AGENCY & PARTNERSHIP

OUTLINE

I. NATURE OF THE AGENCY RELATIONSHIP

A. Agent Distinguished from Partner
1. A partnership is an association of two or more persons to carry on as co-
owners a business for profit.
2. Members of a partnership are liable as principals both in contract and in tort
for the acts of a partner which are authorized.
3. A partner who is active in management or otherwise regularly employed in the
business is a servant of the partnership.

B. Agent Distinguished from other Independent Contractors

1. One who contracts to act on behalf of another and subject to the other’s control
except with respect to his physical conduct is an agent and also an independent
contractor.
2. 2 types of independent contractors:
a. Independent contractor as agent- has a fiduciary duty, examples: brokers,
attorneys, collection agencies, and selling agencies because they are not
subject to control or right to control of the principal with respect to their
physical conduct but still owe the basic obligations of agency: loyalty and
obedience.
b. Independent contractor non-agent- do not owe a fiduciary duty, example:
builders

C. Agent Distinguished from a Corporate Director

1. An agent must follow instructions of principal, but corporate directors do not
have to follow instructions.
2. Corporate directors are not subject to another’s control except with regard to
the appointment and removal of its officers.
3. Corporate directors have a fiduciary duty to the corporation, but not to any
shareholder individually.
4. An individual director acting as a member of a board does not act as an agent
but is instead a member of the group which supervises the corporation.
5. Individual directors have no power to act on their own.

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D. Agent Distinguished from Vendor
1. The person acting as a vendor is only an agent if it is agreed that he is to act for
the benefit of the principal and not himself.
2. Factors to determine if one is a vendor and not an agent:
a. that he is to receive a fixed price for the property irrespective of the price
paid by him (this is most important)
b. that he acts in his own name and receives the title to the property which he
is thereafter to transfer
c. that he has an independent business in buying and selling similar property
3. The agent may not profit from the agency relationship other than whatever
consideration the principal may agree to.
4. F.C. Adams v Elemer F. Thayer Estate: decedent offered to pay certain price
for stock purchased by broker. The decedent’s estate refused to pay the broker.
Ct held the broker was not an agent because the broker acted for himself and
did not have to account for any profits. (no fiduciary duty). The decedent is
not liable as a principal for the broker’s expenses.

E. Agent Distinguished from Purchaser

1. One who receives goods from another for resale to a third person is not thereby
the other’s agent in the transaction: whether he is an agent for this purpose or
his himself a buyer depends upon whether the parties agree that his duty is to
act primarily for the benefit of the one delivering the goods to him or is to act
primarily for his own benefit.
2. A consignment situation is difficult. Some factors indicating that a sale has
occurred and an agency relationship does not exist are:
a. That the consignee gets legal title and possession of the goods
b. That the consignee becomes responsible for an agreed price either at once
or when the goods are sold
c. That the consignee can fix the price at which he sells without accounting to
the transferor for the difference between what he obtains and the price he
pays.

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F. Who is the Principal?
1. When someone is conducting a transaction between two people they may be an
agent of both if both agree and there is full disclosure or they can be an agent
for one party part of the time and another party the other part of the time.
a. Example: An insurance agent who sells different policies from different
companies. He is an agent of the buyer to select the best policy, but an
agent of the insurance company to collect payments.
b. If it is not clear who the principal is the key may be who pays the agent.
2. Fish v Bloodworth- shall the plaintiff or defendant suffer the wrongdoing of
Graham who did not deliver the proceeds of a loan check? If Graham is acting
as agent of plaintiff then payment to him was payment to the plaintiff and
plaintiff bears the loss. However, if he was acting as agent of the defendant the
defendant is responsible and must repay the plaintiff.
3. Oklahoma Publishing v Video Theatres- Plaintiff billed 3rd party who would
forward the bill plus his fees to the defendant. The defendant would then pay
the 3rd party who would forward the billed amount to the plaintiff. The 3rd
party stopped forwarding the billed amount to the plaintiff and the Ct held the
defendant was liable because the 3rd party was acting as their agent. Payment
to your own agent is not payment to the plaintiff. Case turns on who pays the
fees of the middle man.
4. National Advertising v Scovil- Nat’l bills Gadd who bills Scovil. Scovil pays
Gadd who then subtracts 15% and forwards the remaining 85% to Nat’l.
Scovil sent letter notifying Nat’l that Gadd was its agent so when Gadd did not
forward Scovil’s payment Scovil is still liable for payment b/c Gadd was their
agent.

