Agency Relationship - James Vs. Miller

Issues

Is James an independent contractor acting without the directions and control of the Millers?

Is there agency relationship between James and the Millers?

Rule

An agency relationship exists when an agreement has been reached that the agent will act on behalf of the principal and for his benefits while the principal exercises his direction and control on the agent. Agency relationship does not depend on payment of compensation (Reilly 1994).

As concerns the independent contractor, they are contracted to provide services without the control or directions by the employer. They are not themselves employees. Independent contractor may or may not be agents (LeRoy Miller 2015).

Application

In the case at hand, James is a landscaping contractor who had been contracted to do landscaping work at the Liliy Court Villa owned by the Millers. On 23 December 2014, the Millers left for Sucre for a three week Christmas holiday trip.  While on their Christmas trip, James continued with his work. He was left with a contact number for their host hotel in Sucre.

On 10 Jan 015, while James was alone working in the garden, a delivery truck arrived with a load of plants. They purported that they were acting upon Millers instructions. James signed for the plants and then purchases special fertilizer and an irrigation system for the plants on the Miller's account.

On 13 Jan 2015, the Millers arrived and were shocked to find the plants and irrigation system. James is informed that delivery was a mistake because they had not ordered the plants. Thus, James is informed that if the plants cannot be returned, he will have to pay for them, as well as for the fertilizer and the irrigation system.

To establish who would be liable to pay for the delivery, the relationship between and James the Millers must therefore, be examined. This is in view of establishing whether James is an employee, or an independent contractor or an agent. If the relevant rules are applied, a conclusion that James is an employee, an independent contractor or an agent must be made.

Is James an independent contractor?

An independent contractor is contracted to provide services without the control or directions by the employer. Independent contractor may or may not be agents. An independent contractor executes his duties according to his own methods and is not supervised by the employer. He is simply hired to do a piece of work for the employer using his own means and methods so long as the desired outcome is achieved (Bennett and Bennett 2003). James, in his landscaping work, appears to have been simply hired to offer that particular service to the Millers. He seems to enjoy a lot of independence in his operation.

During the time he was left alone, no way could the Millers have had direct control over him. It is logical that during that period, James employed his own methods and skills without interference. During this time, James could make his own decisions without interruptions from the Millers. Thus, from a critical point of view, James operated as an independent contractor.

There seems to be no much control extended to James by the Millers. Nonetheless, the it is not disclosed if James used his own tools to do the landscaping work as this would build on an argument that he was an independent contractor. Based on the facts known to us, James received the plants, irrigating system and fertilizer believing that the Millers had ordered them for use in the landscaping work. This fact casts doubt as to the independence of James in his work. Nonetheless, it has been disclosed to us that the Millers objected having ordered for the delivery of the above-mentioned items. That being the case then, it could be argued that the delivery was not a sign of control or direction coming from the Millers as the delivery was termed it as a mistake

 

As already mentioned, independent contractors may or may not be agents. Thus, it will depend on the relationship existing between them and the hirers. From the facts presented in the case scenario given for assessment, James is an independent contractor. The test applied to determine if a contractor is an independent contractor or not revolves around the control extended towards the contractor by the hirer. Where the contractor operates without the control or the directions of the hirer in that he can make his own decisions and employ his own professional skills without interference by the employer, the law perceives that contractor as an independent contractor.

Is James an agent?

An Agency relationship exists when an agreement has been reached that the agent will act on behalf of the principal and for the benefits of the principal. While this relationship exists, the principle exercises his direction and control on the agent.  In the case at hand, there is no such agreement conferring agent powers to James. There is also no sign of direct control by the Millers on James during his work. However, it is important to note that agent powers must not be express as it could be implied from the words or conduct of the parties (Lank 2003).

A rationale argument that James has been granted agent powers by way of implication could be made. This is because as opposed to the express powers created in the agency instrument, powers of an agent to act on behalf of the principal may come from various sources such as: (1) oral expressions, (2) parties conduct, (3) nature of the employment, (4) necessity (5) or by way of a valid ratification by the principal after a successful event (Latimer 1996).

Drawing reference to the above, James could be said to possess agent powers based on the nature of his work. As a person who was undertaking landscaping work, he could have innocently accepted the delivery without a second thought since the nature of his work required him to have the plants, irrigating system and the fertilizer. When the truck driver said that the delivery had been ordered by the Millers, he had no reason to doubt the same as the truth. He, therefore, proceeded to accept the delivery on behalf of the Millers. This could, therefore, signify agency relationship between the Millers and James.

