Deck 17: Agency

Question 1

Employee versus Independent Contractor. Stephen Hemmerling was a driver for the Happy Cab Co. Hemmerling paid certain fixed expenses and abided by a variety of rules relating to the use of the cab, the hours that could be worked, and the solicitation of fares, among other things. Rates were set by the state. Happy Cab did not withhold taxes from Hemmerling's pay. While driving the cab, Hemmerling was injured in an accident and filed a claim against Happy Cab in a Nebraska state court for workers' compensation benefits. Such benefits are not available to independent contractors. On what basis might the court hold that Hemmerling is an employee? Explain. (See pages 489-492.)

Answer 1

Case Facts:
As per this case concern, trial court determined that HL was an independent contractor and not an employee. The appellate court affirmed. The Supreme Court of NBK reversed and remanded. HL was injured while on the job and sued for worker's compensation an as employee. Happy contended that HL was an independent contractor and not entitled to coverage.
Employee: Employees who deal with third parties are agents and act on the principal% behalf. Agency law is based on common law and most have been replaced by employment law, which only covers employer-employee relationships.
Independent Contractor. An independent contractor is not an employee and employers who hire independent contractors do not have control over the detail of their physical performance, so employment law does not apply. An independent contractor is hired through a contract for specific performance on a per-job basis and may or may not be an agent.
Determining Employee Status:
The following is a list of elements that a court will consider when determining the employment status of a worker:
• The amount of control an employer may exercise over the details of the work.
More = employee; less = independent contractor.
• Whether the worker has his or her own business or engaged in an occupation.
Occupation - employee, self-employed = independent contractor.
• Whether the worker is a specialist or under the employer's direction.
Employer's direction = employee, specialist = independent contractor.
• Whether the worker or employer supplies the tools.
Employer supplied = employee; worker supplied = independent contractor.
• Period of employment.
Long period of time = employee; short term = independent contractor.
• Whether the worker is paid at the end of the job or by time period.
Time period = employee; end of job = independent contractor.
• Degree of skill required of the worker.
Low skill = employee; high skill = independent contractor.
Conclusion: The Supreme Court held that Happy exerted a considerable amount of control and direction over HL's employment. Therefore, as a matter of law, HL's employment status was employee and not independent contractor, and thus entitled to workers' compensation coverage.

Question 2

Disclosed Principal. To display desserts in restaurants, Mario Sclafani ordered refrigeration units from Felix Storch, Inc. Felix faxed a credit application to Sclafani. The application was faxed back with a signature that appeared to be Sclafani's. Felix delivered the units. When they were not paid for, Felix filed a suit against Sclafani to collect. Sclafani denied that he had seen the application or signed it. He testified that he referred all credit questions to "the girl in the office." Who was the principal? Who was the agent? Who is liable on the contract? Explain. [Felix Storch, Inc. v. Martinucci Desserts USA, Inc., 30 Misc.2d 1217, 924 N.Y.S.2d 308 (Suffolk Co. 2011)] (See page 502.)

Answer 2

Disclosed principal involves revealing of the identity of the principal to the third party with the help of an agent. In the contract, disclosed principal is liable towards the third party but the agent is not liable. Principal is solely responsible for the actions of the agent whether performed by the agent according to his own will or in accordance with the principal.
In the given case, FS is the principal because he has the primary responsibility in a liability or obligation. The employee of S will be considered as agent because she handled the work for him.
In the given case, FS is liable on the contract. The principal agent relationship states that instead of principal the agent will act on his behalf pertaining to transacting and negotiation involved in the business. The decision taken by girl (agent) makes FS liable for the cause as principal is responsible for the actions of the agent. Therefore, the claim made by FS that he is innocent and is unaware of underlying credit application does not have any weightage. He is liable to pay.

