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Chapter 5 The Law of Agency

Principal’s Duties

Termination of agency

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Principal’s Duties

Duty of Compensation

Duties of Reimbursement and indemnification

Duty of Cooperation

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Duty of Compensation

Principal must pay the agent agreed-upon compensation. If there is no agreement, the principal must pay what is customary in the industry, or, if there is no custom, then the reasonable value of the services.

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Example 5-9

Balfour employed Hunan to find a buyer for her coin collection. Hunan found a buyer and sold the collection for $15,000. Hunan told Balfour the coins sold for $11,000 and kept $4,000 for himself.

Do you think Balfour could get the $4,000 from Hunan?

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Duties of Reimbursement & Indemnification

Principal must reimburse an agent for all

expenses paid that were authorized by the principal, within the scope of the agency, and necessary to discharge the agent’s duties. The principal must indemnify the agent for any losses suffered because lf the principal’s misconduct.

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Example 5-10

While on a business trip for his company, Torres attended a professional basketball game.

Can he claim the expense on this event?

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Example 5-11

Boynton hired Pasqua to sell a rare stamp. Pasqua sold the stamp to Grubbs and turned over the purchase price, less his commission, to Boynton who remained unknown to Grubbs. Discovering that the stamp was not authentic, Grubbs obtained a judgment against Pasqua for the purchase price. Who should be liable for the loss, Boynton or Pasqua?

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Duty of Cooperation

The principal must cooperate with and assist the agent in the performance of the agent’s duties and the accomplishment of the agency.

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Remedies Available to Agent

• leave the principal’s employ;• recover damages for the principal’s

breach of contract;• recover the value of services

rendered; • obtain reimbursement for payments

made for the principal; • secure indemnity for personal

sustained while performing an authorized act for the principal.

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Contract Liability to Third Parties

Fully Disclosed Agency

Partially Disclosed Agency

Undisclosed Agency

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Fully Disclosed Agency

The third party entering into the contract knows that the agent is acting for a principal and knows the identity of the principal. The principal is liable on the contract, the agent is not liable on the contract.

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Partially Disclosed Agency

The third party knows that the agent is acting for a principal but does not know the identity of the principal. Both the principal and the agent are liable on the contract.

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Undisclosed Agency

The third party does not know that the agent is acting for a principal. Both the principal and the agent are liable on the contract.

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You’ll See Seafoods, Inc.

v. Gravois

Court of appeals of Louisiana

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1. In 1978, James Gravois purchased a restaurant and named it “The Captain’s Raft.” The restaurant was actually owned by Computer Tax Services of LA., Inc., a corporation owned by Gravois. Gravois did not inform the managers, employees, or suppliers that the restaurant was owned by a corporation. Further, the menus were printed with the name “The Captain’s Raft ” with no indication it was a corporate entity.

CASE BRIFING

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2. Supplies purchased by the restaurant were paid for by checks signed by Gravois with no indication of his agency capacity. You’ll See Seafoods, Inc. (You’ll See), supplied fresh seafood to the restaurant and was paid for the merchandise by checks signed by Gravosi. On February 28, 1984, You’ll See filed suit against Gravois d.b.a. The Captain’s Raft to recover unpaid invoices. Gravois responded by saying that he was merely acting as an agent for a corporate principal. The corporation was in bankruptcy.

CASE BRIFING

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Was Gravois liable on the debt owed You’ll See Seafoods, Inc.?

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An agent has the burden of proving he or she disclosed his or her capacity and the identity of the principal if he or she wishes to escape personal liability for a contract he or she entered into with a third party on behalf of the principal. Gravois failed to do this.

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The appellate court held that Gravois was an agent for an undisclosed corporate principal and, therefore, was liable for the debts owed to You’ll See Seafoods, Inc.

DecisionDecision

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Why do you think Gravois wanted the debts to be placed in the corporation? Why do you think You’ll See did not want the debts placed in the corporation?

Contemporary Business

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Tort Liability to Third Parities

Tort liability

Misrepresentation

Negligence

Intentional Torts

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Tort liability

Principals are liable for the tortious conduct of an agent who is acting within the scope of his authority. Liability is imposed for misrepresentation, negligence, and intentional torts

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Edgewater Motels, Inc. v. Gatzke and Walgreen Co.

