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42 Cards in this Set
- Front
- Back
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Definition: Agency
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Fiduciary relationship (closer than a contractual relationship, absolute undivided loyalty) which results from the manifestation of consent by one person to act on behalf of another
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2 Parties involved in Agency Law:
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1.) Principal
2.) Agent |
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Does consideration matter when it comes to duties of the Agent and Principal?
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No, same rules apply whether consideration is present or not.
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2 Types of Relationships for Agent and Principal
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(1)Master-Servant Relationship – Principal can be sued – If Principal can tell the Agent what to do and how to do it
(2)Independent Contractor – Can not sue Principal – Principal can tell Agent what to do, but not how to do it --Tyler contracts a Builder to build a house for the price of $175,000 ; if the builder commits a negligent tort harming a 3rd Party, can a suit be brought against Tyler (principal) as well as Builder (agent)? NO, on basis of Independent Contractor --Clerk at Wal-Mart trips a customer, can suit be brought against the Clerk (Agent) as well as Wal-Mart (principal)? YES, on the basis of Master-Servant Relationship |
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Define: Respondeat Superior
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Theory of Law allowing 3rd Party to bring suit against Principal
---Policy Reasons: (1) Principal is in better position to spread the risk of laws; for example, Wal-Mart could increase prices in order to cover a loss in a law suit (2) Encourage the proper selection and training of employees |
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Agency Relationship:3 Things you must have/don't need.
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(1) Capacity: the Principal must have Capacity; an individual or Incorporation can serve as a Principal
(2)Do NOT need consideration (3)Do NOT need to have it in writing. |
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What are the 3 different types of authority?
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(1) Actual : whatever you reasonably believe that you can do
(2) Apparent Authority: Principal is holding out to a 3rd person that someone can act on their behalf (3) Inherent Authority: Agent is disobeying the direction of the Principal, and the Principal is still bound despite the Agents disobeying |
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Agent Disqualifications: 3 Reasons
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1)Agent represents both sides in dispute only if conflict is explained can both sides agree
2) Agent takes secret profit/bribe 3) If law requires license |
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Expressed Consent:
Definition and Types |
any authority communicated directly to the Agent
--W owns Apartment Complex and hires Leslie as Manager; W tells Leslie she has the right to Lease and collect Rent, those are her Expressed rights --W owns Lot 125 & 126, W wants Leslie to sell 125 but by mistake he tells her to sell 126; her Expressed right is to sell 126, mistake does not take away Expressed rights |
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Implied Consent: Definition and 3 Characteristics
CIA |
Rights assumed by position given
--Apartment Manager Leslie assumes she has the Implied rights to contract maintenance bargains Characteristics-- --Incidental to the Agent’s Expressed Rights --Custom in the Industry --Acquiescence – never being objected to |
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3 Types/Examples of Implied Consent
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1.) Ministerial Act = little or no judgement involved
--W owns a large Shoe Store, hires Adam as Manager; one act of Adam is taking Inventory…Could Adam assume W gave him the right to hire workers to take inventory? Adam could hire because it is a Ministerial Act…Could Adam delegate duties for a mult-million advertisement campaign? NO 2.) Impossibility --I employ W to build a 20 story building – It is a reasonable assumption for W to hire workers to assist in his building because it would be impossible for him to do it himself 3.)Authority to Purchase --W ask me to purchase a boat on his behalf – Expressed = enter into a contract for boat – Implied = payment for boat, accept delivery Authority to Sell --W aks me to sell a boat on his behalf – Expressed = enter into contract – Implied = accept payment (not implied to accept personal check), deliver boat |
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Actual Authority: 5 Methods of Termination
LHC BP |
1.Lapse of Time
2.Happening of an Event : agree to work until Cubs win the Series, win the Cubs win the agreement is terminated 3.Change in Circumstances : Jill employs W to sell her boat, the boat sinks – authority terminates 4.Breach by the Agent of his fiduciary duties 5.Principal has right to take away Authority of Agent; Agent has right to give up authority |
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Apparent Authority: Definition and Example
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EXAMPLE
--Holiday Inn in Dunn hire Bill Smith as a Night Clerk from 11:00-7:00, terms of the contract state that Smith is entitled to a break from 3:00-3:30 --During Smith’s break, Shane comes in and nobody is working a the desk, so Shane goes behind the desk --a guest comes in the lobby and sees Shane behind the desk and thinks he is the clerk, so she leaves $50,000 worth of jewelry for the Holiday Inn safe --Holiday Inn is liable; the company was negligent |
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Lingering Apparent Authority: Example
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--Lee was Office Manager for XYZ Inc. for 30 years, he was fired
--While he was Office Manager he had the Authority to buy things of credit from ABC --after Lee is fired, he goes to ABC and buys 10 laptops on credit --Is XYZ liable for payment of Lee’s purchase?? --Depends on if XYZ gave ABC proper notice of Lee’s termination of his job and authority |
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What 2 ways can you give proper notice, to be exempted from being liable for Lingering Apparent Authority?
