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Bus 207 Week 4-5 Notes

by: Brittany Bourdage

Bus 207 Week 4-5 Notes bus 207

Brittany Bourdage
Cal Poly

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These notes cover the material from weeks 4-5, including videos shown in class.
Legal Responsibilities of Business
Chris Carr
Class Notes
business, businesslaw
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This 18 page Class Notes was uploaded by Brittany Bourdage on Tuesday May 3, 2016. The Class Notes belongs to bus 207 at California Polytechnic State University San Luis Obispo taught by Chris Carr in Winter 2016. Since its upload, it has received 9 views.

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Date Created: 05/03/16
Bus 207- Law and Responsibilities of Business Notes  Jeff Radding – free legal advice th  Final: Friday, June 10 @ 4:10pm 4/18/16  Video: The Man Who Sells the Moon - Dennis Hope has been selling property on the moon since 1980, talked to the UN & never got a response back with a problem, costs about $24 to buy a property, “novelty gift”, sell around 200 properties a day ~1.7mil a year TORTS - A civil wrong against persons or their property. In laymen’s terms, this means that somebody (the defendant) “screwed up” and hurt or injured somebody else (the plaintiff). - Primary aim: to compensate injured persons for such harms, seek to shift the risk of loss to parties/defendants who may be in a better position to bear a loss and can recoup that loss by spreading it out to society. - Intentional Torts - · Usually involve some type of intentional, malicious, or reckless behavior - Negligence - · The failure to act with “reasonable care” - Strict Liability - · If it applies and you are the one who engaged in that act and caused damage or injury to another, you are strictly liable – period! It does not matter how careful you were! INTENTIONAL TORTS Battery  An intentional act by the defendant  Results in a harmful OR offensive touching (i.e., contact) of another without his/her consent Defenses: · Consent · Self Defense · Defense of others · Defense of property Assault  An attempt by the defendant to cause harmful or offensive contact with another, OR, any offer/threat to cause such contact … but under either circumstance the attempt or offer must cause a:  Well-grounded (i.e., reasonable) fear or apprehension of imminent harmful or offensive contact. Defenses (same as battery): · Consent · Self Defense · Defense of others · Defense of property Defamation  Designed to protect a person’s reputation. -Publication -Of a statement of a factual nature -That statement is false -And that statement is also defamatory Defenses: · Truth of the statement · Absolute privileges (see UR textbook for details) · Conditional privileges (see UR textbook for details) 4/20/16 Defamation Lessons: 1. The Constitution/First Amendment only protects TRUE (not false) speech. 2. Be particularly careful about what you say (especially if it’s bad) about colleagues, co-workers, former employees, etc. 3.Watch what you say in that email; watch what you post on the Internet, etc. 4. “If you can’t say something nice about someone, don’t say anything at all.” I.e., Mom and Dad, and their advice, were right! 60 Mins Video: Arthur Anderson and Baptist Foundation of Arizona  Largest bankruptcy of a non-profit, Baptist Foundation of Arizona went bankrupt, 1980s new owner, foundation just hid the bankruptcy through fraud, ALO was created by the foundation itself so it was just an accounting trick, 8 officers guilty of fraud, Arthur Anderson was served multiple times, but they didn’t stop Invasion of Privacy  Different types: -Intrusion of solitude -Publicity concerning private facts -False light -Appropriation of name or likeness The Tort Liability Ladder Intentional Torts · Usually involve some type of intentional, malicious, or reckless behavior Negligence ·The failure to act with “reasonable care” Strict Liability ·If it applies and you are the one who engaged in that act and caused damage or injury to another, you are strictly liable – period! It does not matter how careful you were! Negligence Elements: • Duty (a duty must be owed by the defendant to the plaintiff) – Factors to analyze in determining what duty, if any, is owed: • Level of danger posed to the consumer/public/plaintiff • Foreseeability of that injury occurring • Burden on the defendant in meeting/complying with that duty • Breach of that duty by the defendant • Causation (the defendant must have caused the plaintiff’s injuries) – Actual (but/for test) – Proximate (foreseeability test) • Damages (the plaintiff must have suffered damage or injury) Defenses (in order for the plaintiff to recover, none of the following can apply): • Contributory negligence • Comparative negligence (note pure and mixed distinction) • Assumption of Risk (plaintiff must have voluntarily assumed a known and specific danger or risk) 4/25/16  Strict Liability applies to: -abnormally dangerous or ultra-hazardous activities -certain statutory situations -products liability Strict Products (Not Services) Liability Elements: ·A “seller” must be engaged in the business of selling the product that harmed the plaintiff (vs. an occasional seller) ·The product must also be in a “defective condition” when it left the hands of the manufacturer or seller, and, it (the product) must also be “unreasonably dangerous” because of that condition -The test of whether a product is in a “defective condition” is whether the product meets the “reasonable expectations of the average consumer” (e.g., the average consumer probably does not expect a step ladder to break when a person weighing 150 pounds uses it) -An “unreasonably dangerous” product is one that is dangerous to an extent beyond the reasonable contemplation of the average consumer Defenses: · Assumption of risk · Obviousness of the risk · Product misuse · State-of-the-art defense · Comparative fault How Can A Product Be “Defective” and/or “Unreasonably Dangerous”?? – Design Defect – Manufacturing Defect – Failure to Adequately/Properly Warn Agency Law 1. Helps you plan and structure your business and employee relationships so as to maximize competitive advantage and minimize risk/legal liability. 