NOTICE: RELAUNCHING OF WEBSITE – WWW.HAWAIIESQUIRE.COM

Dear clients, readers, and friends I am letting you know that starting next week I will begin migrating content from http://www.hawaiiesquire.wordpress.com to http://www.hawaiiesquire.com. This represents a disruption in my posting schedule and you will not see new content from me on both sites (old and new) for 2 weeks.

While I realize that may seem simple, I assure you that my friends in the tech community have long advised that I do this and my awesome IT and web management crew are working hard to do it as soon as possible. Expect to see a better user experience, which means more resources and content to be useful for small business and startup owners.

In the meantime, please continue following me on Facebook, Twitter, and Linkedin, as I will be doing frequent updates through those social media avenues – I will be doing another speaking event soon, so please follow, as it will be a good one.

Finally, I would like to say that wordpress.com has been a great home to my website and blog for over a year. I highly recommend those of you starting a business to do a blog and a website if you are not savvy enough, and start here, as they make it easy and accessible. It has definitely made my practice better and gives me a unique voice in the crowded field of legal services.

So I will see you all soon again and please favorite, bookmark, subscribe, or just write a note to yourself to in the future go to www.hawaiiesquire.com.

Mahalo!

-RKH

Another Word on Agents, Employees, and Independent Contractors

Yesterday’s post was primarily about an agent’s authority to enter into contracts with another party.  As many of you know, as a small business or startup owner there are advantages to using an independent contractor over hiring an employee.  I will not go into the tax details or compliance issues here, as I do a seminar that goes into that in-depth.  In addition, I covered some of those issues in a prior post.

What I did want to mention today is this: while all employees are agents, not all agents are employees.  Some agents may be independent contractors.  Finally, agents that are not employees do necessarily have to be independent contractors.

Why is this important?  The manner of the relationship is important when things go wrong, such as when there is injury or accident.  Your independent contractor agreement may not fully reflect the independence of your independent contract and you may be liable for the problems they caused.  Where is one of the places the law looks to see what dictates who is responsible in these situation?

Your agreement. Consider having an attorney or an expert review the provisions that deal with liability, duties, and responsibilities shifting.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Draw the Law: You, Your Contracts, and Other People – Using Agents

Last week I talked about the exception to the necessary consideration you need to form a contract, reliance.  Today, I will focus on dealing with agents in the context of contracts.

 Agents – Can Only Enter Contracts with a Principal’s Permission

A principal (p) typically enters an agreement with an agent (a) so that the agent can do things on the principal's behalf. Typically, (p) gives money to (a), and (a) agrees to do things, such as enter into contracts with third parties for the benefit of (p).

Agents in contract law are people who enter agreements on behalf of another, called the principal.   Most everyone has met or been an agent at some point of their life.  Employees are agent and their principal is the employer.  I bring this up because when you hire your first employee give some thought into how they will be interacting with customers, clients, suppliers, vendors, and other business people.

When Can an Agent Bind the Principal to a Contract?

It depends on the authority given to them by the principal.  An agent can only act as far as the authority given to them by the principal.  An action beyond their authority is unauthorized.  Thus an agent who is only authorized to purchase 3 computers exceeds their granted authority when he buys 5 computers.

(P) only authorized (a) to buy 3 computers, NOT 5. It is in this instance that (a) exceeded his purchasing authority. Thus the issue is whether or not (p) owes the computer seller for the extra 2 computers.

Is the Principal Bound to a Contract made by their Agent when the Agent Exceeded their Authority?

First of all, it is important to understand that when an agent enters a contract, you sue the principal not the agent if something goes wrong.  In the situation of a contract that was unauthorized we need to see there was apparent authority.  In the above example, it is clear the agent had the authority to buy 3 of the 5 computers. However, does the principal have to pay for the other 2?

Under the rule of apparent authority, if the seller reasonably does not understand the agent exceeded their authority the principal is bound on the contract.  If the seller had reason to know, then the principal is released from the contract.

How would you know? For example, if the computer seller sells computers to Computer Purchasing Agent Alex of Principal Piko Powers Partnership on a weekly basis it is safe to assume they would not question the purchase.  However, if Uncle Adam came into the computer store and said he for Piko, the computer seller should question his authority.

Apparent authority can be thought of how does the third party view the relationship of (p) to (a)? The best determination is if the third party has any reason to doubt the authority of the agent. This is always a case-by-case basis in disputes and is determined by the facts of the situation.

The rationale behind apparent authority is that the principal is in the better position to control their agent.  Secondly, an agent who exceeds their authority gives the principal a cause of action against the agent.

Last Word on Agents, Contracts, and Duty

An agent has the duty to put their principal’s interest ahead of their own.  Therefore, an agent cannot make personal gain or profit beyond what the principal and agent agreed to in an agency agreement.  Where does this concept frequently get violated?  When the agent sees a better business opportunity with a third-party, thus they never enter into a contract on behalf of the principal.  Instead they supplant the principal and “steal” the contract and make it their own.  This will also give rise to a cause of action by the principal against the agent.

An agent cannot "steal" an opportunity from a third party to the detriment of their principal if the terms of their agency agreement covers the opportunity. The principal generally sues to get the benefit of the opportunity that was misappropriated by the agent.

As a small business and startup owner you always need help, but just be aware of what others are doing on your behalf.  You don’t want to find yourself stuck with extra inventory and equipment and the bill to pay for it.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.