solved Content Purpose of Assignment: The purpose of this assignment is

Content

Purpose of Assignment: The purpose of this assignment is to understand the liability employers or principals might have for the action’s agents and employeesCourse Competency: Evaluate agency and employment relationships
Instructions
Content:

A client, Arthur Krupke, has approached your supervising attorney about liability he may face when he opens a business, Krupke’s Consultants, in your state. The client will be hiring management consultants as employees to go into other businesses and advise them on how they can improve their operations. Particularly, the client is interested in learning about the liability he may face in the following scenarios
If his consultants were to enter into a bad contract
If his consultants were to enter into a bad contract outside of their authority to do so
If his consultants were to negligently cause a car accident while on the way to a client worksite
If his consultants were to negligently cause a car accident while at lunch

Agency Relationships

WHAT IS AGENCY?Agency relationships occur when one party (the agent) is authorized to act on behalf of another (the principal). The existence of an agency relationship can make the words or actions of the agent binding on the principal.
How are agency relationships created?An agency relationship is created by contract, operation of law, or by actions of the principal that give rise to an “appearance” of the agent being able to lawfully act on his/her behalf. Some types of agency relationships occur merely because of status (lawyer, spouse, employee, guardian, etc.) A contract or agreement to create an agency relationship may be express or implied, oral or in writing. A principal can appoint any competent person to act on their behalf. The following are some different types of agency relationships:
Agency by AgreementWhen agency is created by agreement, the scope of authority of the agent is determined by the express terms of the agreement. Additionally, authority of an agent may be implied to third parties based on conduct and course of dealings. If a principle knowingly fails to repudiate actions by an agent that exceeded the scope of the agent’s authority, the principle is deemed to have ratified those actions.
Agency by EmploymentThe employer-employee relationship gives rise to agency. The employer is the principle and the employee is the agent. When an employee acts in a legal manner and as authorized by their employer, the employer (as principle) is liable to third parties for the actions of the employee (agent).
Independent ContractorsIndependent contractors perform tasks for principles, but exercise independent judgment in doing so and are not subject to the control of the principle. Independent contractors generally have specialized skills and use their own equipment and tools in performing tasks for principals. Accordingly, absent an express, written indemnification agreement, principals are generally not liable for the actions of independent contractors that occur during the course of the relationship.

DUTIES OWED BY AGENT TO PRINCIPALAn agent is required to be loyal to the principal and cannot act in a manner that is inconsistent with the interests of the principal. An agent is required to obey instructions of the principal, as long as they are not illegal. An agent must disclose all relevant facts to the principal. They must preserve confidential information of the principal and not disclose it to others, absent the express consent of the principal. An agent must also be diligent and exercise due care in acting on the principal’s behalf. Finally, an agent must account to the principal for all monies and resources used in the agency undertaking.
Duties Owed by Principal to AgentA principal owes the agent the duty of good faith and fair dealing. This means that the principal must be truthful with the agent and seek to fulfill all aspects of their agreement. The principal owes the agent the duty of remuneration and must pay the agent according to their agreement. Absent an express agreement in writing to the contrary, a principal also owes an agent the duty of indemnification – so long as the agent acts legally, within the scope of the agency agreement, and on behalf of the principal, if a third party seeks damages for the actions of the agent, the principal must make the appropriate payment to the third party.
Duties between Principals and Independent ContractorsThe duties between a principal and independent contractor are generally set forth in a written agreement. In some relationships, such as with lawyers, physicians, realtors, or other licensed professionals, codes of ethics and statutes may impose additional duties on independent contractors.

LIABILITY
Tort Liability of Principals for Actions of AgentsWhile an agent may be held personally liable for acts of negligence, if those acts were committed during the course of the agent undertaking a duty owed to the principal, the principal may also be held liable for the acts of the agent. Principals are generally NOT liable for intentional torts committed by agents during the scope of agency or employment, however.
Contract Liability of Principals for Actions of AgentsIf an agent acts within the bounds of the actual authority given to them by the principal and commits to a contract on the principal’s behalf, the principal is liable to the third party for the contract. If, however, the agent exceeds the scope of authority, the principal cannot be held liable for a contract with a third party unless the principal expressly ratifies the contract.
Defenses of Principals to Liability Claims by Third PartiesThe liability of principals to third parties in contract or for torts committed by agents, employees, or independent contractors is not absolute. The following are defenses that may be raised by a principal to avoid or limit liability for acts committed by agents, employees, or independent contractors:

The acts giving rise to liability were committed outside the scope of agency or employment or independent contractor agreement.
The acts giving rise to liability were committed by the agent, employee, or independent contractor occurred as part of a “frolic and detour” from the prescribed acts that were supposed to occur.
The acts giving rise to liability were committed by the agent, employee, or independent contractor occurred as part of the act of “coming or going” from work for the principal and was not part of the actual work itself. 