G. Agent Distinguished from Person Given a Power for Security

1. If someone grants power but for the benefit of the power holder, not for the
benefit of the power giver then the power holder is not an agent of the power
giver.

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II. CONTRACT LIABILITY
A. Introduction
1. The question of contract liability is when can an agent or purported agent enter
into a contract on behalf of, or purportedly on behalf of, his principal and
impose contract liability upon the principal or purported principal.
2. Always remember third person must take reasonable steps to determine that an
individual is an agent and the extent of his authority. The key is
reasonableness. This probably does not require more than asking for company
identification.
3. If a person does not make reasonable investigation and it turns out the person
is not an agent or lacks the authority he claims the person cannot recover from
the principal (although he may have a cause of action against the purported
agent).
4. Agents who hold themselves out as agents give a warranty and if they are not
the agent or do not have the authority there may be a COA against the agent. It
is an implied-in-law warranty. An agent warrants that:
a. he is in fact an agent
b. there exists a principal who is as the agent described him
c. he has the authority he claims he has

B. Methods of Contracting
1. Fully disclosed principal- Unless otherwise agreed a person making or
purporting to make a contract with another as agent for a disclosed principal
does not become a party to the contract. The agent must disclose:
 that he is an agent,
 who the principal is and
 what the agent is authorized to do.
a. Moran v Loeffler-Greene Supply- The plaintiff claims the agent intended
to bind himself to the contract. This fails to rebut the general rule that an
agent for a fully disclosed principal is not a party to the contract.
b. Copp v Breskin- If lawyer is acting as a fully disclosed agent for a fully
disclosed principal then lawyer is not liable for expert witness fees. There
are exceptions however:
 When expert is retained it is expressly provided for in the contract that
law firm will be responsible for fees or
 It is implied that law firm will be responsible (by custom, ethics, rules,
etc.)
2. Partially Disclosed Principal- Unless otherwise agreed a person purporting to
make a contract with another for a partially disclosed principal is a party to the
contract.
a. A principal is partially disclosed when at the time of the making of the
contract the other party has notice that the agent is acting for a principal but
has no notice of the principal’s identity.

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 3. Undisclosed Principal- An agent purporting to act upon his own account but in
fact making a contract on account of an undisclosed principal is a party to the
contract. Both the agent and the undisclosed principal are parties to the
contract.
a. Lane v Oklahoma Lincoln- Hotel operator liable for air conditioning repair
when acting as an agent for an undisclosed principal, the owner of the
building. Subjective intent to serve principal is irrelevant.

C. Ways By Which Contract Liability May be Imposed

1. Actual Authority
a. Actual authority is the power of the agent to affect the legal relations of the
principal by acts done in accordance with the principals manifestations of
consent to him.
b. Express authority- authority is created by an oral or written statement
c. Implied authority- created from incidental duties and acquiescence, can
also be created by custom. Implied actual authority can be withdrawn by
specific express instructions to the contrary. Test to determine whether
implied actual authority exists is whether acts are reasonably inferred from
the job. Factors:
i. Nature of the business
ii. What is being done in the same industry (custom)
 Note illegal industry custom or one which is against public policy
cannot create implied authority
iii. Time period
d. If agent’s authority is ratified the liability of the principal dates back to the
time of the first action of the purported agent.
e. If agent’s authority is affirmed the principal’s liability dates back only to
the point of affirmance.
f. Home State Bank of Hobart v Sullins- Defendant’s agent collected portion
of debt and issued a release for the remainder. Bank said agent had
authority to collect but not authority to release. Ct said when authority is
implied from the job itself the principal has the burden of proving any
special limitations and notice to or knowledge by the adverse party.
g. Anglo American Clothing v Marjories- Agent of Plaintiff negotiated to put
jackets in store on a sale and return basis. Plaintiff says agent didn’t have
authority to enter into a sale and return contract. Ct found no express
actual authority, but there was a question whether implied actual authority
existed. Ct said no b/c it was not customary for salesmen in the clothing
business to be authorized to enter into sale and return contracts. Note:
Store might have claimed apparent authority but this claim fails b/c the
agent cannot create apparent authority for himself.

