Agency Relationships in Business

Agency law deals with the relationship between the “principal” and “agent” (Cornell University Legal Information Institute, n.d.). The concept of agency finds basis on the Latin maxim “Qui facit per alium, facit per se,” which means that anyone who acts through another person is legally considered to have done it himself (Cornell University Legal Information Institute, n.d.).

Thus, by virtue of an express authorization or an implied one, a person or agent may act for and behalf of another and perform things as if the other or principal has performed it. The most common agency relationships include “guardian-ward, executor or administrator-decedent, and employer-employee” (Cornell University Legal Information Institute, n.d.).

“The law of agency allows one person to employ another to do her or his work, sell her or his goods, and acquire property on her or his behalf as if the employer were present and acting in person” (West's Encyclopedia of American Law, 1998).Thus, the principal specifies the scope, parameters of authority and the acts or duties to be performed by the agent for his benefit which necessarily connotes control by the principal over the agent. This principle evokes liability of the principal for the acts of the agent within the scope of duties and authority (West's Encyclopedia of American Law, 1998). This is the master-servant relationship (Marketing Daily web site, n.d.

).As a general rule, the agent is not liable on contracts entered into when he acts for and in behalf of his principal and that his acts are within the scope of authority granted by the principal (West's Encyclopedia of American Law, 1998). He only becomes personally liable if he acts in excess or outside of his granted authority, thus violating his fiduciary duty and in cases of fraud (Aviram, n.d.

).Anent, liability for tort, the principle of respondeat superior is followed. The principal is deemed liable and responsible for the acts of the agent when performed within the scope of authority and during the course of the employment (West's Encyclopedia of American Law, 1998).The principle of respondeat superior or ‘let the master answer’ proceeds from the theory that “a master must respond to third persons for losses negligently caused by the master's servants” (West's Encyclopedia of American Law, 1998). In contemporary times, the damages that the employee caused shall be recompensed by the employer because the latter is vicariously liable for the acts of his employee (West's Encyclopedia of American Law, 1998).

It is crucial to be able to determine whether or not there exists a relationship of agency, i.e. whether the person is considered an employee or an independent contractor for purposes of determining liability and responsibility.DiscussionAn independent contractor is defined as one who enters into a contract to perform a job using his own procedures but is subject to control only based on the output of work (West's Encyclopedia of American Law, 1998).The Internal Revenue Service has developed criteria and guidelines in determining whether a person or entity is an independent contractor.

This twenty four factor test can generally be summarized into three general characteristics of: “a) control (whether the employer or the worker has control over the work performed), b) organization (whether the worker is integrated into the business), and c) economic realities (whether the worker directly benefits from his or her labor)” (West's Encyclopedia of American Law, 1998).An essential element of an agency relationship is the element of control. The principal is in direct control of the agent. He can immediately direct the agent’s actions and for which control, the law makes him liable for the agent’s acts. On the other hand, the extent of control over the independent contractor by the principal is more indirect and remote. This is the central feature that makes an agent different from an independent contractor (West's Encyclopedia of American Law, 1998).

An independent contractor has discretion to use whatever means and methods he may devise to do his work and is only subject to the control of the employer with respect to the final output pursuant to an oral or written agreement to that effect. The agency relationship is said to exist when the employer exerts a direct control over the worker by giving specific and definite instructions on details of manner the work should be carried out (West's Encyclopedia of American Law, 1998).To illustrate this clearly, in the case of Pusey v. Bator, where the trial court and as affirmed by the Seventh District Court of Appeals of Ohio, ruled that Greif Brothers cannot be held liable for the acts of an employee, Bator because the latter is an employee of an independent contractor, YSP and not Greif Brothers [Pusey v. Bator (2002), 94 Ohio St.3d 275].

The basis of the trial court and the district court in dismissing the complaint and in declaring the Greif Brothers as not liable for the death of Derrell is the fact that as employer it cannot be held liable for the negligent acts of an independent contractor.The court, using the ‘right to control’ test passed upon the issue of whether YSP is an independent contractor. The court reiterating the ruling in the case of Bobik v. Indus. Comm. explained that the right of control rests in the employer then the relationship is one of employer-employee consequently, the employer shall be liable for the acts of his employee.

However if the “manner or means of performing the work is left to one responsible to the employer for the result alone, an independent contractor relationship is created” [Bobik v. Indus. Comm. (1946), 146 Ohio St.

187].Applying this principle to the instant case, the court said that the objective to be achieved was to “deter vandals and thieves” but the manner by which this shall be accomplished was left to the discretion of YSP including the uniform and equipment of its personnel, the manner of monitoring and patrolling the property, thus making its status as an independent contractor.On discretionary appeal by the plaintiff Pusey, it is claimed that by contracting YSP to patrol and guard the property of the defendant, it “creates a nondelegable duty because the work is inherently dangerous” [Pusey v. Bator (2002), 94 Ohio St.3d 275].

This necessarily falls under the exceptions of the rule that generally employers are not liable for the tort/ negligence of independent contractors, therefore notwithstanding the fact that YSP is an independent contractor; Greif Brothers should be liable for damages for the wrongful death of Derrell.The court enumerated the exceptions to the general rule which proceeds from the ‘non-delegable duty’ doctrine, i.e. “(1) affirmative duties that are imposed on the employer by statute, contract, franchise, charter, or common law and (2) duties imposed on the employer that arise out of the work itself because its performance creates dangers to others, i.e., inherently dangerous work” [Pusey v.

Bator (2002), 94 Ohio St.3d 275].It is therefore the contention of the plaintiff that hiring armed guards by Greif Brothers is an inherently-dangerous-work exception because the work entailed special risks that are not regular, routine, and customary and which requires special precautions.Greif Brothers on the other hand, interposed as defense the contention that hiring guards to patrol the property does not entail a special risk and therefore it does not fall under the purview of the exception. Greif Brothers rely on the doctrine enunciated by the court in the case of Joseph v.

Consol. Rail Corporation (1987).However, the court ruled that the doctrine enunciated in the Joseph case is inapplicable to the instant case since in the Joseph case, it involved hiring an independent contractor for surveillance.This did not involve special risks and danger considering that the activity of surveillance required the hired armed guards to “remain undetected and remain unobtrusive” while in the instant case, hiring armed guards to protect the property entailed a high risk of danger and special risks because ‘deterring thieves and vandals’ meant confrontation.Thus, this satisfies and falls under the category of the exception of inherently dangerous work [Pusey v.

Bator (2002), 94 Ohio St.3d 275].