principal

Indemnify Principal – If the agent has acted without actual authority, but the principal is bound because the agent had apparent authority. However, the agent is liable to indemnify the principal for any resulting loss or damage.

Principal Liability to Agent

Indemnify agent – If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent for payments made during the course of the relationship whether the expenditure was expressly authorized or merely necessary in promoting the principal’s business.
Implicitly compensation – Without evidence to the contrary, there is an implied duty to compensate the agent for the agent’s service
Third Party Liability to Principal

Undisclosed but still liable – Principal may hold third party liable without agent disclosing existence or identity of third party.
Duties An agent owes a fiduciary duty to be loyal to the principal. The following are the types of duty that the agent owes:
Reasonable Care: Not acting in a negligent manner Obedience: Follow directions as prescribed by the principal
Loyalty: Act in the best interest of the principal

RatificationWhen an agent acts without authority, the principal may choose to be bound to the transaction and accept liability as negotiated.
Tort Liability As discuss in above past post, an operator is somebody approved by third person—the chief—to follow up for his sake. This, obviously, can host a huge effect on third gatherings with whom the specialist is in actuality connecting. The topic of operator risk to an outsider along these lines gets to be distinctly huge. The way of the relationship between the operator and the outsider—and subsequently, the nature of specialist risk to the outsider—relies on upon the conditions of the office relationship and the kind of organization relationship that exists.

Unveiled Principal On the off chance that an operator conducts business in the interest of an unveiled foremost—that is, a primary whose personality is revealed to the outsider—through the execution of an approved demonstration, the specialist is not at risk and is not a gathering to the agreement. Subsequently, any agreement that the specialist goes into is an agreement between that outsider and the primary. The operator is not a gathering to that agreement and can in this way not be considered capable by the outsider for satisfying its prerequisites. On account of uncovered principals, there is by and large no specialist risk to outsiders.

Unidentified Principal In the event that an operator conducts business for the benefit of a unidentified foremost—that is, a vital whose presence yet not personality is known to the outsider—the specialist is a gathering to the agreement, unless the gatherings concur something else. Thus, on account of unidentified principals, the specialist might be considered responsible for the satisfaction of any legally binding commitments.

The main special case to this general govern happens where the operator and the outsider concur that the specialist is following up in the interest of an undisclosed vital and that specialist is not a gathering to the agreement. The outsider must, in any case, agree to such a course of action. Without such an understanding, there is specialist risk to the outsider.

Undisclosed Principal The foremost is undisclosed when the specialist follows up for the chief’s sake without showing that he is acting in the limit of an operator. In this manner, to the outsider it creates the impression that the specialist is following up for his own sake. In such conditions, the specialist is a gathering to the agreement and there exists operator risk to the outsider.

Holding the Agent Liable The contrasts between uncovered, unidentified, and undisclosed principals are imperative since it serves to ensure guiltless outsiders. The tenets applying to every come from the general important that for an operator not to be held at risk for an agreement, he should unveil enough, not just for the outsider to know or have motivation to know about the presence of an organization relationship, additionally to know the central’s personality. Simply unveiling the presence of an office relationship is insufficient. Without distinguishing the important, the outsider stays oblivious of the individual with whom he is going into a legitimately authoritative understanding. In this way, the recognize of the main should likewise be uncovered or the individual the outsider knows—the specialist—will be held subject for the execution of the agreement.

Suggested Warranty of Authority At whatever point an operator signs an agreement with an outsider, there is a suggested guarantee of power. Subsequently, a claim might be documented against an operator that does not have the genuine power to go into the assention, whether that implies the specialist had no power or that he acted past the extent of the power the chief gave. Assuming, in any case, the operator expresses that he doesn’t make a guarantee of power or the outsider realizes that the specialist does not have the fundamental power, there is no guarantee of power, thus the specialist is not subject to any claim emerging from damaging that guarantee.

Specialist Liability to Third Party The issue of specialist risk to outsiders is critical. Since operators would regularly rather not be held at risk for responsibilities they make in the interest of someone else, it is imperative for specialists—and principals and outsiders—to comprehend when operator obligation connects.Operator for Undisclosed or Partially Disclosed Principal An operator require not, and every now and again won’t, advise the individual with whom he is arranging that he is following up for the benefit of a central. The mystery primary is generally called an “undisclosed important.” Or the specialist may tell the other individual that he is going about as an operator however not uncover the main’s name, in which occasion the vital is “incompletely unveiled.” To comprehend the troubles that may happen, consider the accompanying theoretical yet normal case. A land engineer known for building entertainment meccas needs to get a few packages of land to develop another stop. He needs to keep his personality mystery to hold down the land cost. In the event that the landowners understood that a noteworthy building task was going to be propelled, their asking cost would be very high. So the designer gets two choices to buy arrive by utilizing two mystery operators—Betty and Clem. Betty does not say to venders that she is a specialist; in this manner, to those merchants the designer is an undisclosed main. Clem tells those with whom he is managing that he is an operator yet declines to uncover the designer’s name or his business enthusiasm for the land. Along these lines the engineer is, to the last venders, a somewhat unveiled vital. Assume the merchants get twist of the approaching development and need to retreat from the arrangement. Who may authorize the agreements against them The engineer and the operators may sue to propel exchange of title. The undisclosed or incompletely unveiled primary may act to uphold his rights unless the agreement particularly denies it or there is a representation that the signatories are not marking for an undisclosed main. The operators may likewise bring suit to uphold the important’s agreement rights on the grounds that, as specialists for an undisclosed or in part revealed key, they are considered gatherings to their agreements. Presently assume the designer endeavors to cancel the arrangement. Whom may the venders sue? Both the engineer and the operators are at risk. That the dealers had no information of the engineer’s personality—or even that there was a designer—does not refute the agreement. On the off chance that the merchants first sue operator Betty (or Clem), they may even now recoup the price tag from the engineer the length of they had no learning of his character preceding winning the primary claim. The engineer is released from risk if, knowing his personality, the offended parties hold on in a suit against the specialists and recuperate a judgment against them in any case. Additionally, if the vender sues the vital and recoups a judgment, the operators are soothed of obligation. The merchant hence has a “right of decision” to sue either the operator or the undisclosed primary, a correct that in many states might be practiced whenever before the vender gathers on the judgment.