CASE

5-2

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1.Arlen Gatzke (Gatzke ) was a district manager for the Walgreen Company (Walgreen). In August 1979, Gatzke was sent to Duluth, Minnesota, to supervise the opening of a new Walgreen store. In Duluth, Gatzke stayed at the Edgewater. While in Duluth, Gatzke was “on call ” 24 hours a day to other Walgreen stores located in his territory. About midnight on the evening of August 23, 1979.

CASE BRIFING

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2.Gatzke, after working 17 hours that day, went with several other Walgreen employees to a restaurant and bar to drink. Within one hour’s time, Gatzke had consumed three “doubles” and one single brandy Manhattan. About 1:30, A.M., he went back to the Edgewater Motel and filled out his expense report. Soon thereafter a fire broke out in Gatzke’s motel room. Gatzke escaped, but the fire spread and caused extensive damage to the motel.

CASE BRIFING

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3.Evidence showed that Gatzke smoked two packs of cigarettes a day. An expert fire reconstruction witness testified that the fire started from a lit cigarette in or next to the wastepaper basket in Gatzke’s room. Edgewater Motels, Inc., sued Gatzke and Walgreen. The parties stipulated that the damage to the Edgewater Motel was $330, 360.

CASE BRIFING

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4. The jury returned a verdict against defendants Gatzke and Walgreen. The court granted Walgreen’s posttrial motion for judgment notwithstanding the verdict. Plaintiff Edgewater and defendant Gatzke appealed.

CASE BRIFING

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Was Gatzke’s act of smoking within his “scope of employment” making his principal, the Walgreen Company, vicariously liable for his negligence?

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1.In reaching its decision, the supreme court stated; “After careful consideration of the issue we are persuaded that smoking can be an act within an employee’s scope of employment.

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It seems only logical to conclude that an employee does not abandon his employment as a matter of law while temporarily acting for his personal comfort when such activities involve only slight deviations from work that are reasonable under the circumstances, such as eating, drinking, or smoking. The record indicates that Gatzke was an executive type of employee who had no set working hours. His room at the Edgewater Motel was his “office away from home.”

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The state supreme court held that Gatzke’s negligent act of smoking was within the scope of his employment while acting as an employee of the Walgreen Company. The supreme court reinstated the jury’s verdict awarding damages to plaintiff Edgewater Motels, Inc.

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1.Should smoking cigarettes be held to be within an employee’s scope of employment?

2.Because of the dangers of smoking, would employers be justified in hiring only non-smokers as employees?

Contemporary Business

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Misrepresentation

Principals are liable for intentional and innocent misrepresentations made by an agent acting within the scope of his or her employment.

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Negligence

Principals are liable for the negligent conduct of agents acting within the scope of their employment.

Frolic and detour “Coming and going ”rule Dual-purpose mission

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Intentional Torts

1.Motivation test. The principal is liable if the agent’s intentional tort was committed to promote the principal’s business .

2.Work-related test. The principal is liable if the agent’s intentional tort was committed within a work-related time or space.

Agents are personally liable for their own tortious conduct.

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Desert Cab Inc. V.

MarinoSupreme Court

of Nevada

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1. On October 6, 1986, Maria Marino, a cab driver with Yellow-Checkered Cab Company (Yellow Cab), and James Edwards, a cab driver with Desert Cab parked their cabs at the taxicab stand at the Sundance Hotel and Casino in Las Vegas to await fares. Marino’s cab occupied the first position in the line and Edwards occupied the third. As Marino stood alongside her cab conversing with the driver of another taxi, Edwards began verbally harassing

her from inside his cab.

CASE BRIFING

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When Marino approached Edwards to inquire as to the reason for the harassment, a verbal argument ensued. Edwards jumped from his cab, grabbed Marino by her neck and shoulders, began choking her, and threw her in front of his taxicab. A bystander pulled Edwards off Marino and escorted her back to cab. Marino sustained injuries that rendered her unable to work for a time. Edwards was convicted of misdemeanor assault and battery. Marino brought a personal injury action against Desert Cab. The jury found Desert Cab liable and awarded Marino $65,000. Desert Cab appealed.

