• How much control does the employer have over the details of the work (the most important factor)?
• How distinct are the occupations of the individual and employer?
• Does the employer supervise the work?
• Does the employer supply the tools at the place of work?
• What is the length of the employment?
• How is the individual paid (periodically or by project)?
• What skill does the work require?
• Under the equal dignity rule, in many states an agent’s author¬ity must be in writing if the agent is empowered to enter into a con¬tract that the Statute of Frauds requires to be in writing.
• A power of attorney must be in writing.
1. The Third Party’s Reliance Must Be Reasonable
Facts must show that an ordinary, prudent person familiar with business practice and custom would have been justified in concluding that the agent had authority.
2. Created by the Principal’s Conduct
The deeds or statements of the principal create an agency by estoppel.
a. Standard of Care
The degree of skill or care required of an agent is that expected of a reasonable person un¬der similar circumstances (un¬less the agent has presented himself or herself as possessing special skills). If an agent fails to perform his or her duties, he or she will be li¬able for breach of the agent’s duty.
b. Gratuitous Agents
An agent who does not act for money may be sub¬ject to the same standards of care, but cannot be liable for breach of contract because there is no contract.
An agent must notify a principal of matters that come to his or her at¬tention concerning the subject matter of the agency (the principal is bound even if the agent says nothing).
An agent cannot represent two principals in the same transaction unless both know of the dual capacity and consent.
a. Maintain Confidentiality
Knowledge ac¬quired through an agency relationship is confidential.
b. Actions Benefit the Principal
An agent must act solely for the benefit of the principal.
An agent must follow the principal’s instructions (except during an emergency or when in¬struc¬tions are not clearly stated, in which case an agent must act in good faith and in a manner reasonable under the circumstances.
An agent must account for all property and money received and paid out on behalf of the principal. The agent should keep personal funds separate.
Except in a gratuitous agency, a principal must pay an agent for services rendered and to do so in a timely manner. The amount is the agreed-on value, the cus¬tomary value, or, if no amount has been agreed on or established by custom or law, the reasonable value.
2. Reimbursement and Indemnification
A principal must reimburse an agent for sums disbursed at the principal’s request or for necessary expenses in the agent’s performance of his or her duties. A prin¬cipal also must indemnify an agent for liability incurred in accord with the agency. A subagent can recover from the principal or the agent who hired him or her.
A principal must cooperate with and assist an agent in performing his or her du¬ties.
4. Safe Working Conditions
A principal must provide safe premises, equipment, and conditions (and warn about unsafe areas).
1. Tort and Contract Remedies
Remedies follow normal con¬tract and tort remedies.
2. Demand for an Accounting
An agent can withhold further performance and demand that a principal give an accounting.
3. No Right to Specific Performance
When an agency is not contractual, an agent can recover for past ser¬v¬ices and future dam¬ages but has no right to specific performance.
1. Constructive Trust
When an agent retains benefits or profits that belong to the principal, a court may impose a con¬structive trust.
If an agent breaches an agency agreement, a princi¬pal can avoid any contract entered into with the agent.
A third party can sue a principal for an agent’s negligent conduct, and some¬times an agent must indemnify the principal for the damages. The same is true if an agent violates a prin¬ci¬pal’s instructions.
• A corporate executive doing ordinary business does not need written authority from the corporation.
• An agent acting in the presence of the principal does not need written authority.
• When the agent’s act of signing is a formality, written authority is not necessary.
Apparent authority exists when a principal causes a third party reasonably to believe that an agent has authority. This can occur through a pattern of conduct.
2. Apparent Authority and Estoppel
If the third party changes position in reliance on the principal’s representa¬tions, the principal may be estopped from denying that the agent had authority.
• The agent acted on behalf of an identified principal who later ratified the action.
• The principal must know all of the material facts. If not, the contract can be rescinded
• The principal must affirm the agent’s act in its entirety.
• The principal must have the capacity to authorize the transaction when the agent engages in it and the principal ratifies it. The third party must also have capacity
• The principal’s ratification must occur before the third party withdraws from the deal.
• The principal must follow the same formalities to ratify the contract as would have been needed to authorize it initially.
• The undis¬closed principal was expressly excluded as a party in the con¬tract.
• The contract is a ne¬gotiable instrument, and it does not show the agent signed in a representative capacity.
• The agent’s performance is personal to the con¬tract, allow¬ing the third party to refuse the principal’s performance.
The basis is the social duty that requires every person to manage his or her affairs, whether accomplished by the person or through agents, so as not to injure another.
b. Public Policy
Liability is imposed on employers in part because they are deemed to be in a better financial position to bear the expense. Insurance can cover the cost. Its risk can be spread among business customers
• Whether the employer authorized the act.
• The time, place, and purpose of the act.
• Whether the act is commonly performed by employees on behalf of their employers.
• The extent to which the act advanced the employer’s interest.
• Whether the employer furnished the means by which the injury was inflicted.
• Whether the employer had reason to know that the employee would perform the act.
• Whether the act involved the commission of a serious crime.
• Purpose achieved. An agency may terminate if it is limited to a particular purpose and the purpose is achieved.
• Occurrence of a specific event. An agency may terminate if it is subject to a specific event that occurs (or doesn’t occur).
• Mutual agreement. An agency may terminate if the parties agree to end it.
• Termination by one party. Either party can terminate an agency—the agent by renunci-ation of authority, the principal by revocation of authority. Both parties have the power, but they may not possess the right.
• Death or insanity. Either party’s death or insanity terminates an agency. Some states require the agent’s knowledge of the principal’s death to terminate the agency.
• Impossibility. When the specific subject matter of an agency is destroyed or lost, the agency termi¬nates.
• Changed circumstances. When an event has such an unusual effect on the subject matter of an agency that an agent can reasonably infer that the principal would not want the agency to continue, it ter¬minates.
• Bankruptcy. The bankruptcy of either party usually terminates an agency.
• War. War between a principal’s country and an agent’s country terminates an agency.