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--What is Proper Notice??
(1)Actual – any company who ever gave XYZ any credit is entitled to it, means XYZ has to either call or write ABC and notify them of Lee’s status (2)Constructive – Lee goes to Alaska after XYZ fired him, and charges a laptop to XYZ from a purchase made in Alaska from NMF – not entitled to Actual notice, but they are entitled to constructive notice = XYZ could run an advertisement in a paper that said Lee was no longer an employee of XYZ, this would serve as constructive notice to NMF and they would not be able to collect |
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Inherent Authority: Definition and Example
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Agent is disobeying the direction of the Principal, and the Principal is still bound despite the Agents disobeying
Ex:--Avery wants to have a party, she wants to have a band at her party, so she hires W to find a band --Avery tells W not to hire a band for over $500; however, W hires a band for $5000 --Avery is still liable to pay the band $5000 because she is the one hired W under her own decision and will |
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Inherent Authority under the UCC: Example
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EXAMPLE
--Tyler needs a watch, so he asks W to borrow his and W lets him --Tyler sells the watch to me, Is W allowed to get watch back from me? YES --Tyler’s possession does not give him the right to sell --Tyler needs to borrow a car from W, so W allows him to borrow and signs over the Title to Tyler --Tyler sells the car to me, W can not get the car back from me because there was a transfer of Title --W takes his watch to a Jeweler to get it cleaned, and the Jeweler accidentally sells W’s watch to me --Jeweler is a Dealer of Goods, so W can not get his watch back under the UCC |
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Ratification: Definition and Example
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choosing to be bound by the contract
--Situation = W and Tyler pass Albert’s car, and W makes the comment that he likes this car and wishes he had it; Tyler lies and says the he is Albert’s agent (which he is not) and offers to sell the car to W…Albert is not bound, but could ratify the contract |
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Adoption: Definition and Example:
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--3 people want to begin XYZ Inc., they need a tract of land
--1 of the people find a tract of land and purchases it before XYZ Inc. is formed --XYZ Inc. is not bound by the contract, but they could choose to adopt the contract --Difference from ratification is that he Principal was not yet formed |
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3 Types of Principal - Agent Disclosure with respect to 3rd parties
DPU |
1.)Disclosed Principal = 3rd party is aware that they are dealing with an Agent and the 3rd Party knows the identity of the principal
2.)Partially Disclosed Principal = 3rd Party aware they are dealing with an Agent but does not know who the Principal is 3.)Undisclosed Principal = 3rd party not even aware that they are dealing with an Agent |
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Rights of 3rd Party w/ a Disclosed Principal:
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EXAMPLE
--I work for XYZ, and on behalf of XYZ I contract to sell 100,000 calculators to W for $1 m --there is a Breach of Contract by XYZ --W has the right to sue XYZ, not the right to sue me --3rd Party only has the right to bring suit against the Principal |
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Rights of 3rd Party w/Partially Disclosed and Undisclosed Principal
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EXAMPLE
--For both of these, you have the choice to sue either the Agent or the Principal but not both --there is a breach of contract, 3rd party sued the Agent before they obtain knowledge of the Principal --3rd party wins judgement against Agent and collects…it is too late to sue because compensation has been given --3rd party wins judgement against Agent and does not yet collect…it is still possible to sue the Principal if the 3rd party learned the identity of the Principal after suing the Agent --if the 3rd Party finds the identity out of the Principal before he brings suit, then you can not sue the Agent and then sue the Principal --I am an employee of Tyson Chicken, W is a Chicken Farmer --Me, as an Agent of Tyson Chicken, enters into a contract with W to sell baby chicks to him for him to raise – 20,000 baby chickens for $40,000 --I owe W $5000 for something unrelated to this contract --W is under an Undisclosed Principal situation, he is under the impression that he is in a contract with me not Tyson Chicken --Tyson Chicken sends W a bill for $40,000; since W did not know he was in contract with Tyson, then he is allowed to deduct $5000 (what I owed him, the Agent’s debt) from the bill he owes Tyson |
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Who has the right to sue a 3rd Party?