On the contrary, the principle remains that in an agency, the principal must have some control on the agent. Thus, the agent decision making power is limited (Steiner, Skarlicki and Gilliland 2002). Based on this principal, the facts of the case at hand the shows that Millers limitation on James’s decision making power is very minimal if any.  During the Christmas trip, James could do the landscaping depending on his personal decisions as there was no direct control coming from the Millers. Thus, the agency relationship is between James and the Millers is in question. The only instance when the Millers are seen to intrude into James operation is when they returned back home only to find the delivered items.

It is worth noting that the Millers informed James that if the delivered items could not be returned James was to take liability for them.  This fact implies that James did not depend on his own resources while undertaking his work.  In most cases, agents do not incur personal costs while acting on behalf of the principals. In case the agent incurs personal expenses while acting on behalf of the principal, the agent is entitled to be indemnified for expenses incurred. It should, however be noted that the agent will only be entitled to indemnification and reimbursement if his action were lawful and within the scope of his powers as an agent (Latimer 1996).

However, the agent is not entitled to reimbursement and indemnification if he acts without authorization and his actions are not ratified by the principal. Also, if the agent was negligence in his actions, he is not entitled indemnification. Lastly, if the costs are incurred due to engaging in unlawful act, the agent loses his right to reimbursement and indemnification.

In the case at hand, assuming that James operated according to the instructions given by the Millers, it was negligent of him not to consult the Millers before accepting the delivery. The fact that the Millers left James a contact number for their host hotel cannot be overlooked as this could imply that he was expected to consult them whenever necessary. Thus, logically speaking, he should have called to consult if the delivered item had been ordered by the Millers as claimed by the truck driver.

In most cases, the common law is concerned with investigating the kind of a relationship existing in an employment setup so as to determine vicarious liability. In so doing, the court tries to find out to whose business the employee was toiling. In ACE Insurance Limited v Trifunovski.[1] Justice Perram stated that the court is more concerned with investigating the nature of the relationship existing between the employer and the employee for the purposes of establishing vicarious liability. Depending on the argument advanced, James could be acting as an independent contractor or an agent. Nonetheless, it is worth mentioning that the court can only uphold one relationship. That is, either agency relationship or an employee contractor relationship but not both.

One side of the argument is that James could be an independent contractor based on the way he has conducted himself in the course of his work. He has been hired to provide landscaping services to the Millers who evidentially, does not have much control over him. If the issue is taken to the court and a decision is made that James is an independent contractor, the Millers may not be liable to pay for the delivery.  Though in the Australian context the employer may be liable for the acts of an independent contractor as observed in Burnie Port Authority v General Jones (Pty)Ltd.[2]  It is however noted that the position of the above case is only applicable to certain specific cases whereby the employer will not be allowed to exempt himself from the liability by hiring An independent contractor to act on his behalf. The High Court of the Australia observed that where there is a foreseeable risk of harming others, the employer will still be liable for negligent acts of an independent contractor.

Most probably the above case may not be applicable in the present case scenario. Thus, the blame may rest upon James as an independent contractor. If the case takes this direction, James could argue that based on the work he had been hired to do, he could not reasonably think the delivery as a mistake. He had been hired to do landscaping work and plants could be used to cover the ground. In fact, the truck driver is to blame for making a mistake in delivery. He ought to have taken reasonable steps to make sure that the delivery was done to the right place. He could argue that he was only a victim of the negligent acts of the truck driver.

At common law, it is an ancient principle that an employer will only be vicariously liable for the actions of his employees but not for the actions of the independent contractor (Burnett 2016). However, where an independent contractor is an agent of the principal, the principal may be vicariously liable for the acts or omissions of the independent contractor. This is especially if it is shown that the contractor lacks the independence due to a number of things. For instance, if the contractor has acquired training at the expense of the principal, has undertaken his work under the supervision of principal, has received payments on a commission basis and has not generated goodwill for his own business, the contractor cannot be said to be independent. Thus, any liability that accrues due to his actions may render the principal vicariously liable.

Based on the above, the Millers could advance an argument that James was an independent contractor and therefore not vicariously liable for his actions. This being the case, James may be liable to pay for the delivery.

The second part of the argument is that James could be an agent of the Millers. The agency relationship could be due to the conduct of the parties. The practice of the law acknowledges that agent powers must not be expressed and could still be implied.  For instance, when the Millers left for a Christmas trip and James continued with his work in their absence, this could be interpreted to mean that during that period, James could make decisions on their behalf. Perhaps purchase things that could be necessary for his work.  In the Australian context, when an agent is appointed to act on behalf of his principal, the agent may enter into contracts that are binding on the principal (Business Law 1974). However, it should be noted that in so doing, the agent should act in the best interest of the principal. This is also the common law position.