2. Helps you spot relevant legal issues that nobody else in your firm/business will spot. 3. Helps you recognize what “no-nos” to never commit. Principal (Employer) Employee Independent (Agent) Contractor (Notan Agent) Why do we have agency law? -Distinction between an employee and independent contractor The creation of an agency relationship ·Agreement ·Ratification ·Estoppel -Duties owed by an agent to the principal, and vice versa The authority of agents ·Actual (express and implied) ·Apparent Liability in agency relationships ·Liability for contracts ·Liability for torts - Respondeat superior - Direct liability ·Liability for the torts of independent contractors Termination of the agency relationship (how is an agency relationship terminated?) ·Termination by acts of the parties ·Termination by operation of law -The effect of the termination of an agent’s authority 4/27/16 Study Outline I. Nature and Function of Tort Law A. Torts are private (civil) wrongs against persons or their property. B. Primary aim: to compensate injured persons for such harms, injured persons can sure for actual (compensatory) damages, and possibly punitive damages (where applicable) II. Intentional Torts A. Battery: occurs where the defendant intentionally does an act that results in a harmful or offensive touching (contact) of another without consent 1. Harmful – produces any bodily injury 2. Offensive – calculated to offend a person of ordinary sensitivity’s reasonable sense of personal dignity and is unwarranted by the social usages prevalent at the time and place at which the contact is made 3. Intentional – defendant either desired to bring about the consequences of his act, acted recklessly, or believed that harmful or offensive consequences were substantially certain to follow from what he did 4. Note: direct contact between plaintiff & defendant isn’t necessary 5. Note: making contact with anything connected with the plaintiff’s body counts 6. Note: Doctrine of transferred intent applies: you intend to injure one person or do throw something this is substantially certain to injure another person, but you miss and actually injure another 7. Note: The plaintiff need not be aware of the contact in order for a battery to occur 8. Defenses: a. Consent to the contact – must be free and voluntary b. Self defense – but force used must be reasonably necessary under the circumstances and not excessive c. Defense of others – defense so long as reasonable under the circumstances d. Defense of property – defense so long as reasonable under the circumstances, but can never use deadly force to protect or defend only property B. Assault: any intentional attempt or offer to cause harmful or offensive contact with another is an assault, if it causes a well- grounded fear or apprehension of imminent harmful or offensive contact 1. Threats of future harm/contact no are generally not sufficient 2. Whether contact actually occurs between he plaintiff and defendant is irrelevant 3. Threatening words alone are also generally not enough to constitute a civil assault 4. Fear and apprehension are also not the same thing 5. The plaintiff must also be aware of the threat 6. Defenses: same as battery C. Defamation: designed to protect a person’s reputation. In order to prevail on a claim for defamation, the plaintiff must prove beyond a preponderance of the evidence that the defendant: 1. “published”; 2. A false and defamatory 3. About another person 1. Libel – written defamation (includes TV and radio). Because more “permanent” in nature than oral defamation, deemed to be more serious and is actionable without any proof of “special damage” to the plaintiff 2. Slander – oral defamation. Generally, requires proof of special damage (meaning the plaintiff has to prove that he/she was actually somehow injured), but not when slander per se is involved in which the defamatory and harmful nature of the statement is presumed. In other words, these situations are deemed to be so bad that the court will PRESUME that the plaintiff was injured and doesn’t need to prove how they were injured 3. Defamatory – means it harms the reputation of another by injuring the community perception of him or by deterring others from associating or dealing with him 4. Publication – only need be from one person to another. Widespread communication is not necessary, and, making the statement to only the plaintiff doesn’t normally count 5. Miscellaneous rules regarding Defamation a. Groups – individual member of a group of people that has been defamed can’t recover unless the group is so small that statement can reasonably be understood to refer to specific