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 h. Evans v Skinner- Attny asks client if he can talk settlement, client says yes,
attny enters into settlement contract w/out consent, client fires lawyer and
wants out of the settlement contract, Ct holds attny did not have express
actual authority b/c client said talk settlement not settle. Ct finds there is
no implied actual authority b/c it is not customary for a lawyer to settle a
case w/out consent from client. Ct also finds no apparent authority b/c
other party should have been on notice that attny should consult client.
2. Apparent Authority
a. results from a manifestation by a person that another is his agent, the
manifestation being made to a third person, not to the agent. (focuses on
the manifestations between the principal and the third person)
b. Apparent authority exists only to the extent it is reasonable for the third
person dealing with the agent to believe the agent is authorized
c. Manifestations can be made directly or to the community through signs,
advertising, etc.
d. Problems with this arise mostly in cases where the principal has discharged
the agent.
e. Jones v World Publishing- ?
f. Wheeler v Puritan Insurance- People buy insurance from an agent and
attempt to collect after home burns. The agent admits he had no actual
authority and thus could not create apparent authority. Ct held insurance
co. not liable b/c there is no actual authority and an agent cannot create
apparent authority.
g. A-OK Construction v McEldowney- Agent tells ER that she will obtain
worker’s comp insurance for him and she never does. ER sues the agent
and the agent pleads that he was an agent for a fully disclosed principal and
is not party to a contract between the insurance co. and ER. Ct held the
agent is liable, not the insurance co.
3. Estoppel
a. A principal may be liable even when there is no actual or apparent
authority on grounds that a third person has relied on and changed his
position b/c of his reasonable belief the purported agent was acting on
behalf of the principal if:
i. the principal intentionally or carelessly caused such belief or
ii. the principal knowing of such belief and that others might change
their position did not take reasonable steps to notify them of the
facts
b. Hoddeson v Koos Bros.- When a proprietor of a place of business
carelessly lets someone act as if he is an agent and transact business with a
patron, the appearance being that the patron will believe the imposter is an
agent, the law will not permit the imposters lack of authority to allow the
proprietor to escape liability for the loss sustained by the customer.

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 c. Goldstein v Hanna- Plaintiffs attempted to exercise option on lease. Agent
told plaintiffs that lease terms could be extended and then called the
principal and confirmed. The principal remained silent and then tried to
claim the lease option had expired. Ct held the principal had a duty to
speak and failing to do so can create estoppel. A principal must take
reasonable steps to correct. Factors include expense, time, and effort.
4. Inherent Agency Power
a. This situation arises only after it is determined no actual, apparent, or
estoppel exists.
b. Public policy is the reason for this doctrine. Respondeat superior, let the
master pay.
c. The other party has to be acting in good faith or reasonably.
d. 3 situations in which inherent agency power arises:
 general agent does something similar to what he is authorized to do but
in violation of orders
 an agent does something for his own purposes in entering into a
transaction which would be authorized if he were actuated by a proper
motive.
 An agent is authorized to dispose of goods and departs from the
authorized method of disposal.
e. Zanac v Frazier Neon Signs- agent had authority to get a price on fixing the
sign, but he went ahead and said to fix it. Ct held principal liable under
inherent agency power b/c the acts done usually accompany transactions
the agent would be authorized to conduct, even though they were forbidden
by the principal & the other party reasonably believed the agent was
authorized to do the acts.
f. Crisp v Medler- Client liable when attny ordered entire transcript against
her wishes b/c normally an attny has the inherent authority to do this. An
attny is empowered with real and apparent authority to bind a client within
the scope of employment, absent proof that a third party had actual notice
of a limitation on that inherent authority.
g. Restatement: Acts of Manager Appearing to be an Owner- an undisclosed
principal who entrusts an agent with the management of his business is
subject to liability to third persons with whom the agent enters into
transactions usual in such businesses and on the principal’s account,
although contrary to the directions of the principal.
h. Restatement: Agent Acts for Improper Purpose- A disclosed or partially
disclosed principal is subject to liability upon a contract purported to be
made on his account by an agent authorized to make it for the principal’s
benefit although the agent acts for his own or other improper purposes
unless the party has notice that the agent is not acting for the principal’s
benefit.
i. Ocean Accident v Denner- agent stole payments made to principal by
defendant. Question was did defendant have to pay again b/c agent was
not acting for principal’s benefit? No, unless the other party had notice
that he was not acting for the principal’s benefit.

