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Legal Environment of Business - Practice Exam 3 | BUS, Exams of Business and Labour Law

Indiana University South BendBusiness and Labour Law

Material Type: Exam; Class: LEGAL ENVIRONMENT OF BUSINESS; Subject: Business; University: Indiana University-South Bend; Term: Fall 2012;

Typology: Exams

2011/2012

Uploaded on 11/06/2012

carenx
carenx 🇺🇸

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I. AGENCY: a consensual, fiduciary relationship, recognized by law, wherein one person (the
Principal) has the right to control the actions of another (the Agent), and wherein the Agent has the power
to affect the legal rights of the Principal. [Note: All employees are agents, but not all agents are
employees.]
II. CREATION OF AGENCY
A. Express
B. Implied
C. Ratification
D. Estoppel
III. TYPES OF AGENTS (non-exclusive)
A. General
B. Special
C. Gratuitous
D. Servants (employees)
E. Independent contractors
IV. LEGAL DUTIES OWED BY AN AGENT TO HIS PRINCIPAL:
A. Duty of honesty and good faith
B. Duty of loyalty
C. Duty to act with reasonable care
D. Duty to obey lawful instructions
E. Duty to segregate and account for funds
F. Duty to give notice of business opportunities
V. LEGAL DUTIES OWED BY A PRINCIPAL TO HIS AGENT:
A. Duty to compensate Agent reasonably, or as agreed
B. Duty to indemnify the Agent for liability properly incurred
C. Duty not to interfere with Agent's work
D. Duty to provide safe workplace and equipment (statutory -- OSHA)
VI. TERMINATION OF AGENCY -- Always distinguish between the power to terminate the agency
and the right to terminate the agency : the power is always there, even when the right is not.
A. Mutual consent of parties
B. By Principal (revocation, that is, “You’re fired!”)
C. By Agent (renunciation, that is, “I quit!”)
D. Operation of law
1. Death of Agent
2. Death of Principal (sometimes)
3. Insanity of either party
4. Bankruptcy of Principal
5. Bankruptcy of Agent (if agency affected)
6. Fulfillment of agency's purpose
7. Destruction of subject matter of agency
8. Supervening illegality
VII. SPECIAL SITUATIONS: Employment-at-Will and Continuation of Fiduciary Duty
A. Employment-at-will doctrine: either Employee or Employer may terminate the agency, usually
at any time, without incurring liability to the other. The harsh reality: your employer may fire you at any
time, for no reason or any reason, however arbitrary or capricious, so long as doing so does not violate
1) a private employment contract; 2) a federal or state anti-discrimination law; or 3) other laws limiting
the employer’s right to fire (e.g., retaliation for serving jury duty, filing for workers compensation.)
B. The A’s fiduciary duty of confidentiality may continue after termination of Agency
1. Examples: Attorneys, clergy, doctors
VIII. THE PRINCIPAL-AGENT-THIRD PARTY RELATIONSHIP: When can an injured Third
Party (TP) hold the Principal (P) liable for the acts or omissions of the Agent (A)?
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I. AGENCY : a consensual, fiduciary relationship, recognized by law, wherein one person (the Principal) has the right to control the actions of another (the Agent), and wherein the Agent has the power to affect the legal rights of the Principal. [ Note : All employees are agents, but not all agents are employees.] II. CREATION OF AGENCY A. Express B. Implied C. Ratification D. Estoppel III. TYPES OF AGENTS (non-exclusive) A. General B. Special C. Gratuitous D. Servants (employees) E. Independent contractors IV. LEGAL DUTIES OWED BY AN AGENT TO HIS PRINCIPAL : A. Duty of honesty and good faith B. Duty of loyalty C. Duty to act with reasonable care D. Duty to obey lawful instructions E. Duty to segregate and account for funds F. Duty to give notice of business opportunities V. LEGAL DUTIES OWED BY A PRINCIPAL TO HIS AGENT : A. Duty to compensate Agent reasonably, or as agreed B. Duty to indemnify the Agent for liability properly incurred C. Duty not to interfere with Agent's work D. Duty to provide safe workplace and equipment (statutory -- OSHA) VI. TERMINATION OF AGENCY -- Always distinguish between the power to terminate the agency and the right to terminate the agency : the power is always there, even when the right is not. A. Mutual consent of parties B. By Principal ( revocation , that is, “You’re fired!”) C. By Agent ( renunciation, that is, “I quit!”) D. Operation of law

