Business Law

law, 30 LIABILITYOFPRINCIPALS,AGENTS, ANDINDEPENDENTCONTRACTORS The wherein, as in a magic mirror, we see reflected not only our lives, but the lives of all men that have been! When I think on this majestic theme, my eyes dazzle. Oliver Wendell Holmes Jr. I. Teacher to Teacher Dialogue The benefits of agency are not without counterbalancing detriment. The Latin maxim respondeat superior may be familiar to your students. In certain instances, a principal is liable to third parties for the acts of his or her agent. Just as the benefits of agency can be great, so can the burdens. One of the fastest growing areas of management specialization in todays business environment is risk management. This area generally concerns business financial responsibility for exposures to specified contingencies or perils. Included in these perils are the acts of the agents for which the principal may be liable. The ironic aspect of all this is that the very same people who help a business grow can lead that same enterprise to financial ruin. Every agency liability question having an involvement with third parties has three subquestions that must be answered in order to come to a final resolution of the issues at hand. They are: 1. What are the responsibilities of the principal and agent vis--vis each other? 2. What are the responsibilities of the agent vis--vis the third party? 3. What are the responsibilities of the principal vis--vis the third party? Invariably a certain fact pattern emerges. First there is some sort of principal/agent relationship established. This relationship may be based on actual, implied, apparent, or ratified authority. In all events, once that authority line has been drawn, the question of the legal consequences to the principal and agent vis--vis each other must be answered. These consequences include their respective rights and duties to each other. Once the first subquestion is resolved, the rights, duties, and obligations of the agent and principal,...