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5. Breach of Warrant of Authority
a. If you go all the way through the 4 other theories and cannot find the
principal liable, then you may attempt to hold the agent liable based on
breach of warrant of authority.
b. Restatement: A person who purports to make and contract, conveyance or
representation on behalf of another who has full capacity but whom he has
no power to bind thereby becomes subject to liability to the other party
thereto upon an implied warrant of authority unless he has manifested that
he does not make such warranty or the other party knows the agent is not
so authorized.
c. Aetna Casualty v Wofford- Defendant told agent of plaintiff that as
liquidating agent of a dissolved partnership he had the authority to sign a
note to pay money owed to plaintiff. He did not have such authority to
bind the partnership, but ct said judgment could be secured against
defendant individually b/c he misrepresented that he had the authority.

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III. LIABILITY FOR PHYSICAL TORTS
A. Introduction
1. Independent Contractors- hired to accomplish a particular job and can use his
own methods to do so
a. Independent contractor non-agent- does not owe principal a fiduciary duty
b. Independent contractor agent- owes the principal a fiduciary duty
2. Servant- employed to work for another, person for whom the servant works has
the right to control the way in which the job is performed. (It doesn’t matter if
they actually exercise control or not)
3. Basics to remember:
a. The tortfeasor is always liable for the tort committed regardless of
relationship or authorization.
b. A servant is not an indispensable party to a tort suit against the master.
c. A principal is liable for the non-physical torts of his agents.
d. A master has the right of indemnification from the servant.

B. Is There a Master Servant Relationship?

1. Restatement: Master has right to control, whether it is exercised or not, the
conduct of his agents.
2. Konick v Berke Moore Co.- Ct adopted modern American rule to establish
liability of principal: all that is required is that principal has sufficient control
over act or business in general, overruled Massachusetts rule which required
control or right to control the specific item or act.
3. Factors for determining whether one acting for another is a servant or an
Independent Contractor:
a. extent of control the employer exercises over the details of the work
b. whether or not one is employed in a distinct occupation or business
c. whether in a given locality work is usually done with supervision or by a
specialist with no supervision
d. skill required in the occupation
e. who supplies the tools, machinery in the place of work
f. length of employment (longer time, usually a servant)
g. method of payment (daily = IC, monthly = servant)
h. whether work is part of normal business of employer
i. belief of parties (this is of little significance)
j. Is principal in the business? (not in business = IC)
4. Risk of loss test- often used to determine whether a person is an IC or a
servant. If the risk of loss is on the person performing then the relationship is
likely to be one of IC-agent.
5. Conoco v Oneok- Case citing examples of controlling work for finding of
master-servant relationship. Ct found construction co. hired by ONG was a
servant therefore ONG is liable for the later rupture caused by the pipeline
built by their servant.

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 6. Singleton v Dairy Queen- Dairy Queen exercised sufficient control over the
franchisee to establish liability for an injury which occurred due to the
negligence of the franchisee, even though there was boiler plate language in
the contract purporting to make it an independent contractor relationship.
These situations are always a question of fact for the jury.

