Agency and Partnernships Flashcards
Vicarious Liability
A principal may be responsible for the torts of its agents under two theories:
1) respondeat superior
2) apparent authority
Vicarious liability will mean that joint and several liability for the agent’s torts will be imputed to the principal.
Vicarious Liability (employee)
If the tortious act of the agent was in the course and scope of the agent’s employment (i.e. was the employee where she was supposed to be, doing what she was supposed to be doing, with the purpose of the employer in mind?), then the principal will be held vicariously liable.
If the tortious act was not in the course and scope of the agent’s employment, the principal will not be found vicariously liable.
Vicarious Liability (independent contractor)
If the activity involved is inherently dangerous, the duty was nondelegable, or the principal knowingly selected an incompetent independent contractor, the principal will be held vicariously liable for the agent’s tortious acts.
Apparent Authority and Vicarious Liability
A principal is vicariously liable where an agent appears to deal or communicate on behalf of the principal and the agent’s apparent authority enables the agent to:
- commit a tort
- conceal its commission
Apparent Authority
Arises from the reasonable belief of a 3rd party. If a principal directly or indirectly holds out another as possessing certain authority, thereby inducing reasonable reliance by another on that authority, the person so held out has apparent authority, even if between the agent and the principal no authority has been granted.
> The person dealing with the agent must do so with reasonable belief in the agent’s authority
The belief must be generated by some act or neglect on part of the principal
Actual Authority
Authority the agent reasonably believes she possesses based on the principal’s dealings with her. IT may be express or implied.
Express Authority
That which is actually contained within the four corners of the agency agreement. It is effective even if it was granted mistakenly or because of misrepresentation.
Implied Authority
That which the agent reasonably believes she has as a result of the principal’s actions.
- Incidental to express authority
- Arising out of custom known to the agent
- Resulting from prior acquiescence by the principal
- to take emergency measures
- to delegate authority in cases of ministerial acts, where circumstances require, where performance is impossible without delegation, or where delegation is customary
- to pay for and accept delivery of goods
- to give general warranties as to fitness and quality and grant customary covenants in land sales; collect payment, and deliver where there is authority to sell
- to manage investments in accordance with the prudent investor standard
Ratification
An agency relationship is created by ratification when an “agent’ purports to act on behalf of a principal without any authority at all, but the principal subsequently validates the act and becomes bound.
Ratification Prerequisites
Principal must know (or have reason to know) all material facts of the transaction, accept the entire transaction, and have capacity.
Ratification is a unilateral act of the principal and requires no consideration.
Respondeat Superior
- Does an employer-employee relationship exist? (Or did it exist at the time?)
- If it is an employer-independent contractor relationship, did the employer have the right to control the manner and method in which the job is performed?
Independent Contract or Employee? Employer Right to Control (9 factors)
- the characterization by the parties
- whether the business is distinct
- the customs of the locality regarding supervision of work
- the degree of skill required on the job
- whose tools or facilities are used
- what the period of employment is (definite and/or short, more likely to be independent contractor)
- what the basis of compensation is
- what the understanding of the parties is
- whether the person was hired to further the principal’s business
Partnership
an association of two or more persons to carry on as co-owners a business for profit.
*a partnership may not exist with only one partner, but a “person” may be an individual, trust, corporation, partnership, or other entity. (i.e. Partnership A and Corporation B may form Partnership C)
Partnership formation
- agreement (may be implied by conduct)
- Writing not generally required (but Statute of Frauds will invalidate if there is an intention to partner for longer than 1 year)
- Capacity: partners must be capable of entering into a binding contract
- Legality of Purpose: a partnership formed to achieve an illegal purpose is void.
- Consent: no one can become a partner without the express or implied consent of all partners
- Statement of partnership authority: partnership may choose to file a statement of partnership authority with the secretary of state, which can give constructive knowledge of the extent of the partner’s authority with regard to the partnership.
Existence of Partnership
look for intent of the parties, first. Where intent is uncertain, the courts consider the following:
- sharing of profits- raises a presumption of partnership
- evidence indicative of partnership: title to property held in joint tenancy or in common; parties designate their relationship as partnership; venture undertaken by parties requires extensive activity; or sharing of gross returns