 Agent principal relationship between James and the Millers may be inferred from a number of things.  For instance, when a keen assessment of the Millers reactions after they learnt of the delivery discloses a possible agency relationship between them and James. When they discovered that some delivery had been done, they informed James that if the plants and other delivered items could not be returned, he would be the one to pay for them. In law, this could be interpreted to mean that the Millers were ratifying the actions by allowing the successful purchase of the plants and other items. If the delivered items were not useful for landscaping, the expected reaction by the Millers would be to render them unnecessary as opposed to suggesting that James pay for them.

As held in Hely-Hutchinson v Brayhead Ltd,[3]  the principal's consent may still be impliedly given to an agent. When the Millers left the James in their premises and additionally gave him the key to their house, this implies that he was entrusted with their premises and could undertake in activities that could reasonably be for the best interest of the Millers. Hence, in his act of accepting the delivery made by the truck driver, he was merely acting on Millers behalf. Could this kind of an argument be accepted in a court of law, the Millers would be regarded as the principals and James actions would be binding to them.

Advice to James

After a close examination of the facts presented in the cases scenario, there is a possibility that James could be an independent contractor hired to do landscaping work using his own methods and without control by the Millers. If the cost of the delivery is to be met from a point of view that James is an independent contractor. He would be liable to pay for all the costs. The circumstances surrounding the case cannot render the Millers liable if James is found to be an independent contractor. Actions of an independent contractor are not binding to the employer.  For instance, contracts entered by independent contractors with other persons other than the employers are not binding to the employers (Kuchhal 1978).

On the other hand, the idea of James being an agency relationship cannot be dismissed, if it is found out that for the period James was left in the premises of the Millers he was to act Millers behalf, both James and the Millers could be jointly and severally liable to pay the costs of the delivered things. Though, it would be difficult to establish an agency relationship between them since there was no instrument in support of that.

Nonetheless, if the agency relationship is successfully proved, it could be held that the Millers are liable to pay for the delivery. Case law has established that even when the agent is thought to have gone outside his actual powers, the principal may still be bound.  This was the holding in Freeman v Buckhurst Park Properties (Mangal) Ltd.[4] Further, in the above-stated case, Diplock LJ stated that an agent has the power to enter into a contract that is within the scope of his obvious authority.   Hence, the principal becomes liable to fulfill the obligations created by such a contract.

To evade liability, James should maintain that he acted as an agent of the Millers. He should argue that he operated under the instructions of the Millers and that is the reason the Millers objected having ordered for the plants. If he acted independently, they could not have bothered themselves with the delivered items. He should argue that his possession of the premises keys implied that he was entrusted with taking care of the premises. Accepting the delivery could, therefore be a sign of taking responsibility over the premises.

Should the above argument fail, he should prove negligence on the part of the truck driver for delivering in the wrong place.

Conclusion.

To sum it up, whether James is an independent contractor or an agent depends on the approach or the argument made as the case could be argued both ways. Nonetheless, there is a great possibility that the outcome would be far much inclined towards the finding that James is an independent contractor.

 

 

 

 

Bibliography

 

LeRoy Miller, Roger. 2015. The Legal Environment Today - Summarized Case Edition: Business In Its Ethical, Regulatory, E-Commerce, And Global Setting. Cengage Learning.

Reilly, John W. 1994. Agency relationships in real estate. Chicago, Ill: Real Estate Education Co.

Lank, Edith. 2003. Modern real estate practice in New York: for salespersons and brokers. Chicago, IL: Dearborn Real Estate Education.

Latimer, Paul. 1996. Australian Business Law. North Ryde, N.S.W.: CCH Australia.

Burnett, Jonathan. 2016. Avoiding Difficult Questions:Vicarious Liability And Indipendent Contractors In Sweeny V Boylan Nominees. Ebook. Accessed February 23. http://www.austlii.edu.au/au/journals/SydLRev/2007/5.pdf.

Business Law. 1974. ata McGraw-Hill Education.

Kuchhal, M. C. 1978. Mercantile Law. New Delhi: Vikas Pub. House.

Tomasic, Roman, Stephen Bottomley, and Rob McQueen. 2002. Corporations law in Australia. Sydney: Federation Press.

Nolan, James L. 1996. Australia business: the portable encyclopedia for doing business with Australia. San Rafael, Calif: World Trade Press.

Zeller, Bruno. 1999. International commercial law for business. Leichhardt, N.S.W.: Federation Press.