C. Is There a Subservant or Subagent Relationship

1. Restatement: A subservant is a person appointed by a servant to perform
functions undertaken by the servant for the master and is subject to control as
to his physical conduct both by the master and by the servant, unless whose
conduct the servant agrees with the principal to be primarily responsible.
2. General Rule: Vicarious liability extends to everyone in the chain of the
master servant subservant relationship.
3. If a subservant commits a tort in the scope of employment all three are liable.
The servant may claim indemnity from the subservant and the master may
claim indemnity from the servant.
4. If the subservant causes loss from rightful authorized performance the
subservant may claim indemnity from the servant and the master.
5. If the master overrides the servant and directly controls the subservant then the
servant is taken out of the liability equation as to that transaction.
6. If there is no authority to hire a subservant then the master did not agree and is
not liable for the actions of the subservant. However, the master may still be
liable for the negligence of the servant in hiring the subservant.
7. Frank v Sinclair Refining Co.- Oil Co hires distributor and distributor hires a
truck driver who has a wreck. Truck driver was a servant of the distributor. Ct
found the distributor was a servant of the oil co even though this was
disclaimed in the contract. Master servant relationship existed b/c of extent of
control by the oil company. Therefore, the truck driver is a subservant and the
oil co. is liable for his torts.
8. Murrell v Goertz- Paper boy tried to collect money, woman bitched, kid hit
her, she sues publishing co. Ct held the paper boy was hired as an IC by an
IC. The publishing co. had no direct contact, supervision, or control over the
paper boy. Note: Long thinks this case is wrongly decided, should have gone
to jury.

D. Apparent Master Servant or Master Servant by Estoppel

1. Apparent Master Servant
a. Exists when a master holds out another as his servant to a third party and
the third party relies to his detriment on the existence of the master servant
relationship
b. A servant can never est. apparent authority. However, be careful to
recognize when a servant creates appearance and the master ratifies the
appearance of a master servant relationship through conduct.
c. The belief by the third party must be reasonable and have occurred before
the injury.

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 d. Restatement: One who represents that another is his servant and thereby
causes a third person justifiably to rely upon the care or skill of such
apparent servant is subject to tort liability to the third person for the harm
caused by the servant.
2. Master Servant by Estoppel
a. Exists when servant intentionally or negligently causes a third party to
reasonably believe that he is a servant and a master knows this but fails to
correct it or ratifies it and the third party changes his position in reliance
thereon.
b. The belief of the third party is created by the purported servant not by the
master.
c. Belief by third party must be reasonable before injury and result in a
change of position.
d. Restatement: A purported master is subject to liability for the physical
harm caused to others or their belongings by their reasonable reliance upon
the representations of one acting within his apparent authority or apparent
scope of employment.
3. Cases
a. Wood v Holiday Inns- Salesman has heart attack after hotel manager
attempted to seize credit card by fraud. Salesman wants to sue hotel,
franchisor and credit card co. Lower Ct found no master servant
relationship existed between hotel and hotel chain. Appellate Ct found an
apparent master servant relationship existed b/c of the extent of control.
b. Gizzi v Texaco- Texaco man sells a man a car after fixing the brakes.
Texaco advertising said “Trust your car to the man who wears the star”
The purchaser of the car said he believed he was dealing with the Texaco
corporation. The Ct held the jury could find evidence of apparent or
estoppel master servant relationship. Long says this was master servant by
estoppel b/c the servant was creating the appearance that Texaco was
selling the cars and Texaco knew this, but did nothing about it.
c. Peters v Sheraton Hotels- infant injured at hotel, Franchise agreement
clearly spelled out an IC relationship, but Ct said it is different when third
parties are involved. It will depend upon the facts of the case whether
liability will be imposed.
d. Stephens v Yamaha Motors- Man takes motorcycle to gas station to have
tire repaired and afterwards has a blowout. Sues Conoco. Ct granted SJ
for Conoco finding no apparent master servant relationship b/c it was
unreasonable for the plaintiff to believe Conoco authorized the repairs.
e. Jackson v Power M.D.- Plaintiff treated by doctor at Hospital. Dr failed to
order tests which later resulted in patient losing his kidneys. Plaintiff
sought to hold Hospital vicariously liable for the care rendered by the Dr.
Ct held a jury could conclude that Hospital held itself out as providing
emergency care services to the public. A jury could also find that plaintiff
reasonably believed that the dr. was employed by Hospital to deliver
emergency service.