member, or statement is such that it is reasonable to conclude that a particular group member is being referred to b. Opinions – not actionable because not a statement of fact 6. Defenses available to a plaintiff in a defamation case (meaning that even if the plaintiff proves their case in chief, if the defendant can show that one or more of the below apply, then the defendant is NOT liable to the plaintiff) a. Truth is an absolute defense. b. Absolute privileges – statements by participants in judicial proceedings, legislators, or witnesses in legislative proceedings, executive officials in the course of their duties, and between spouses in private 1. Rationale behind absolute privileges – in order for such proceedings, situations, relationships etc. to be effective, open, etc. then as a policy matter we need people to feel completely free to say any and all things c. Conditional privileges – Examples are intra-corporate communications D. Fraud: to recover for fraud in a civil case, a plaintiff must prove ALL of the following elements by a preponderance of the evidence: 1. A false statement of fact (not opinion) 2. Knowingly made by the defendant; a. “Knowingly” means the defendant knew that it was not true, did not believe it to be true, or to recklessly disregard the truth of statement. 3. Made with the intent to induce the plaintiff to rely on the statement, which, in fact causes the plaintiff to rely; 4. The plaintiff’s reliance on the statement was reasonable and justifiable; and 5. The plaintiff was also somehow injured/damaged E. Invasion of Privacy (there are 4 different types) 1. Intrusion of Solitude: intentional intrusion on the solitude or seclusion of another where the intrusion is highly offensive to a reasonable person and violates someone’s reasonable expectation of privacy a. Defenses – the intrusion was not highly offensive/the expectation of privacy was not reasonable; note that this cause of action is not available to dead persons or corporations because it is a personal right that is involved 2. Publicity Concerning Private Facts: publicity of such facts that are highly offensive to a reasonable person a. Publicity must be widespread b. Defenses – the fact disclosed is a matter of public record or legitimate public interest; truth of the publicized fact is not a defense here; this cause of action is not available to dead persons or corporations because personal rights are involved 3. False Light – publicity that places a person in a false light in the public’s eye can be an invasion of privacy if that false light is highly offensive to a reasonable person 4. Appropriation of Name or Likeliness: using a well-known or famous person’s name, likeness, picture, etc., in an advertisement or for other commercial purposes without their consent F. False Imprisonment: the intentional confinement of another for an appreciable length of time without his consent 1. Defenses – consent, plaintiff’s lack of knowledge or awareness of the confinement 2. Store owners and shoplifters a. Traditional rule – the store is liable if the plaintiff is later found to be innocent of shoplifting b. The more modern and applicable rule – the store isn’t liable if it had a reasonable belief the plaintiff shoplifted, acted reasonable and only detained the plaintiff for a seasonable period of time (often called “shopkeepers privilege”) G. Intentional Infliction of Emotional Distress: prank calls, stalking, harassing phone calls 1. Elements: a. Defendant’s conduct must be “so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community” b. The plaintiff’s emotional distress must also be severe in order for them to recover 1. Note: is proof of bodily harm or injury required here in order for the plaintiff to recover/to prove that the plaintiff suffered “severe emotional distress”? 2. Note: remember that the “intent” to cause intentional infliction of emotional distress works the same way as it does for assault and battery H. Trespass: an offense against the right to possession of property 1. Elements: a. The intentional and unlawful entry onto/into property in the possession of another b. Unlawfully remaining on/in another’s property, after lawful entry c. Unlawfully causing something to enter onto/into property possessed by another d. Failure to remove something from property which you hate a duty to remove 2. In most jurisdictions, no actual harm or damage to the property is required for there to have been a trespass 3. Defenses: trespass was warranted/reasonable/justified, showing that the purported owner didn’t actually have the right to possess the property, etc. a. Note that mistake is generally NOT a defense here III. The Tort of Negligence A. Negligently: the defendant failed to exercise reasonable care and act as a “reasonably prudent person” would have acted under the circumstances, and the plaintiff was injured as a result B. Elements of Negligence: duty, breach of duty, causation, damages/injury, and no defenses apply 1. Duty – it’s the duty to exercise “reasonable care”/act as a “reasonable person” would act under the circumstances a. How far/high does this duty go/how extensive is this duty? Depends on: 1. The level of danger posed to the consumer/plaintiff/public 2. The reasonable foreseeability of that injury occurring 3. The burden on the defendant in the meeting/complying with that duty 2. Breach – this duty must have been breached by the defendant a. A person is guilty of a breach of duty if he exposes another to an unreasonable, foreseeable risk of harm 3. Causation – the breach of this duty of care must have caused damage/injury to the plaintiff (both actual AND proximate causation must be satisfied) a. Actual causation – the breach of duty must have been the actual cause of the plaintiff’s injury. Here, courts apply a “but/for” test b. Proximate causation – in addition to being the actual cause of the plaintiff’s injury the breach of duty must have also have been the proximate (or legal) cause of the plaintiff’s injury. The test for what constitutes “proximate cause” is one of foreseeability. 