Agency & Partnership Flashcards
HIGH
**AUTHORITY OF AGENT TO BIND PRINCIPAL
An agent may bind a principal to a contract if the agent is acting within his (if he has):
- actual authority or
- apparent authority or
- inherent agency power.
Once a principal is validly bound to a contract by his agent, the principal is liable under the terms of the contract.
MED
*ACTUAL AUTHORITY
Express vs. Implied
An agent acts with actual express authority when the principal directs him to engage in a specific task.
An agent acts with actual implied authority when the agent believes, based on a reasonable interpretation of the principal’s words or conduct, that the principal wishes him to act on the principal’s behalf.
(Incidental authority. The agent’s authority to conduct a transaction includes the authority to engage in actions that are incidental to it, usually accompany it, or are reasonably necessary to accomplish it.)
HIGH
**APPARENT AUTHORITY
An agent acts with apparent authority when:
- The principal holds the agent out as having authority to act on the principal’s behalf; AND
- The principal’s conduct, when reasonably interpreted, causes a third party to rely on the agent’s appearance of authority when dealing with the agent.
- Apparent authority does NOT exist if the third party has knowledge that the agent does not have actual authority.
HIGH
**RESPONDEAT SUPERIOR
An employer (principal) may be liable for torts committed by an employee (agent) if:
- An employer-employee relationship exists; AND
- The employee’s commission of the tort occurs within the scope of employment.
HIGH
**RESPONDEAT SUPERIOR
Scope of Employment
(a) Activity is within the scope of employment when the employee’s conduct is of the
- same general nature as that authorized, or
- incidental to the conduct authorized by the employer.
In making this determination, courts examine whether the employee’s conduct was:
(i) A function for which the employee was hired to perform;
(ii) Within the employer’s authorized time and space limits;
(iii) Conducted to serve the employer; AND
(iv) Foreseeable to the employer.
HIGH
**RESPONDEAT SUPERIOR
Detour
The employer remains liable during an employee’s detour (i.e., a minor deviation from the scope of employment), even if the detour is mainly for the employee’s own personal reasons.
However, the employer does NOT remain liable during an employee’s frolic (i.e., a major deviation from the scope of employment).
HIGH
**RESPONDEAT SUPERIOR
Intentional Torts
Generally, employers are NOT liable for the intentional torts of employees UNLESS:
(1) The intentional tort was authorized by the employer; OR
(2) Force is within the scope of employment in the employee’s work (e.g., security guards).
MED
*INDEPENDENT CONTRACTOR
An independent contractor is a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.
MED
*INDEPENDENT CONTRACTORS AND PRINCIPAL LIABILITY
Generally, a principal is not liable in tort for the unauthorized conduct of an independent contractor.
The principal’s amount of control over the agent is the key factor in determining whether an agent is an independent contractor.
Other relevant factors include:
- The nature of the work
- The skill required in the particular occupation;
- Who supplies the equipment or tools to perform the work;
- The method of payment (hourly, salary, etc.);
- The length of the employment; AND
- How the parties characterize the transaction.
MED
*INDEPENDENT CONTRACTORS AND PRINCIPAL LIABILITY
Unauthorized Conduct
Generally, a principal is NOT liable in tort for the unauthorized conduct of an independent contractor. However, the principal may be liable when an independent contractor:
(1) Makes misrepresentations for the benefit of the principal;
(2) Is engaged in abnormally dangerous activities; OR
(3) Acts with apparent authority.
HIGH
**GENERAL PARTNERSHIP [GP] FORMATION
A GP is a type of partnership that has NO limited personal liability (i.e., general partners remain personally, jointly and severally liable for ALL debts of the partnership).
A GP is formed when:
- Two or more persons;
- Associate as co-owners;
- To carry on a business for profit.
HIGH
**GENERAL PARTNERSHIP [GP] EXISITANCE
In determining whether a general partnership exists, it is irrelevant whether the parties intended to form a partnership. However, courts may consider the following:
(1) Sharing of Profits. A person who receives a share of the profits of a business is presumed to be a partner in the business unless the partner receives the profits as payment of debt, rent, wages, or for services rendered.
(2) Joint Ownership. Joint ownership of property tends to show that the parties associated as co-owners; however, it does not necessarily establish a partnership in and of itself.
(3) Sharing of Control. Sharing of control, capital investment, and labor tends to show that the parties associated as co-owners; however, it does not necessarily establish a partnership in and of itself.
MED
*TORT LIABILITY OF GENERAL PARTNERS
General partners are jointly and severally liable for all obligations of the partnership arising from any wrongful act or omission of any partner acting:
- Within the ordinary course of the partnership’s business; OR
- With the authority of ALL other partners.
MED
*TORT LIABILITY OF LIMITED PARTNERS
Limited partners are not personally liable for obligations of the limited partnership arising from the wrongful acts or omissions of other partners.
However, limited partners are always liable for their OWN misconduct.
HIGH
**CONTRACT LIABILITY OF THE PARTNERSHIP
Ordinary Course In and Out
The actions of every partner that are made within the ordinary course of business to carry on the partnership’s business bind the partnership, unless the partner taking the action:
- Has no authority to act on behalf of the partnership; AND
- The other side has knowledge or notice that the partner lacks authority.
Actions taken by a partner that are OUTSIDE the ordinary course of the partnership’s business do NOT bind the partnership UNLESS the other partners unanimously authorize the action with actual or apparent authority.