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E. If No Master-Servant, Still Potential Liability
1. General Rule: A person who employs an independent contractor incurs no tort
liability for negligence of the independent contractor. However, the employer
may incur tort liability for any of these four things:
a. negligent hiring
b. negligent supervision
c. negligent retention
d. negligent entrustment
2. Hudgens v Cook Ind.- Employer hired I.C. to transport grain. Employer didn’t
check out his record or he would’ve seen it was very bad. IC causes an
accident in which Plaintiff is hurt. Ct finds that employer is liable b/c they
were negligent in hiring the IC.

F. Clearly a Servant, But a Servant of Whom?

1. Restatement: A person may be the servant of two masters, not joint employers,
if the service to one does not involve abandonment of the service to another.
2. Concurrent Master-Servant Relationship:
a. Elements
 person working for two masters at one time
 both masters must agree to the concurrent employment
 both masters may incur tort liability
b. Example: A (traveling salesman) negotiates with X (Arrow Shirts) and Y
(Jockey Shorts) to sale for both of them concurrently. A goes to Harolds in
Norman to sell only shorts so if he has an accident on the way only Y will
be liable. But if he is going to Ardmore to sell for both X and Y, but stops
in Norman to sell for Y, and has an accident both will be liable.
c. Hiner v Olson- traveling salesman sells drugs for more than one drug co.
and has an accident on the way home. One employer asserted that the
salesman’s other employment prevented it from being liable under
respondeat superior b/c his work for multiple companies indicated that the
salesman was actually an IC and the salesman’s intervening employment.
Ct held salesman was a servant serving all masters simultaneously. Both
were responsible b/c the employments did not conflict w/ each other and
the masters knew of the other employments.
d. Howard v American Paper Stock Co.- poses the question of whether a
person is acting within the scope of employment when they have a dual
purpose. (Dual Purpose Doctrine) Factors to determine scope of
employment are (1) subjective intent to serve master and (2) objectively
doing something master expects. Employee is on errand for master, sees
relatives, tries to catch up but hits them. Ct holds employer will be liable
even though servant was acting with a dual purpose, b/c he at least had
partial intent to serve the master.

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 3. Two Employers as a Joint Venture and Master Hired as Agent or Servant
a. Comment to Restatement: Two persons may agree to employ a servant
together or to share the services of a servant. If there is one agreement
with both of them the actor is the servant of both at such times as the
servant is subject to joint control.
b. Example: X goes to Y and they decide to hire together a single employee
to do traveling sales (A). They have entered into a joint enterprise or
venture. X and Y will be jointly and severally liable for the torts of A.
c. Albina Engine & Machine Works v Abel- Albina owned equipment and
Safway was in business w/ them to rent it out. Employer of Abel rented
the equipment & Abel was injured while using it. Abel argued this was a
master/servant relationship in which Albina and Safway have entered in to
a joint venture. Ct said a jv is a special combination of 2 or more persons
where in some specific venture, a profit, is jointly sought w/out any actual
partnership or corporate designation. Ct also said a jv may be created even
if the parties do not express it b/c the substance of the legal intent rather
than the actual intent may be controlling. Under common law property had
to be in the hands of individuals when a partnership or jv exists. Mutual
agency is the test for jv. Sharing profits is a way to est. the existence of the
mutual agency, as well as sharing taxforms.

G. Scope of Employment
1. A master is only liable for those torts committed within the scope of
employment.
2. Test: Both elements must be met and must be analyzed in order.
a. Servant must have the subjective intent to serve his master
b. Servant must be doing something that master would reasonably expect him
to be doing.
 servant must be within zone of acceptable deviation- it is reasonable to
expect a servant may deviate from the course of where he is going,
employer will still be liable so long as a reasonable person would find
that the deviation is reasonable, question of fact: 3 areas of concern-
space, time and nature of act
 Leaving the zone of acceptable deviation is called a frolic and detour,
employee is then out of the scope of employment.
3. Restatement §228 Scope of Employment: General Statement
a. Conduct of a servant is within the scope of employment if, but only if,
 It is of the kind he is employed to perform
 It occurs substantially within the authorized time and space limits
 It is actuated, at least in part, by a purpose to serve the master
 If force is intentionally used by the servant against another the use of
force is not unexpectable by the master
b. Conduct of a servant is not within the scope of employment if it is different
in kind from that authorized, far beyond the authorized time and space
limits or too little actuated by a purpose to serve the master