Question 3

Laurel Creek Health Care Center v. Bishop
FACTS Gilbert Bishop was admitted to Laurel Creek Health Care Center suffering from various physical ailments. During an examination, Bishop told Laurel Creek staff that he could not use his hands well enough to write or hold a pencil, but he was otherwise found to be mentally competent. Bishop's sister, Rachel Combs, testified that when she arrived at the facility she offered to sign the admissions forms, but Laurel Creek employees told her that it was their policy to have a patient's spouse sign the admissions papers if the patient was unable to do so. Combs also testified that Bishop asked her to get his wife, Anna, so that she could sign his admissions papers.
Combs then brought Anna to the hospital, and Anna signed the admissions paperwork, which contained a provision for mandatory arbitration. Subsequently, Bishop went into cardiopulmonary arrest and died. Following his death, Bishop's family filed a negligence lawsuit against Laurel Creek, which asked the court to compel arbitration in accordance with the provision in the admissions paperwork signed by Anna. The trial court denied the request on the ground that Anna was not Bishop's agent and had no legal authority to make decisions for him. Laurel Creek appealed.
ISSUE Did Anna Bishop become her husband's agent by agreeing to sign the hospital admission papers on his behalf?
DECISION Yes. The Kentucky Court of Appeals reversed the lower court's judgment and remanded the case. An actual agency relationship between Bishop and his wife, Anna, had been formed, and the trial court had erred when it found otherwise.
REASON The court reasoned that to establish an agency relationship, a principal must voluntarily consent to be affected by the agent's actions, and the agent's actions must express consent to act on the principal's behalf. The court noted that "according to his sister, Rachel, Gilbert [Bishop] specifically asked that his wife be brought to the nursing home so that she could sign the admissions documents for him, and [his wife] acted upon that delegation of authority and signed the admissions papers." Another requirement is that the agent's actions affect the principal's legal relations. Clearly here, the court concluded, Anna's actions "affected Gilbert's relations with Laurel Creek, a third party." Therefore, "Gilbert had created an agency relationship upon which Laurel Creek justifiably relied."
CRITICAL THINKING-Legal Consideration Laurel Creek argued that even if there was no actual agency relationship, an implied agency relationship existed. Is this argument valid? Why or why not?

Answer 3

Implied agency relationship is generally established between the principal and the agent by the underlying circumstances of the particular case and the communication and conduct of the parties. In other words implied agency involves the permission to act on behalf of the principal, even if it is not established in writing or orally.
In this case, the wife became the agent by signing the agreement on the behalf of her husband and this makes the argument valid. Since, there exists implied agency relationship between the two as, G refused her sister to sign the declaration form and asked her to call her wife A to sign the same. An implied agency does not require being in writing or orally as it depends on the conduct and communication and the legal relation of the parties. Therefore, agreement signed by Mrs. A is perfectly valid as authority is passed on to the wife through implied agency relationship.

Question 4

Case Problem with Sample Answer-Liability for Contracts. Thomas Huskin and his wife entered into a contract to have their home remodeled by House Medic Handyman Service. Todd Hall signed the contract as an authorized representative of House Medic. It turned out that House Medic was a fictitious name for Hall Hauling, Ltd. The contract did not indicate this, however, and Hall did not inform the Huskins about Hall Hauling. When a contract dispute later arose, the Huskins sued Todd Hall personally for breach of contract. Can Hall be held personally liable? Why or why not? [Huskin v. Hall, 2012 WL 553136 (Ohio Ct.App. 2012)] (See pages 501-502.)

Question 5

ISSUE SPOTTERS
Vivian, owner of Wonder Goods Company, employs Xena as an administrative assistant. In Vivian's absence, and without authority, Xena represents herself as Vivian and signs a promissory note in Vivian's name. In what circumstance is Vivian liable on the note? (See page 501.)