4. Damage/Injury a. The plaintiff must have suffered damage or injury as a result of the defendant’s negligent act b. The damage or injury can be economic (ex. Lost profits) or non-economic (ex. Pain, suffering) c. Ordinarily the plaintiff has physical injuries so this is not an issue. But what about purely emotional injuries? 1. Most courts have dispensed with the “physical impact/contact or injury” requirement and allow for the recovery of pureply emotional injuries. However, some of these courts still require, as a precondition of recovery, proof that some physical injury or symptom resulted from plaintiff’s emotional distress. 5. Defenses – Finally, in order for the plaintiff to recover, none of the below defenses can apply: a. Contributory negligence – plaintiff fails to exercise reasonable care for his own safety. This is a total bar to any recovery by the plaintiff. This doctrine and defense means that if the defendant was 99% negligent and the plaintiff was only 1% negligence, the plaintiff loses and recovers nothing. b. Comparative negligence – looks at the relative fault of parties and assesses liability according accordingly. This doctrine and defense was developed and adopted by courts in most states to help mitigate the harshness and potential unfairness to plaintiffs of the contributory negligence doctrine and defense discussed above. Different states have different types of comparative negligence systems. For example: 1. Pure comparative negligence jurisdiction: plaintiff recovers a portion of his damages even if he was more at fault (% wise) than the defendant. 2. Mixed comparative fault jurisdiction: plaintiff recovers a portion of his damages, but only so long as his & of fault is less than the defendant’s % of fault c. Assumption of risk – plaintiff who voluntarily exposes himself to a known and specific danger or risk (this is different than a general danger or risk) created by defendant’s negligence can’t recover 1. Note that the plaintiff’s assumption of a risk can be expressed or implied IV. The Tort of Strict Liability A. Abnormally Dangerous (or Ultrahazardous) Activities 1. Activities that necessarily involve a risk of harm to others that can’t be eliminated by the exercise of reasonable care B. Statutory Strict Liability 1. Workers’ Compensation 2. Dram Shop Statutes (ex. They make a bar owner civilly liable for injuries caused to or by patrons who are served too much alcohol and then get in a car, drive away, and kill/injure someone) 3. Operators of aircraft for ground damage resulting from aviation accidents C. Strict Products Liability (Not Services) 1. Product Liability Law – What is it? a. The legal liability of the manufacturer or seller of a product which, because of a defect, causes injury to the purchaser, user, or bystander. In theory, liability extends to anyone in the business of selling goods or in the chain of distribution 2. The Evolution of Product Liability Law a. The 19 century 1. Product liability rules were very much in favor of sellers and manufacturers. It was an era of caveat emptor (let the buyethbeware) b. The 20 century 1. A more positive climate emerged. Product liability law moved from a caveat emptor emphasis to a stance of caveat venditor (let the seller beware) 3. The current (perceived) crisis in product liability law a. Many sellers and manufacturers contend that it’s becoming too difficult or prohibitively expensive to obtain liability insurance. 4. Strict Product Liability – “The Rules/Elements” a. Requirements/elements of strict liability theory: 1. The seller must be engaged in the business of selling the product that harmed the plaintiff; and a. Note that liability under this theory extends to anyone in the chain of distribution – manufacturers, wholesalers, distributors, and retailers. 2. The product must also be in a “defective condition” when it left the hands of the manufacturer or seller; and it must also be “unreasonably dangerous” because of that condition a. The test of whether a product is one that is dangerous to an extent beyond the reasonable contemplation of the average consumer (some courts also balance the social utility of a product against its danger when analyzing whether a product is unreasonably dangerous) b. An “unreasonably dangerous” product is one that is dangerous to an extent beyond the reasonable contemplation of the average consumer (some courts also balance the social utility of a product against its danger when analyzing whether a product is unreasonably dangerous) i. “Unreasonably dangerous” = manufacturing defect, a design defect, or inadequate warnings, labeling, or instructions **ALWAYS REMEMBER: product liability lawsuits can be brought under either strict liability theory and/or negligence theory*** b. Defenses – to a strict products liability lawsuit 