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 4. Subjective Intent:
a. Restatement §235: An act of a servant is not within the scope of
employment if it is done with no intention to perform it as part of or
incident to a service on account of which he is employed.
5. Dual Purpose
a. Restatement §236: Conduct may be within the scope of employment
although done in part to serve the purposes of the servant or a third person.
b. Note: Usually you are not within the scope of employment when driving to
and from work, however this is not always true. An example would be
when an employer asks an employee to perform a job related task on the
way to or on the way home from work.
6. Spatial Deviation Restatement §234:
a. Conduct is within scope of employment only in the authorized area or
locality not unreasonably distant from it.
b. Always a jury question
7. Time Deviation Restatement §233
a. Conduct of a servant is within the scope of employment only during a
period which has a reasonable connection with the authorized period.
8. Nature of the Act
a. Restatement 230: An act, although forbidden or done in a forbidden
manner may be within the scope of employment.
b. Still must be in furtherance of the master’s business, but if it such a great
and unpredictable deviation from the normal employment duties, Ct will
find it is not within scope of employment.
c. Restatement 231: An act may be within the scope of employment although
consciously criminal or tortious.
d. Note, even if a master has expressly forbidden an act, he still could be
found liable if the act was in furtherance of the master’s business.
e. Use of Force: Restatement 245 Violence is within the scope of
employment if force can be expected from the nature of the servant’s
duties, even if unauthorized or if actual force is authorized.tr4
 If assault is triggered or motivated by an attempt to further the master’s
business then the employer may be liable.
 In some businesses a certain amount of force is authorized, however the
force used must not be excessive and must also be in furtherance of the
business, not for personal purposes.

H. Ratification
1. Where a master with full knowledge of the wrongful acts of his servant
accepted the benefits derived from the servant’s conduct the master thereby
ratifies the acts of the servant and becomes liable as if authority had been
given.

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I. Duty to Separate Personal Acts From Acts Done Within the Scope of
Employment, If Possible
1. Majority view: Personal acts must be separated if possible from the acts
performed for the master.
2. Minority view: If an act is done while engaged in the business of the employer
then it is within the scope of employment, even if it is personal.
3. 2 main areas where court usually finds the personal act is part of the scope of
employment:
a. custodial cases
b. professions where people are considered on duty 24 hours a day
4. Restatement 242: A master is not subject to liability for the conduct of a
servant towards a person harmed as a result of accepting or soliciting from the
servant an invitation which is not binding upon the master to enter or remain
upon the master’s premises or vehicle although the conduct which immediately
causes the harm is within the scope of employment.
a. Courts are split on this issue, could be foreseeable for a trucker to pick up a
hitchhiker
5. Restatement 241: A master who has entrusted a servant with an
instrumentality is subject to liability for harm caused by its negligent
management by one to whom the servant entrusts its custody to do the work
the servant was employed to perform if the servant should realize that there is
an undue risk that such person will harm others.

J. Servant’s Re-Entry into Scope of Employment

1. Restatement 237: A servant who has temporarily departed in space or time
from the scope of employment does not re-enter it until he is reasonably near
the authorized space and time limits and is acting with the intention of serving
his master.

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IV. LIABILITY FOR NON-PHYSICAL OR WHITE COLLAR TORTS

A. Introduction
1. Restatement 257
a. A principal is subject to liability for loss caused to another by the other’s
reliance upon a tortious representation of a servant or other agent, if the
representation is:
 Authorized
 Apparently authorized; or
 Within the power of the agent to make for the principal

B. Liability for Misrepresentations Actually Authorized

1. A representation known to the agent to be untrue is authorized if the agent has
reason to believe from his principal’s conduct that the principal wishes the
statement made although untrue.
2. Even if not authorized, a principal could ratify such acts.

