Chapter 14: Agency and the Employment Relationship
Answers to Select Case Questions

2. Hubco was a dealer for MAI, but their relationship was contractual, not agency. Agency "does not mean that an agency relationship exists every time one party has a contractual right to control some aspect of another party's business." The "dealership agreement gave MAI some degree of control over the manner in which Hubco handled MAI products." These controls concerned display of equipment, payments, credit standards, and reporting. "Only when a manufacturer controls the day to day or operative details of the dealer's business is an agency potentially created." But MAI did not control Hubco's daily business activities, including how it dealt with its customers. MAI sold equipment to Hubco; title passed; Hubco was not selling as a sales agent for MAI; it resold at whatever price it wished to charge. Their relationship was as seller and buyer. Further, there was no evidence that MAI ever made any representations to Hunter that it relied upon in this matter.

4. Guardsmark is not liable. There was nothing in Kadah's background or job record to indicate any problem. It was not responsible for supervising his every move while he was on duty, so if he was found guilty, that did not impute responsibility to his employer. The payment of his legal fees by Guardsmark did not imply ratification of his actions by indicating that the company would assist in his defense. Under California law, Guardsmark would be liable to Kadah if he had to pay to defend himself and he was found not liable, since he incurred the costs as a result of activities that occurred while he was on the job. It was in the company's interest to ensure that Kadah had competent counsel.

6. The appeals court held it was for the jury to decide if National was liable in tort on the theory of vicarious liability. "A master is liable for the negligence of his servant if at the time of the negligent act the latter is acting within the scope of his employment, and this liability applies even in instances where the servant, while disobeying his master's orders injures a third party. On the other hand, an act committed by the servant solely for this own purposes is outside the scope of employment for 'unless an assault, or other tort, is actuated in part at least by a purpose to serve a principal, the principal is not liable.'" The jury could find that Picard was acting in his employer's interest by having the dog with him, as most people would see that as a reasonable part of guard service. Attempting to show Meyers the dog could also be found to be attempting to further the employer's interest, even though these acts were in violation of company policy.