1. Assumption of risk a. But remember that the facts must show that the plaintiff voluntarily consented to a specific and known danger order for this defense to work for a defendant 2. Obviousness of the Risk a. If the use of a product carries an obvious risk, the defendant will not be held liable for injures that result from ignoring the risk 3. Product Misuse a. General Rule: usually available to a defendant to a valid defense b. Exception: not available where the defendant knew of or had reason to foresee the particular misuse involved 4. State-of-the-Art Defense a. This defense is based on a manufacture’s compliance with the best available technology at the time 5. Comparative Negligence (comparative fault) a. In product liability actions, the plaintiff’s damages may be reduced by the degree to which the plaintiff’s own negligence contributed the injury b. Note that contributory negligence is not a defense in a strict products liability action I. Agency A. Definition: A two party relationship in which one party (the agent) is authorized to act on behalf of and under the control of, the other party (the principal) B. Why do we have agency law/why is this material important for you to know? 1. It is virtually impossible to run a modern business without hiring agents. Agency law helps stimulate commercial activity. II. The Creation of An Agency Relationship A. How is an agency relationship created by two parties? 1. Agreement: a. An agency can be created by the agreement of two parties (written, oral, and/or implied by their conduct) that one party (the agent) will act for the benefit of the other (the principal) 2. Ratification: a. Where, after the fact, the principal, either by act (conduct) or agreement, ratifies the conduct of an agent who acted outside the scope of his/her authority or the conduct of a person who is in fact not an agent 3. Estoppel: a. When the principal (not the agent) does something that causes a third person to reasonably believe that a person is his or her agent, and the third person deals with the supposed agent on that basis, the principal is “estopped” from denying the existence of an agency relationship 1. In reality, this is a form of apparent authority” 4. Miscellaneous III. Duties Owed By The Agent to The Principal A. Regardless of whether or not an agency relationship is contractual in nature, agency law establishes certain fiduciary duties that the agent owes the principal, and vise-versa. 1. Duty of Loyalty – this includes: a. Avoiding conflicts of interest with the principal, which includes: 1. Not dealing with himself (unless the principal knowingly and voluntarily consents after knowing all of the facts) 2. Not competing with the principal regarding the agency business so long as he remains an agent 3. Not acting on behalf of the other party to the transaction unless the principal knowingly consents 4. Not using or disclosing any confidential and proprietary information acquired during or throughout the agency a. Note: after the termination of the agency relationship, in the absence of an agreement to the contrary, an agent may usually compete with principal. 2. Duty to Obey the Principal’s Instructions (Obedience) a. An agent has the duty to obey the principal’s reasonable instructions for carrying out the agency business. An agent obviously has no duty to obey orders to behave illegally or unethically 3. Duty to Perform Duties with Reasonable Diligence and Skill (Performance) a. Agents must possess and exercise the degree of care and skill that is a standard in the locality for the kind of work the agent performs. Agents that represent that they possess a higher than customary level of skill may be held to a higher standard of performance 4. Duty to Notify the Principal (Notification) a. An agent must promptly communicate to the principal matters within his knowledge that are reasonably relevant to the agency business and that he knows or should know are of concern to the principal 5. Duty to Account to the Principal (Accounting) a. An agent must give to the principal any money or property received in the course of the agency business (includes gifts, bribes, etc.) b. An agent must also account for his work 1. An accounting includes such things as keeping accurate records and accounts of all transactions, disclosing them to the principal when he makes a reasonable demand for them, not commingling principal or agency property with his own property IV. Duties Owed By the Principal To The Agent A. The most important duties are the principal’s obligations to compensate the agent, reimburse the agent for money spent in the principal’s service, and to reimburse the agent for losses suffered in conducting the principal’s business: 1. Duty to Compensate the Agent (Compensation) a. Generally, the principal-agent contract/agreement controls the scope of the duty. 1. For example, the principal-agent contract/agreement provides that the agent is responsible for all of their expenses, then the agent is bound by that agreement. 2. But where there is no written or oral contract/agreement between the parties, or, where the is one but it doesn’t address he specific issue at hand, then the relationship of the parties, the surrounding circumstances, industry custom, etc., determine whether and in what amount the agent is to be compensated. 