C. Liability for Misrepresentations Not Authorized, But Within Power of Actual

Agent to Make.
1. Restatement 258: A principal is liable if in the course of negotiations the agent
makes tortious misrepresentations upon matters which the principal might
reasonably expect would be the subject of the representations.

D. Liability For Misrepresentations by an Agent with Apparent Authority

1. A statement is apparently authorized if the other party to a transaction
reasonably believes from conduct for which the principal is responsible that the
agent is authorized to make the representations as made.
2. 3 steps involved in est. the apparent authority:
a. The words or acts of the principal communicated to the third party made it
reasonable to believe the agent possessed the authority to act for the
principal.
b. The third party relied on the reasonable belief
c. The third party made reasonable inquiries as to the apparent agent’s actual
authority
3. The words or acts must be those of the principal, not the agent.

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E. Liability for Misrepresentations by an Agent Under Inherent Agency Power
1. Inherent Agency Power exists to protect people who are wronged by agents,
but their acts do not fall within the other three categories.
2. Restatement 261: A principal who puts a servant or other agent in a position
which enables him while apparently acting within his authority to commit a
fraud upon third persons is subject to liability for such third persons for the
fraud.
a. The principal is subject to liability under this rule although he is entirely
innocent, has received no benefit from the transaction, and although the
agent acted solely for his own purpose.
3. Restatement 262: Principal not relieved of liability even when agent acts for
his own purpose.

F. Liability for Fraud or Misrepresentation by an Apparent Agent or Agent by

Estoppel
1. A principal can be liable for fraud or misrepresentation on a theory of apparent
agency or agency by estoppel.

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V. DUTIES OF PRINCIPAL AND AGENT

A. Duties of Principal
1. Duty of Principal Not to Compete: depends upon the agency relationship
a. non-exclusive agency relationship: Principal can hire other agents, so no
duty not to compete with other agents or the principal can even perform the
assigned tasks
b. exclusive agency: agreement that another agent will not be hired, but
principal can still compete
c. exclusive powers agreement: Principal nor other agents will compete,
agent is the only one who can handle the transaction
Note: Custom and usage usually determines what type of agency relationship
exists.
2. Duty of Principal to Compensate Agent
a. inferred that a person promises to pay for the services which he requests or
permits another to perform
b. Restatement 445: Except where there is a revocation in bad faith, an agent
whose compensation is conditional upon the performance by him of
specified services or his accomplishment of a specified result is not entitled
to the agreed compensation unless he renders the services or achieves the
results.

B. Duties of the Agent to his Principal

1. Agent’s Responsibility to Principal for Acts of Fellow Agents and Subagents
a. Agent is not responsible for the acts of fellow agents, but is responsible for
the acts of subagents.
2. Fiduciary Duty to Account
a. An agent who makes a profit in connection with transactions conducted by
him on behalf of the Principal is under a duty to give such profit to the
principal.
b. Remedies for Breach of Fiduciary Duty
 Injunction against further taking
 Recovery of money
 Damages
c. Using or Disclosing Confidential Information
 Can’t use or communicate confidential information acquired during the
course of business in competition or in injury to the principal
 Also an obligation to tell the principal anything he would want to know
about his business
d. You cannot defend the breach of one fiduciary duty by honoring another.

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C. Liability of Person Causing Breach of Fiduciary Duty or Who Receives
Confidential Information
1. A person who without being privileged to do so intentionally causes or assists
an agent to violate a duty to his principal is subject to liability to the principal.
2. A principal, in theory, can recover double, once from his agent and once from
the third person.
3. Sue on tort first, interference of contractual relations, then sue on breach of
fiduciary duty, which does not require actual damages.
4. When a person receives inside info. and they know it is inside they have a
fiduciary duty which is breached if they use it.

D. Duty to Not Compete

1. Unless otherwise agreed, an agent is subject to a duty not to compete with the
principal concerning the subject matter of his agency.

E. Duties After Leaving Employment

1. Can’t announce leaving until you leave.
2. Can’t actively solicit business prior to leaving.

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