Agency Relationships

WHAT IS AGENCY?Agency relationships occur when one party (the agent) is authorized to act on behalf of another (the principal). The existence of an agency relationship can make the words or actions of the agent binding on the principal.
How are agency relationships created?An agency relationship is created by contract, operation of law, or by actions of the principal that give rise to an “appearance” of the agent being able to lawfully act on his/her behalf. Some types of agency relationships occur merely because of status (lawyer, spouse, employee, guardian, etc.) A contract or agreement to create an agency relationship may be express or implied, oral or in writing. A principal can appoint any competent person to act on their behalf. The following are some different types of agency relationships:
Agency by AgreementWhen agency is created by agreement, the scope of authority of the agent is determined by the express terms of the agreement. Additionally, authority of an agent may be implied to third parties based on conduct and course of dealings. If a principle knowingly fails to repudiate actions by an agent that exceeded the scope of the agent’s authority, the principle is deemed to have ratified those actions.
Agency by EmploymentThe employer-employee relationship gives rise to agency. The employer is the principle and the employee is the agent. When an employee acts in a legal manner and as authorized by their employer, the employer (as principle) is liable to third parties for the actions of the employee (agent).
Independent ContractorsIndependent contractors perform tasks for principles, but exercise independent judgment in doing so and are not subject to the control of the principle. Independent contractors generally have specialized skills and use their own equipment and tools in performing tasks for principals. Accordingly, absent an express, written indemnification agreement, principals are generally not liable for the actions of independent contractors that occur during the course of the relationship.

DUTIES OWED BY AGENT TO PRINCIPALAn agent is required to be loyal to the principal and cannot act in a manner that is inconsistent with the interests of the principal. An agent is required to obey instructions of the principal, as long as they are not illegal. An agent must disclose all relevant facts to the principal. They must preserve confidential information of the principal and not disclose it to others, absent the express consent of the principal. An agent must also be diligent and exercise due care in acting on the principal’s behalf. Finally, an agent must account to the principal for all monies and resources used in the agency undertaking.
Duties Owed by Principal to AgentA principal owes the agent the duty of good faith and fair dealing. This means that the principal must be truthful with the agent and seek to fulfill all aspects of their agreement. The principal owes the agent the duty of remuneration and must pay the agent according to their agreement. Absent an express agreement in writing to the contrary, a principal also owes an agent the duty of indemnification – so long as the agent acts legally, within the scope of the agency agreement, and on behalf of the principal, if a third party seeks damages for the actions of the agent, the principal must make the appropriate payment to the third party.
Duties between Principals and Independent ContractorsThe duties between a principal and independent contractor are generally set forth in a written agreement. In some relationships, such as with lawyers, physicians, realtors, or other licensed professionals, codes of ethics and statutes may impose additional duties on independent contractors.

LIABILITY
Tort Liability of Principals for Actions of AgentsWhile an agent may be held personally liable for acts of negligence, if those acts were committed during the course of the agent undertaking a duty owed to the principal, the principal may also be held liable for the acts of the agent. Principals are generally NOT liable for intentional torts committed by agents during the scope of agency or employment, however.
Contract Liability of Principals for Actions of AgentsIf an agent acts within the bounds of the actual authority given to them by the principal and commits to a contract on the principal’s behalf, the principal is liable to the third party for the contract. If, however, the agent exceeds the scope of authority, the principal cannot be held liable for a contract with a third party unless the principal expressly ratifies the contract.
Defenses of Principals to Liability Claims by Third PartiesThe liability of principals to third parties in contract or for torts committed by agents, employees, or independent contractors is not absolute. The following are defenses that may be raised by a principal to avoid or limit liability for acts committed by agents, employees, or independent contractors:

The acts giving rise to liability were committed outside the scope of agency or employment or independent contractor agreement.
The acts giving rise to liability were committed by the agent, employee, or independent contractor occurred as part of a “frolic and detour” from the prescribed acts that were supposed to occur.
The acts giving rise to liability were committed by the agent, employee, or independent contractor occurred as part of the act of “coming or going” from work for the principal and was not part of the actual work itself.