What Is Law?

Agency Law What are the essential differences among the relationships of principal and agent, employer and employee and employer and independent contractor? Under contract law, the employer is referred to as the principal and the employee is referred to as the agent. Regardless of whether the agent is the employee of the principal or is an independent contractor for the principal, the same principles apply in holding the principal liable on contracts to third parties. In contrast, employer/employee relationships and employer/independent contractor relationships typically apply in tort law.

The difference between an employee and an independent contractor is that the principal or employer has the right to control the manner and the method by which the person performs his tasks. (Community for Creative Non-Violence v. Reid, 490 v. U.S.730 (1989). Independent contractors typically control their own schedules and progress on a work assignment. Identify, define and discuss the categories of authority by which an agent can bind a principal and a third party in contract.

Generally, a person is not responsible for the acts of another who assumes to represent him. He will be held liable only if he has made the other his representative and given her the power to bind him. Such authority can arise in three ways: (1) through actual authority granted by the principal to the agent; (2) through apparent authority arising from the principal's holding out of another as his agent to third parties; and (3) through ratification authority, power given after the act has been performed.

If one of the three above-mentioned types of authority exists, then the principal is liable to the third party in contract. Actual authority is authority that the agent reasonably thinks she possesses based on the principal's dealings with her. In determining whether the agent had actual authority, we need to look at (1) whether the requisite formalities, if any have been met; (2) what type of actual authority (express or implied) is present; and (3) whether the authority has been terminated.

Express authority is that authority contained within the four corners of the written or oral agency agreement between the principal and the agent. Implied authority is authority that the agent reasonably believes she has based on the actions of the principal.

Examples of implied authority are (1) implied when it is the custom and usage of a particular business; (2) implied that results from the principal's acceptance of, or failure to object to, a series of unauthorized acts that leads the agent to believe that she has authority to act in the future; and (3) implied because of an emergency or necessity.

Even if the agent lacks actual authority, the principal can still be held liable on contracts entered into on his behalf if the third party seeking to hold the principal liable can show that the agent had apparent authority to act. Under the apparent authority theory, the principal holds out another as having authority. This holding out induces third parties to reasonably believe that the agent has authority to act on behalf of the principal.

There are situations where an agent will purport to act on behalf of principal without any type of authority. In this situation, the principal may still be bound in contract to a third party, if the principal ratifies the agent's act. 3. How can a principal be liable for an agent's torts principal may be held liable to third parties for torts committed by her agent under the doctrine of respondeat superior.

In order for a principal to be held liable for its agent's torts, there must be an employee-employer relationship between agent and principal, and the conduct must have been committed within the scope of the employment relationship. The liability of the employer for the.