Question 6

A Question of Ethics-Agency. Emergency One, Inc. (EO), makes fire and rescue vehicles. Western Fire Truck, Inc., contracted with EO to be its exclusive dealer in Colorado and Wyoming through December 2003. James Costello, a Western salesperson, was authorized to order EO vehicles for his customers. Without informing Western, Costello e-mailed EO about Western's financial difficulties, discussed the viability of Western's contract, and asked about the possibility of working for EO. On EO's request, and in disregard of Western's instructions, Costello sent some payments for EO vehicles directly to EO. In addition, Costello, with EO's help, sent a competing bid to a potential Western customer. EO's representative e-mailed Costello, "You have my permission to kick [Western's] ass." In April 2002, EO terminated its contract with Western, which, after reviewing Costello's e-mail, fired Costello. Western filed a lawsuit against Costello and EO, alleging that Costello breached his duty as an agent and that EO aided and abetted the breach. [Western Fire Truck, Inc. v. Emergency One, Inc., 134 P.3d 570 (Colo.App. 2006)] (See pages 492-496.)
1. Was there an agency relationship between Western and Costello? Western required monthly reports from its sales staff, but Costello did not report regularly. Does this indicate that Costello was not Western's agent? In determining whether an agency relationship exists, is the right to control or the fact of control more important? Explain.
2. Did Costello owe Western a duty? If so, what was the duty? Did Costello breach it? How?
3. A Colorado state statute allows a court to award punitive damages in "circumstances of fraud, malice, or willful and wanton conduct." Did any of these circumstances exist in this case? Should punitive damages be assessed against either defendant? Why or why not?

Question 7

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What is the difference between an employee and an independent contractor?

Question 8

Critical Legal Thinking. What policy is served by the law that employers do not own the copyrights for works created by independent contractors (unless there is a written "work for hire" agreement)? (See page 492.)

Question 9

Lynne Meyer, on her way to a business meeting and in a hurry, stopped by a Buy-Mart store for a new pair of nylons to wear to the meeting. There was a long line at one of the checkout counters, but a cashier, Valerie Watts, opened another counter and began loading the cash drawer. Meyer told Watts that she was in a hurry and asked Watts to work faster. Watts, however, only slowed her pace. At this point, Meyer hit Watts. It is not clear from the record whether Meyer hit Watts intentionally or, in an attempt to retrieve the nylons, hit her inadvertently. In response, Watts grabbed Meyer by the hair and hit her repeatedly in the back of the head, while Meyer screamed for help. Management personnel separated the two women and questioned them about the incident. Watts was immediately fired for violating the store's no-fighting policy. Meyer subsequently sued Buy-Mart, alleging that the store was liable for the tort (assault and battery) committed by its employee. Using the information presented in the chapter, answer the following questions.
1. Under what doctrine discussed in this chapter might Buy-Mart be held liable for the tort committed by Watts?
2. What is the key factor in determining whether Buy-Mart is liable under this doctrine?
3. How is Buy-Mart's potential liability affected depending on whether Watts's behavior constituted an intentional tort or a tort of negligence?
4. Suppose that when Watts applied for the job at Buy-Mart, she disclosed in her application that she had previously been convicted of felony assault and battery. Nevertheless, Buy-Mart hired Watts as a cashier. How might this fact affect Buy-Mart's liability for Watts's actions?
DEBATE THIS The doctrine of respondeat superior should be modified to make agents solely liable for some of their tortious (wrongful) acts.

Question 10

Business Law Critical Thinking Group Assignment. Dean Brothers Corp. owns and operates a steel drum manufacturing plant. Lowell Wyden, the plant superintendent, hired Best Security Patrol, Inc. (BSP), a security company, to guard Dean property and "deter thieves and vandals." Some BSP security guards, as Wyden knew, carried firearms. Pete Sidell, a BSP security guard, was not certified as an armed guard but nevertheless took his gun to work. While working at the Dean plant on October 31, 2014, Sidell fired his gun at Tyrone Gaines, in the belief that Gaines was an intruder. The bullet struck and killed Gaines. Gaines's mother filed a lawsuit claiming that her son's death was the result of BSP's negligence, for which Dean was responsible.
1. The first group will determine what the plaintiff's best argument is to establish that Dean is responsible for BSP's actions.
2. The second group will discuss Dean's best defense and formulate arguments in support of it.