Hogg, Peter W. 1971. Liability of the crown in Australia, New Zealand and the United Kingdom. Melbourne: Law Book Co.

Busnelli, Francesco Donato, and Jaap Spier. 2003. Unification of tort law: liability for damage caused by others. The Hague [u.a.]: Kluwer Law Intern.

Roach, Lee. 2012. Card & James' business law for business, accounting & finance students. Oxford, UK: Oxford University Press.

Fishman, Stephen. 2014. Working with independent contractors.

Schneeman, Angela. 2013. The law of corporations and other business organizations. Clifton Park, NY: Delmar Cengage Learning.

Meiners, Roger E., Al H. Ringleb, and Frances L. Edwards. 2012. The legal environment of business. Mason, OH: South-Western Cengage Learning.

Morissette, Emily Lynch. 2009. Personal injury and the law of torts for paralegals. New York: Aspen Publishers.

Arlen, J. 2013. Research Handbook on the Economics of Torts. Edward Elgar Publishing. http://site.ebrary.com/id/10816604.

Bartschi, Margaret. 2001. Foundations of business organizations for paralegals. Albany, NY: West/Thomson Learning.

Lunney, Mark, and Ken Oliphant. 2008. Tort law: text and materials. Oxford: Oxford University Press.

Bradgate, Robert, Fidelma White, and Margaret Llewelyn. 2012. Commercial law 2012. Oxford: Oxford University Press.

Tulsian, P. C. 2000. Business law. New Delhi: Tata McGraw-Hill.

 

    

LeRoy Miller, Roger. 2015. The Legal Environment Today - Summarized Case Edition: Business In Its Ethical, Regulatory, E-Commerce, And Global Setting. Cengage Learning.

Reilly, John W. 1994. Agency relationships in real estate. Chicago, Ill: Real Estate Education Co.

Lank, Edith. 2003. Modern real estate practice in New York: for salespersons and brokers. Chicago, IL: Dearborn Real Estate Education.

Latimer, Paul. 1996. Australian Business Law. North Ryde, N.S.W.: CCH Australia.

Burnett, Jonathan. 2016. Avoiding Difficult Questions:Vicarious Liability And Indipendent Contractors In Sweeny V Boylan Nominees. Ebook. Accessed February 23. http://www.austlii.edu.au/au/journals/SydLRev/2007/5.pdf.

Business Law. 1974. ata McGraw-Hill Education.

Kuchhal, M. C. 1978. Mercantile Law. New Delhi: Vikas Pub. House.

Tomasic, Roman, Stephen Bottomley, and Rob McQueen. 2002. Corporations law in Australia. Sydney: Federation Press.

Nolan, James L. 1996. Australia business: the portable encyclopedia for doing business with Australia. San Rafael, Calif: World Trade Press.

Zeller, Bruno. 1999. International commercial law for business. Leichhardt, N.S.W.: Federation Press.

Hogg, Peter W. 1971. Liability of the crown in Australia, New Zealand and the United Kingdom. Melbourne: Law Book Co.

Busnelli, Francesco Donato, and Jaap Spier. 2003. Unification of tort law: liability for damage caused by others. The Hague [u.a.]: Kluwer Law Intern.

Roach, Lee. 2012. Card & James' business law for business, accounting & finance students. Oxford, UK: Oxford University Press.

Fishman, Stephen. 2014. Working with independent contractors.

Schneeman, Angela. 2013. The law of corporations and other business organizations. Clifton Park, NY: Delmar Cengage Learning.

Meiners, Roger E., Al H. Ringleb, and Frances L. Edwards. 2012. The legal environment of business. Mason, OH: South-Western Cengage Learning.

Morissette, Emily Lynch. 2009. Personal injury and the law of torts for paralegals. New York: Aspen Publishers.

Arlen, J. 2013. Research Handbook on the Economics of Torts. Edward Elgar Publishing. http://site.ebrary.com/id/10816604.

Bartschi, Margaret. 2001. Foundations of business organizations for paralegals. Albany, NY: West/Thomson Learning.

Lunney, Mark, and Ken Oliphant. 2008. Tort law: text and materials. Oxford: Oxford University Press.

Bradgate, Robert, Fidelma White, and Margaret Llewelyn. 2012. Commercial law 2012. Oxford: Oxford University Press.

Tulsian, P. C. 2000. Business law. New Delhi: Tata McGraw-Hill.



[1] [2013] FCAFC 3

[2] (1994) 179 CLR 520

[3] [1968] 1 QB 549 at 583

[4] [1964] 2 QB 480

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