2. Duty to Reimburse the Agent (Reimbursement) a. General rule: the principal has a duty to reimburse the agent for expenditures expressly or impliedly authorized by the principal while the agent was acting on the principal’s behalf b. Exception: there is a written or oral contract/agreement between the parties to the contrary 3. Duty to Indemnify the Agent (Indemnification) a. Agency law implies a promise by the principal to indemnify (or reimburse) an agent for losses that result from the agent’s authorized activities 1. However, with certain exceptions, the principal is usually not required to indemnify an agent for losses resulting from unauthorized acts 4. Duty to Provide Safe Working Conditions for the Agent 5. Duty to Cooperate and Assist the Agent in Performing his/her Duties V. Liability In Agency Relationships A. Liability For Contracts – when is the principal liable for a contract that an agent enterers into? Generally, it depends on whether one of the below are present 1. Authority – an agent can only legally bind his principal to a contract when he has the authority to do so a. Types of Authority 1. Actual authority – exists where the principal’s consent to act is communicated to the agent by words, writing, or conduct a. Types of Actual Authority: i. Express ii. Implied 2. Apparent authority – arises when the principal’s behavior causes a third party to form a reasonable belief that the agent is authorized to act in a certain way. It is communicated to the third party (vs. the agent). Here, the principal is liable for the agent’s actions even though the agent was not authorized to act/do what he or she did b. Ratification – can also bind the principal for an agent’s unauthorized act/unauthorized entering into of a contract 1. Ratification is the affirmation by the principal of an agent’s unauthorized act or promise after the fact. For the ratification to be effective, the principal must obviously be aware of all material facts B. Liability for Torts: 1. Liability for an Agent’s Torts – of course an agent is always liable/legally responsible for his/her own torts; but when is a principal liable/legally responsible for a tort committed by his/her agent that injures a plaintiff a. The Doctrine of Respondeat Superior 1. Under this doctrine, the principal who is an employer is liable for torts committed by agents who are employees and who commit the tort while acting within the “scope of their employment.” This applies to an employee’s negligent act, and depending on the facts, the situation and the job, even an intentional tort. This is a rule of imputed or vicarious liability. a. “Scope of employment” i. Some courts ask whether the employee was on a frolic of his own (for which the principal is NOT liable), or simply a detour on the job (for which the principal IS liable) ii. In doing this analysis, there are a number of factor that a court may consider: a. Was it the kind of conduct the employee was employed to perform? i. To meet this test, the employee’s conduct need only be of the same general nature as the work expressly authorized, or be incidental to its performance b. Did it occur substantially within the employee’s authorized time period of work? c. Did it occur substantially within the location authorized by the employer?; and d. Was it motivated at least in part by the purpose of serving the employer? b. Direct Liability 1. This differs from respondeat superior. Here, the principal himself is at fault, and there is no need to even impute the agent’s liability to him 2. Rule: a principal is directly liable for an agent’s tortious conduct if the principal directs that conduct and intends that it occur a. The typical direct liability case involves harm caused by the principal’s own negligence. 3. Of course, a principal might be liable under both a respondeat superior and direct liability theory of liability. VI. Employees vs. Independent Contractors A. Normally, all employees who deal with third parties are deemed to be agents of the principal, and thus, all of the rules and exceptions discussed above would apply. B. But what is the legal difference between an employee and an independent contractor? 1. No sharp line delineates what is an “employee” vs. what is an “independent contractor” C. Liability for the Torts of Independents Contractors 1. General Rule: a principal is not liable for the torts of his independent contractors a. Rationale: the principal has no right to control the details of the work, so why should he/she be liable? b. Of course, the independent contractor remains liable for his/her own torts 2. Exception: a principal can be directly liable for tortious behavior connected with the retention of an independent contractor 3. Exception: a principal is liable for an independent contractor’s failure to perform a non-delegable duty 4. Exception: a principal is liable for an independent contractor’s negligent failure to take the special precautions need in order to conduct certain highly dangerous or inherently dangerous activities VII. Miscellaneous: A. Tort Suits Against Both the Principal and Agent 1. Both the principal and the agent are sometimes legally liable for an agent’s torts. In such cases, the parties are jointly and severally liable. a. This means, as a practical matter, that the third party may sue both such defendants in one/the same lawsuit and get a judgment against both of them. b. Note that once (and if) the third party collects from either the principal or agent, no further recovery is permitted


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