The law of agency can be a crucial component of any business. Agency is also important when hiring independent contractors, in construction contracts, overseeing of employees, or completing small things around the home or on private property. An agent can be anyone that is hired to do work to benefit a principal. A principal of course, is the party that hired the agent to do work for them. Principal-agent relationship is formed when you have, assent, benefit, and control.
- The purpose of the relationship must be to benefit the principal in someway. Usually the agent is also benefited through reasonable compensation, but the main goal of the relationship must be to benefit the principal.
- For a relationship to truly exist the principal must have control over the agent. The control the principal must exercise can be slight, but it must exist.
There generally must be some type of authority that the agent principal relationship is relied upon. There are three types of agency that are most common.
Types of agency
- Actual Express Agency
- Actual Implied Agency
- Apparent Agency
Actual Express Agency:
- Actual express agency tends to arise from express communication between the agent and the principal where the principal gives the agent express authority to do something. This can usually occur in contract or through actual commands directly to the agent.
Actual Implied Agency:
- Actual implied agency arises, as a result of the authority an agent believes they have as a result of their prior interactions with the principal. For instance, if the principal before has allowed the agent to communicate with vendors, than the principal likely believes they have the authority to continue to do so.
- Apparent Agency occurs when a third-party reasonably believes that an agent has the power to bind their principal. Even if the agent technically does not have the power to act in the principal’s stead or to make decisions on their behalf, if a third-party believes they have such authority than the principal will be bound.
Vicarious liability is based on the theory of respondeat superior, where an employer will be held liable for any tortious activities or negligence that their agent/employee is involved in while in the scope of their employment. So if the employee gets into any trouble when they are working for the principal/employer the principal/employer will be held responsible. However, if the agent was not acting in the scope of their employment, than the employer will not be liable. For instance if a UPS driver went to stop at a supermarket on their way to work to get donuts for other drivers in his UPS truck this likely would be considered a detour and if the UPS driver got into an accident UPS would be liable. However, if the UPS driver decided he wanted to drive across the state in his UPS car in order to pick up a laptop he just bought for personal use off of Craigslist and gets into an accident, this would be considered a frolic and he would be personally liable, and the employer would not be. An employer is also not generally liable for any torts committed by their employee unless the activity is associated with the business such as being a bouncer.
Independent contractors are generally not considered to be agents. In order for an independent contractor to be considered an agent of a principal there must be some commingling of duties, some exertion of control over the independent contractors, perhaps some sharing of employees, or there must be an inherently dangerous activity that the relationship is involved in. Such as the transportation of toxic materials.