Question 11

Question with Sample Answer-Formation of an Agency. Paul Gett is a well-known, wealthy financial expert living in the city of Torris. Adam Wade, Gett's friend, tells Timothy Brown that he is Gett's agent for the purchase of rare coins. Wade even shows Brown a local newspaper clipping mentioning Gett's interest in coin collecting. Brown, knowing of Wade's friendship with Gett, contracts with Wade to sell a rare coin valued at $25,000 to Gett. Wade takes the coin and disappears with it. On the payment due date, Brown seeks to collect from Gett, claiming that Wade's agency made Gett liable. Gett does not deny that Wade was a friend, but he claims that Wade was never his agent. Discuss fully whether an agency was in existence at the time the contract for the rare coin was made. (See pages 492-495.)

Question 12

Spotlight on Apparent Authority of Managers
FACTS Gilbert Church owned a horse breeding farm in Illinois managed by Herb Bagley. Advertisements for the breeding rights to one of Church Farm's stallions, Imperial Guard, directed all inquiries to "Herb Bagley, Manager." Vern and Gail Lundberg bred Thoroughbred horses. The Lundbergs contacted Bagley and executed a preprinted contract giving them breeding rights to Imperial Guard "at Imperial Guard's location," subject to approval of the mares by Church. Bagley handwrote a statement on the contract that guaranteed the Lundbergs "six live foals in the first two years." He then signed it "Gilbert G. Church by H. Bagley."
The Lundbergs bred four mares, which resulted in one live foal. Church then moved Imperial Guard from Illinois to Oklahoma. The Lundbergs sued Church for breaching the contract by moving the horse. Church claimed that Bagley was not authorized to sign contracts for Church or to change or add terms, but only to present preprinted contracts to potential buyers. Church testified that although Bagley was his farm manager and the contact person for breeding rights, Bagley had never before modified the preprinted forms or signed Church's name on these contracts. The jury found in favor of the Lundbergs and awarded $147,000 in damages. Church appealed.
ISSUE Was Bagley authorized to sign and modify contracts on behalf of Church?
DECISION Yes. The state appellate court affirmed the lower court's award of $147,000 to the Lundbergs. Because Church allowed circumstances to lead the Lundbergs to believe Bagley had authority, Church was bound by Bagley's actions.
REASON A principal may be bound by the unauthorized acts of an agent if the principal leads a third party to believe, or allows a third party to believe, that the agent has authority to perform the act. In this case, Church approved the advertisement listing Bagley as Church Farm's manager and point of contact. Bagley generally was the only person available to visitors to the farm. Bagley answered the farm's phone, and the breeding contract had a preprinted signature line for him. Church was not engaged in the actual negotiation or signing of the contracts but left that business for Bagley to complete. Based on Church's actions, a reasonable third party would believe that Bagley had authority to sign and modify contracts.
CRITICAL THINKING-Legal Consideration What duties to Church might Bagley have violated in this situation?

Question 13

ISSUE SPOTTERS
Davis contracts with Estee to buy a certain horse on her behalf. Estee asks Davis not to reveal her identity. Davis makes a deal with Farmland Stables, the owner of the horse, and makes a down payment. Estee does not pay the rest of the price. Farmland Stables sues Davis for breach of contract. Can Davis hold Estee liable for whatever damages he has to pay? Why or why not? (See page 497.)

Question 14

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
How do agency relationships arise?