Absence of Authority in Agent

A specialist who indicates to make an agreement for the benefit of a central, however who in truth has no power to do as such, is subject to the next gathering. The hypothesis is that the specialist hosts justified to the third get-together that he has the essential power. The central is not subject without clear power or approval. In any case, the specialist does not warrant that the central has limit. Along these lines an operator for a minor is not at risk on an agreement that the minor later repudiates unless the specialist explicitly justified that the chief had accomplished his dominant part. To put it plainly, the inferred guarantee is that the specialist has power to make an arrangement, not that the primary will fundamentally conform to the agreement once the arrangement is made.

Operator Acting on Own Account

An operator will be at risk on contracts made in an individual limit—for example, when the specialist by and by ensures reimbursement of an obligation. The operator’s goal to be by and by subject is regularly hard to decide on the premise of his mark on an agreement. By and large, a man marking an agreement can maintain a strategic distance from individual risk just by demonstrating that he was in certainty marking as an operator. In the event that the agreement is marked “Jones, Agent,” Jones can acquaint prove with demonstrate that there was never an aim to hold him by and by subject. Be that as it may, on the off chance that he marked “Jones” and neither his office nor the chief’s name is incorporated, he will be actually at risk. This can be troublesome to specialists who routinely indorse checks and notes. There are extraordinary tenets administering these circumstances, which are talked about in (Reference mayer_1.0-ch25 not found in Book) managing business paper.

End of Agency The office relationship is not perpetual. Either by activity of the gatherings or by law, the relationship will in the long run end. By Act of the Parties Positively the gatherings to an office contract can end the understanding. Similarly as with the formation of the relationship, the understanding might be ended either explicitly or certainly.

Express Termination Numerous assentions contain determined conditions whose event flags the finish of the organization. The most evident of these conditions is the lapse of a settled timeframe (“office to end toward the finish of three months” or “on midnight, December 31”). An understanding may likewise end on the achievement of a predetermined demonstration (“on the offer of the house”) or taking after a particular occasion (“at the finish of the last steed race”). Shared assent between the gatherings will end the organization. In addition, the key may deny the organization or the specialist may disavow it; such a renouncement or renunciation of office would be an express end. Indeed, even an agreement that expresses the understanding is unalterable won’t tie, in spite of the fact that it can be the reason for a harm suit against the person who broke the assention by repudiating or denying it. Likewise with any agreement, a man has the ability to rupture, even without the privilege to do as such. On the off chance that the organization is combined with an intrigue, in any case, so that the power to act is given to secure an intrigue that the operator has in the topic of the office, then the important does not have the ability to renounce the assention.

Inferred Termination There are various different conditions that will spell the finish of the relationship by suggestion. Unspecified occasions or changes in business conditions or the estimation of the topic of the office may prompt to a sensible surmising that the office ought to be ended or suspended; for instance, the central longings the specialist to purchase silver however the silver market out of the blue ascents and silver pairs in cost overnight. Different conditions that end the organization incorporate traitorousness of the operator (e.g., he acknowledges an arrangement that is antagonistic to his first main or steals from the primary), insolvency of the specialist or of the key, the flare-up of war (on the off chance that it is sensible to induce that the foremost, knowing about the war, would not need the operator to keep on exercising power), and an adjustment in the law that makes a kept doing of the errand unlawful or genuinely meddles with it.

By Operation of Law Beside the express end (by understanding of both or upon the request of one), or the fundamental or sensible inductions that can be drawn from their assentions, the law voids organizations in specific situations. The most successive end by operation of law is the demise of a chief or an operator. The passing of an operator likewise ends the power of subagents he has designated, unless the essential has explicitly assented to the proceeding with legitimacy of their arrangement. Additionally, if the operator or important loses ability to go into an office relationship, it is suspended or ended. The office ends if its motivation gets to be distinctly illicit. Despite the fact that power has ended, whether by activity of the gatherings or operation of law, the key may at present be liable to obligation. Clear power in many cases will in any case exist; this is called waiting power. It is basic for a central on end of power to inform every one of the individuals who may in any case be in a position to manage the operator. The main exemptions to this necessity are when end is affected by death, loss of the important’s ability, or an occasion that would make it difficult to do the question of the organization.


principal/employer is responsible for an agent’s torts. In determining the liability of the principal, courts look primarily at the control the principal has over the agent? The relationship to be considered is whether or not the agent was an employee or independent contractor.
General: Principal not liable for agent’s torts
Exception: “Respondeat Superior” – Principal Employer can be held liable for torts of an agent that is working in the capacity as an employee
Note: Both the employee and employer can be held separately liable for a tort
Control is the major determinant of whether or not the principal/employer can be held liable for an employees torts
Employee : Employer has the right to control the agent (employee), then employer is liable for agent’s torts
Independent Contractor: Employer does not have the right to control the agent, then employer in not liable for agent’s torts
Liability of Employer for Employee Torts
Torts: Employer is liable for torts arising from work that employee has been hired to do
Intentional Torts and Criminal Activity: Employer is not liable for intentional torts committed by employee unless the intentional tort was authorized by the employer
Liability of Employer for Independent Contractor Torts
Generally, since employers do not have control over independent contractors, employers are not held liable for the torts of independent contractors.

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