The Business Environment
Agency- the employment of one person (agent) to perform a task that benefits the other (principal)
● A fundamental principal of agency is the creation of a fiduciary relationship wherein agent and principal owe to each other
duties of loyalty, trust, and care
● The principal is liable for torts committed by the agent in the course and scope of his employment- Vicarious Liability- liability
for the acts of another
● Employee- one who works for an employer
● Agent- one who acts on behalf of another- not all agents are employees
● Legal consequences of agency depend upon whether a person is truly acting as an employee or agent of the principal and not
some other capacity, such as an independent contractor
● Agents vs. Independent Contractors:
-a business is often responsible for wrongful acts of employees, but NOT independent contractors
-business must pay withholding taxes for employees, but not independent contractors
-employees may be entitled to worker's comp (or other) work-related benefits
-employees may be limited to those benefits, while independent contractors may be permitted to sue their negligent
employer/contractor
● Determining Employment Status:
-inverse relationship between control over work and status as an employee. Employers control their employees' work details, bu
independent contractors are given a job and have freedom to decide how to do it
-the doctrine of respondeat superior (which we discussed in torts) means that principals or employees are responsible for the ci
wrongs of their employees (in the course and scope of employment). This is also known as vicarious liability.
● Hypothetical- James works for Pizza Perfecto as a driver. While making a delivery, he runs a red light and injures another
motorist
-Is James liable for the injuries?
-Is Pizza Perfecto liable for the injuries?
-What if James was deviating from the delivery route to take a free pizza to his girlfriend?
● Actual Authority- the power given, in fact, to an agent by the principal or employer
● Apparent Authority- authority created by conduct that leads a third person to believe that authority exists
● Ostensible Authority- another term for apparent authority
● Kaplan v. Coldwell Banker Residential Affiliates, Inc.
-Kaplan purchased property, was dissatisfied, and sued his real estate agent, broker, and Coldwell Banker (of which broker was a
franchise)
-Coldwell Banker argued that franchisor-franchisee relationship was not the same as an agency relationship
-Coldwell Banker did not have control over the day-to-day duties of the realtor, thus was not liable for realtor's act or omissions
-However there may have been an ostensible agency relationship (or such relationship that causes a third party to believe that
such a relationship exists and rely upon that relationship)
-Whether ostensible relationship exists is a question of fact and may be implied form the circumstances of the case
Agency- the employment of one person (agent) to perform a task that benefits the other (principal)
● A fundamental principal of agency is the creation of a fiduciary relationship wherein agent and principal owe to each other
duties of loyalty, trust, and care
● The principal is liable for torts committed by the agent in the course and scope of his employment- Vicarious Liability- liability
for the acts of another
● Employee- one who works for an employer
● Agent- one who acts on behalf of another- not all agents are employees
● Legal consequences of agency depend upon whether a person is truly acting as an employee or agent of the principal and not
some other capacity, such as an independent contractor
● Agents vs. Independent Contractors:
-a business is often responsible for wrongful acts of employees, but NOT independent contractors
-business must pay withholding taxes for employees, but not independent contractors
-employees may be entitled to worker's comp (or other) work-related benefits
-employees may be limited to those benefits, while independent contractors may be permitted to sue their negligent
employer/contractor
● Determining Employment Status:
-inverse relationship between control over work and status as an employee. Employers control their employees' work details, bu
independent contractors are given a job and have freedom to decide how to do it
-the doctrine of respondeat superior (which we discussed in torts) means that principals or employees are responsible for the ci
wrongs of their employees (in the course and scope of employment). This is also known as vicarious liability.
● Hypothetical- James works for Pizza Perfecto as a driver. While making a delivery, he runs a red light and injures another
motorist
-Is James liable for the injuries?
-Is Pizza Perfecto liable for the injuries?
-What if James was deviating from the delivery route to take a free pizza to his girlfriend?
● Actual Authority- the power given, in fact, to an agent by the principal or employer
● Apparent Authority- authority created by conduct that leads a third person to believe that authority exists
● Ostensible Authority- another term for apparent authority
● Kaplan v. Coldwell Banker Residential Affiliates, Inc.
-Kaplan purchased property, was dissatisfied, and sued his real estate agent, broker, and Coldwell Banker (of which broker was a
franchise)
-Coldwell Banker argued that franchisor-franchisee relationship was not the same as an agency relationship
-Coldwell Banker did not have control over the day-to-day duties of the realtor, thus was not liable for realtor's act or omissions
-However there may have been an ostensible agency relationship (or such relationship that causes a third party to believe that
such a relationship exists and rely upon that relationship)
-Whether ostensible relationship exists is a question of fact and may be implied form the circumstances of the case