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--only the Principal has the right to sue the 3rd Party
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3 Duties of Agent to Principal:
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1.Most Important -- undivided, complete loyalty
2.obedience 3.duty to use reasonable care, Basic Standard of Care = an average, ordinary, reasonable, prudent person with an exception : if you have a special skill or if you claim you have a special skill then you will be held to a higher standard of care |
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2 Duties of Principal to Agent:
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1.Compensate the Agent
2.Reimburse the Agent – covers expenses of travel and things of the sort, also will cover law suits brought against the Agent in situations of Undisclosed Principals and Partially Disclosed Principals |
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2 things that determine whether or not the Principal can be sued by a 3rd Party:
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1.) There must be a Master-Servant relationship.
2.) Tort must be committed within the scope of employment. -the Agent must be doing the work of the Principal when the Tort is committed – a Principal can not be sued if the Agent is not working in conjunction with the a job for the Principal Ex: Merita bread driver hits someone on the way to Dunn in Erwin. Merita can be sued. Minor deviations are fine, major ones are not. Merita driver takes the van on a road trip to Cali ... Principal can't be sued. |
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5 things that determine a Master-Servant Relationship:
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(a)if person owns his own business he is more likely to be a Independent Contractor
(b)the higher of the degree of skill required, the more likely the person is to be an Independent Contractor (c)if the worker supplies his own tools, it is more likely that he is a Independent Contractor (d)if the worker is paid by the job compared to by the hour, then it is more likely he is a Independent Contractor (e)if the contract provides one way or the other, then the contract will determine the relationship |
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2 Cases Where a Principal can be sued, if there is an Independent Contractor situation:
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Exception 1: if the work to be performed is inherently dangerous then the Principal is liable
Exception 2: if you knowingly employ an incompetent Independent Contractor |
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3rd Party can not sue the Principal for a Intentional Tort committed by the Agent - Exceptions to the rule
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--Clerk at the ShortStop has had a long day and Leslie comes in and begins complaining about everything
--Clerk shoots Leslie --Leslie could not sue ShortStop --Exception: if the Clerk had a history of shooting customers, then ShortStop is liable --Avery is the bouncer of the bar --I had too much to drink, and Avery picks me up and throws me through a window and I break my arm --Exception: I could sue the bar (Principal) because the nature of the job itself involves the use of an Intentional Tort |
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ERISA - Definition
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Employee Retirement Income Security Act
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ERISA - Statutory Legislation - Definition
MDRAH |
any plan established for employees of one or more employers to provide for employees their families or dependents
-medical care -disability benefits -retirement benefits -annuity benefits -healthcare services which meet statutory requirements |
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8 Types of Plans: Definitions
SITS NCNQ |
(1)Self Administered Plan: the employer provides the funds and administers the plan without the benefit of an insurance company or trustee
(2)Insurance Plan: employer purchase life insurance or annuity contracts (3)Trusteed Plan: the employer contributes funds to a trustee (a large bank trust department) and the trustee will invest the funds and eventually pay out benefits (4)Split Fund Plan: trustee in part will invest in stocks and bonds and take part of the funds and purchase insurance (5)Non-Contributory: only the employer makes contributions (6)Contributory: both the employer and the employee makes contributions (7)Negotiated Plan: Union negotiates the plan with a number of employers, the employee is a member of a union – benefits can transfer as long as you stay in the industry and in the Union (8)Qualified Plan: you have met all of the requirements of ERISA – most important requirement to be qualified is that the plan be non-discriminatory towards highly paid officials, executives, or stock holders --benefits/consequences of Plan being Qualified = (1) when the company makes contributions to the plan, the company can take an income tax deduction for the contribution (2) once the funds are in the plan, they accumulate income tax deferred (3) the plan benefits are taxed only as they are paid out |
