Question

Reviewing: Agency Relationships in Business James Blatt hired Marilyn Scott to sell insurance for the Massachusetts Mutual Life Insurance Company. Their contract stated, "Nothing in this contract shall be construed as creating the relationship of employer and employee." The con- tract was terminable at will by either party. Scott financed her own office and staff, was paid according to performance, had no taxes withheld from her checks, and could legally sell products of Massachusetts Mutual's competitors. Blatt learned that Scott was simultaneously selling insurance for Perpetual Life Insurance Corporation, one of Massachusetts Mutual's fiercest competitors. Blatt therefore withheld client contact information from Scott. Scott complained to Blatt that he was inhibiting her ability to sell insurance for Massachusetts Mutual. Blatt subsequently terminated their contract. Scott filed a suit in a New York state court against Blatt and Massachusetts Mutual. Scott claimed that she had lost sales for Massachusetts Mutual—and commissions--as a result of Blatt's withholding contact information from her. Using the information presented in the chapter, answer the following questions, 1. Who is the principal and who is the agent in this scenario? By which method was an agency relationship formed between Scott and Blatt? 2. What facts would the court consider most important in determining whether Scott was an employee or an inde- pendent contractor? 3. How would the court most likely rule on Scott's employee status? Why? 4. Which of the four duties that Blatt owed Scott in their agency relationship has probably been breached? Debate This ... The doctrine of respondeat superior should be modified to make agents solely liable for their tortious (wrongful) acts committed within the scope of employment.

Answer 1

1. Since Blatt is the one who hired Scott as the agent to increase his sales Blatt is the Principal and therefore Scott will become to Agent. Eventhough both of them represents the insurance company it doesn't make a difference in the determination of principal - agent status.

The method by which she became the agent is 'Express Agreement'. other meathods of agency formation are Implied agreement, by estoppel, etc.

2. The main factor the court will consider in determining the status is 'the degree of control' one person has over the other. Less control by the principal means Scott is an agent of Blatt. More control means Scott is an employee of Blatt.

3.From point 2 we can see that Scott is not an employee but an agent/independent contractor. The fact that she so having her own staff and office and also selling other insurance products further supports this view. so we can safely say that the Court will rule saying Scott is not an employee of Blatt.

4. The 4 duties of principal to agent are Compensation, Indemnification, Good faith and fair dealing, Acting according to contract. Here Blatt violated the last (Acting according to contract) to scott. Blatt has a duty to cooperate with Scott and to assist Scott in performing duties. The principal must not take actions that prevent performance. Blatt made it more difficult for Scott to sell Massachusetts Mutual Life policies.