Question

PI operations and systems will be entirely computerized, and the PI owners want to begin the process to develop the IT systems to be in place prior to opening of the business.  They have had several meetings with Teri Lang, an IT consultant whom they know from prior business dealings to be a skilled and trustworthy expert. Teri has agreed to develop and direct installation of an appropriate system for PI.

The owners want to give full authority to Teri to evaluate and purchase the best computer systems, associated hardware, and software programs for the business. The PI owners recognize Teri as the authority in this matter and want Teri to represent them as their agent in this process.  

The PI owners are unfamiliar with agency agreements, and know they need to ensure that their agreement with Teri will be validly and properly written. Thus, they have asked BCA to contract to reflect their agreement with Teri, so that Teri can begin the process of developing an IT system immediately.

As you continue to be actively involved with the PI project, Pat and Gale direct you to draft an agency contract for PI.

to represent the agreement between the PI owners and Teri Lang defining the agency relationship and Ter's authority as agent.

What are some risks and liabilities that could be associated with the agency contract between PI and Teri Lang?

Answer 1

The following risks and liabilities could be associated with the agency contract between PI and Teri Lang:

• Direct liability - Though PI is giving complete authority to Teri to evaluate and purchase the best computer systems, Teri has to be adequately supervised by PI to make sure he is not involved in any unlawful dealings. PI can't be negligent about acts of Teri while he builds the system. They need to adequately supervise Teri.
• Vicarious liability - PI is also responsible for acts Teri commits within the scope of the project. Suppose Teri's IT system is not secure and it leads to data breach and confidential data of customers gets leaked. Under the principle of respondeat superior PI would be responsible for data breach for not taking due care and having checks & balances in place to avoid data breach.