CASE BRIFING

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Is Desert Cab liable for the intentional tort of its employee?

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Under the doctrine of respondeat superior, an employer is liable for the intentional torts committed by its employees within the scope of their employment. For liability to be imposed on the employer, the intentional tort must be work-related. The court held that Edward’s intentional conduct of assault and battery against Marino was work-related, and Desert Cab was, therefore, liable to Marino.

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The appellate court held that Desert Cab was liable for the intentional tort committed by its employee.

COURT’SDECISION

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1.Should employers be held liable for the intentional torts of their employees?

2.Should employers give prospective employees psychological examinations to determine if they have any dangerous propensities?

Contemporary Business

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Liability for independent contractor’s torts

Generally, principals are not liable for the tortious conduct of independent contractors. Exceptions:

1.Nondelegable duties

2.Special risks

3.Negligence in selecting an independent contractor

Independent contractors are personally liable for their own torts.

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Termination by Acts of the Parties

Mutual agreement

Lapse of time

Purpose achieved Occurrence of a specified event

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Notification of Termination

1.Parties who dealt with the agent--- direct

2. Parties who have knowledge of the agency---direct or constructive

3.Parties who have no knowledge of the agency---not necessary

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Example 5-12

Ullman instructed Stotts to purchase a used bulldozer ( 推土机 )for use in his business. Felmer offered to sell Stotts a bulldozer. On a test run, Stotts discovered that the bulldozer did not operate correctly in reverse speeds. Believing that the bulldozer was an excellent buy and could be repaired easily, Stotts bought it for Ullman. Shortly after delivery, Ullman demanded the return of the purchase price because the equipment did not operate properly in reverse speeds.

Could Ullman use the bulldozer’s defect as the basis for withdrawing from the deal?

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Termination by Operation of Law

1.Death.

2.Insanity

3.Bankruptcy

4.Impossibility

5.Changed circumstances.

6.War

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Irrevocable Agency

An agency coupled with an interest is a special type of agency that is irrevocable by the principal. Commonly used in security interests to secure loans.

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Wrongful Termination of an Agency Contract

If an agency is for an agreed-upon term or purpose, the unilateral termination of the agency contract by either the principal or the agent constitutes the wrongful termination of the agency. The breaching parry is liable to the other party for damages caused by the breach.

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Case 5-4 产品代理法的案例

　甲长期担任 A 公司的业务主管，在 A 公司有很大的代理权限。在甲的努力下， A 公司生意兴隆，新老客户遍及世界。由于甲公司的董事长嫉妒甲的才能，无理解雇了甲。价怀恨在心，于是再遭解雇一个月后，继续假冒 A 公司的名义从老客户 B 公司处骗得货物，逃之夭夭。 B 公司要求 A 公司付款， A 公司则以甲假冒公司名义为由拒绝付款。 B 公司坚持认为在其与甲做生意期间，他并不知甲已被 A 公司解雇，并且也未收到关于 A 公司已解雇甲的任何通知，故 B 公司是不知情的善意第三人， A 公司仍应对甲的无权代理行为负责。双方相持不下，对簿公堂。

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问

（ 1 ）按照国际商法的代理法原则， A 公司是否要为甲的无权代理行为负责

（ 2 ）甲是否也要承担责任？

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答 (1)

（ 1 ）这是个委托人撤回了代理人的代理权后，委托人与代理人之间代理关系的消灭是否对第三人生效的问题。英美法和大陆法的许多国家法律普遍认为，他取决于第三人是否知情。如果第三人知情，第三人就不能要求原委托人对代理人的行为负责；反之，委托人则应负责，以保护善意的第三人的利益。

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答 (2)

（ 2 ）甲的行为从商法的角度来看是无权代理行为。在确定了 A 公司对 B 公司的付款责任后，甲要向 A 公司承担还款的责任。如果 A 公司不承担对 B 的付款责任，则甲应向 B 公司承担付款责任。从另一角度上说，甲骗得货物逃之夭夭，若构成诈骗，则同时要负刑事责任。