Question 15

Spotlight on Agency-Independent Contractors. Frank Frausto delivered newspapers for Phoenix Newspapers, Inc., under a renewable six-month contract called a "Delivery Agent Agreement." The agreement identified Frausto as an independent contractor. Phoenix collected payments from customers and took complaints about delivery. Frausto was assigned the route for his deliveries and was required to deliver the papers within a certain time period each day. Frausto used his own vehicle to deliver the papers and had to provide proof of insurance to Phoenix. Phoenix provided him with health and disability insurance but did not withhold taxes from his weekly income. One morning while delivering papers, Frausto collided with a motorcycle ridden by William Santiago. Santiago filed a negligence action against Frausto and Phoenix. Phoenix argued that it should not be liable because Frausto was an independent contractor. What factors should the court consider in making its ruling? [Santiago v. Phoenix Newspapers, Inc., 794 P.2d 138 (Ariz. 1990)] (See pages 489-492.)

Question 16

Williams v. Pike
FACTS Bobby Williams bought a car for $3,000 at Sherman Henderson's auto repair business in Monroe, Louisiana. Although the car's owner was Joe Pike, the owner of Justice Wrecker Service, Henderson negotiated the sale, accepted Williams's payment, and gave him two receipts. Williams drove the car to Memphis, Tennessee, where his daughter was a student. Three days after the sale, the car began to emit smoke and flames from under the hood. Williams extinguished the blaze and contacted Henderson. The next day, Williams's daughter had the vehicle towed at her expense to her apartment's parking lot, from which it was soon stolen. Williams filed a suit in a Louisiana state court against Pike and Henderson. The court awarded Williams $2,000, plus the costs of the suit, adding that if Williams had returned the car, it would have awarded him the entire price. Pike and Henderson appealed.
ISSUE Can the buyer of a defective car (Williams), hold both the agent and the principal liable when the agent (Henderson) sold the car for an undisclosed principal (Pike)?
DECISION Yes. A state intermediate appellate court affirmed the ruling of the lower court, including its judgment and the assessment of costs against both defendants. The appellate court added the costs of the appeal to the amount. Both Pike and Henderson were liable to Williams.
REASON The court noted that a state permit to sell the car had been issued to Pike and it showed that he was the owner. The car was displayed for sale at Henderson's business, however, and he actually sold it. The court reasoned that this made Pike the principal and Henderson his agent. The fact that their agency relationship was not made clear to Williams made Pike an undisclosed principal. Williams could thus choose to hold either Pike or Henderson liable for the condition of the car, which constituted a breach of implied warranty because the car did not fulfill the purpose for which it was intended. The loss of the use of the car, the "inconvenience" caused by the defect, the price, and the cost of the tow were among the factors that supported the award.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that Henderson had fully disclosed the fact of his agency relationship and the identity of his principal. Would the result have been different? Why or why not?

Question 17

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What duties do agents and principals owe to each other?

Question 18

Loyalty. Taser International, Inc., develops and makes video and audio recording devices. Steve Ward was Taser's vice president of marketing when he began to explore the possibility of developing and marketing devices of his own design, including a clip-on camera. Ward talked to patent attorneys and a product development company and completed most of a business plan before he resigned from Taser. He then formed Vievu, LLC, to market the clip-on camera. Did Ward breach the duty of loyalty? Could he have taken any steps toward starting his own firm without breaching this duty? Discuss. [Taser International, Inc. v. Ward, 224 Ariz. 389, 231 P.3d 921 (App. Div. 1 2010)] (See page 496.)

Question 19

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
When is a principal liable for the agent's actions with respect to third parties? When is the agent liable?

Question 20

Employment Relationships. William Moore owned Moore Enterprises, a wholesale tire business. William's son, Jonathan, worked as a Moore Enterprises employee while he was in high school. Later, Jonathan started his own business, called Morecedes Tire. Morecedes regrooved tires and sold them to businesses, including Moore Enterprises. A decade after Jonathan started Morecedes, William offered him work with Moore Enterprises. On the first day, William told Jonathan to load certain tires on a trailer but did not tell him how to do it. Was Jonathan an independent contractor? Discuss. [Moore v. Moore, 152 Idaho 245, 269 P.3d 802 (2011)] (See pages 489-492.)

Question 21

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What are some of the ways in which an agency relationship can be terminated?