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8 Reasons that Employers Set Up Employee Benefit Plans:
PPAE RE RE |
(1)Provide for employees who become incapacitated
(2)Provide a pension income (3)Allow the employee to share in the profits (4)Enable employees to become part owners (5)Reward employees for distinctive service (6)Encourage creativity (7)Reduce turnover and to attract employees (8)Encourage thrift and economy on the part of employees |
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3 Types of Employee Benefit Plans:
PPE |
1.) Pension Plan (Defined Benefit Plan): EXAMPLE = provide 80% of their average income over the last 5 years of their employment; to have a fully funded plan, how much does the employer need to contribute in order to have the money when retirement comes around, need an actuary to help you calculate based on certain factors --- factors the actuary would consider are (a) the ages of the employees (b) the sex of the employees (c) what is the historical turnover rate (d) the anticipated death rate (e) anticipated rate of return by the trust department
2.)Profit Sharing Plan: no profit, no contribution 3.) ESOP (Employee Stock Ownership Plan): 2 Types (1)Stock Bonus Plan: company gives stock to employees (2)Stock Purchase Plan - AKA - ESPP(Employee Stock Purchase Plan): company gives a discount to employees in order to them to buy stock |
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Roth IRA: Definition
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no income tax deduction up front, however, but the income accumulates within the Roth IRA income tax FREE ------no taxes on the accumulation, either.
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Integrated vs. Non-integrated Pension Plan: Example
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--Pension Plan can be Integrated or Non-integrated = is the plan integrated with Social Security Benefits?? EXAMPLE = Drew’s average income is 100,000 over the last 5 years so he is entitled $80,000 from the company and he is entitled to $22,000 in Social Security ---- if it is Integrated the company only has to pay $58,000, and if it is not, Drew is entitled to the full amount
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Who is entitled to participate in the Employee Benefit Plan (Profit Sharing)?
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EXAMPLE
--Take McDonald’s, you have the Core Management Group and a countless number of workers --I work there one day, and generate 25 cents of profit towards my plan --Can the company require you to work there before you begin participating in the Employee Benefit Plan?? YES --Core Management Group will state that you must work at McDonald’s for 10 years before you can participate in the Plan = most of the benefits if not all would go to Management; can not do this because it is discriminatory --the limit is 1 year that a company can make you work --When you leave after that limit, do you lose your benefits?? If the employee makes contributions, they can not lose what they contributed. The employers contribution will be based on a VESTING schedule to set up percentages of the amount you can receive of your plan |
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Roth IRA: Definition
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no income tax deduction up front, however, but the income accumulates within the Roth IRA income tax FREE ------ no deduction in the accumulation
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3 benefits/consequences of a Qualified Plan
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(1) when the company makes contributions to the plan, the company can take an income tax deduction for the contribution (2) once the funds are in the plan, they accumulate income tax deferred (3) the plan benefits are taxed only as they are paid out
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Rights of Third Parties: Basic Rule
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Third Parties don't have rights.
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2 types of 3rd Party Beneficiaries:
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1.) Incidental - They have no rights.
2.) Intended - They have rights. |
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When do a 3rd party's interests vest?
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When they learn of the arrangement, and agree to accept the benefits.
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