  1. Death of Agent
  2. Death of Principal (sometimes)
  3. Insanity of either party
  4. Bankruptcy of Principal
  5. Bankruptcy of Agent (if agency affected)
  6. Fulfillment of agency's purpose
  7. Destruction of subject matter of agency
  8. Supervening illegality VII. SPECIAL SITUATIONS: Employment-at-Will and Continuation of Fiduciary Duty A. Employment-at-will doctrine: either Employee or Employer may terminate the agency, usually at any time, without incurring liability to the other. The harsh reality: your employer may fire you at any time, for no reason or any reason, however arbitrary or capricious, so long as doing so does not violate
  1. a private employment contract; 2) a federal or state anti-discrimination law; or 3) other laws limiting the employer’s right to fire (e.g., retaliation for serving jury duty, filing for workers compensation.) B. The A’s fiduciary duty of confidentiality may continue after termination of Agency
  1. Examples: Attorneys, clergy, doctors VIII. THE PRINCIPAL-AGENT-THIRD PARTY RELATIONSHIP : When can an injured Third Party (TP) hold the Principal (P) liable for the acts or omissions of the Agent (A)?

A. CONTRACT : when is the P bound by the contractual acts or representations of his A?

  1. In determining whether a P is liable to a TP for breach of contract , the focus of legal inquiry is on the authority given by the P to the A. a) Actual Authority (Note: there can be NO incidental authority or implied authority unless there is some express authority.) (1) Express: oral or written, from P to A, when instructing A on duties (A) Incidental: reasonably necessary to carry out express authority (B) Implied: from A’s position or past dealings w/TP b) Apparent Authority: law implies agency where none ever existed, or imputes to A authority he never actually had, to prevent injustice to a TP (but note that the application of this doctrine requires that the P must actually have misled the TP, either by act or omission, to create the false impression that an agency existed or that the A had more authority than he did – the A alone cannot create apparent authority) c) Ratification Authority: P accepts benefits of A’s acts after the fact d) Emergency Authority: A takes reasonable and necessary action in a bona fide emergency to protect P’s interests
  2. If the necessary authority is present, the P is bound (and liable) even if he is unaware of the A's contractual acts, omissions, or representations.
  3. The A usually has no personal liability for contracts negotiated on behalf of P. However, there are exceptions : a) Undisclosed P b) Partially disclosed P c) A makes personal promise or guarantee d) A commits forgery e) A signs negotiable instrument and a TP pays value for it
  4. P must be legally competent, but A need not be! B. TORT : when is the P liable to a TP for a tort committed by the A?
  5. Direct liability -- P commits a culpable act a) Authorization b) Ratification c) Negligent hiring d) Negligent supervision
  6. Respondeat Superior ["Let the master respond"] (a form of indirect or vicarious liability) – P has personally done nothing wrong, but is held vicariously liable for the acts of the A a) Only when direct liability cannot be found is it necessary to resort to a theory of vicarious liability ( respondeat superior ) to hold the P liable. (Discussion of reasons for the doctrine.) b) In determining whether a P will be vicariously liable to a TP in tort for the acts of the A, the focus of legal inquiry is on the degree of control exercised by the P over the A. a) Was A acting within the scope of his employment when he committed the tort? (1) Time (2) Place (3) Acting on P's orders, or with P's consent, or motivated primarily by a desire to benefit the P. b) No frolic and detour c) The independent contractor relationship does not normally create liability under respondeat superior because of the P's lack of control – but it may, under certain circumstances. HINT : If the Agent has committed an intentional tort , look for direct liability or no liability. Respondeat superior almost never applies when an intentional tort is involved, unless the tort is closely related to the job duties of the Agent, e.g., a bouncer in a bar who uses excessive force to remove an unruly patron, thereby causing unnecessary injury.