Agent/ Principal Flashcards
P-A liability for torts
2 part test if: 1) there is a principal-agent relationship; and 2) the tort was committed by the agent within the scope of that relationship
Principal Agent Relationship (elements)
Assent – informal agreement b/w principal who has capacity and his agent;
Benefit – Agent’s conduct must be for principal’s benefit
Control – Prin must have right to control agent by having power to supervise manner of performance
o Sub-agents liability
If assent benefit control b/w principal and subagent tortfeasor
Typically, principal doesn’t assent to subagent’s help and does not have right to control
o Agents vs. Indep Contractors (ICs)
Key distinction – no right to control an IC b/c no power to supervise manner of performance;
NO liability for IC, unless inherently dangerous activities, or estoppel (holding out IC with appearance of agency)
o Scope of Principal-Agent Relationship Factors
Conduct of the kind agent hired to perform (job description – in scope)
Did tort occur on the job – frolic vs detour
• Frolic – new and independent journey = outside scope
• Detour – a mere departure from assigned task and still within scope of agency
Did the agent intend to benefit principal? (if only in part, that’s enough)
o Intentional Torts
Generally outside scope except: 1) authorized by principle, 2)natural from nature of employment, or motivated by desire to serve principal
• Liability of Principal for Ks Entered By Agents
o One test – P liable for Ks entered into by its agents only the principal authorized the agent to enter the K
4 types of authority:
• Actual express authority – oral, but if K must be in writing then express authority must also be in writing.
o Will be revoked by unilateral act of either the principal or agent; or death or incapacity of the principal
Exception – durable power of atty with conspicuous survival language
• Actual implied authority – authority which the principal gives agent through conduct or circumstance:
o Necessity – implied authority to do all tasks necessary to accomplish an expressly authorized task
o Custom – custom with tile or position
o Prior acquiescence by the principal – implied to do all acts which agent authorized from prior acquiescence
• Apparent authority – 1) principal “cloaked” agent with appearance of authority; and 2) third party reasonably relies on appearance of authority
• Ratification – authority can be granted after K entered if 1) P has knowledge of all material facts regarding K; 2) principal accepts its benefits; 3) exception – ratification cannot alter terms of K.
• Rules of Liability on the Contract
o General Rule – principal is liable on its authorized K, so by rule – agents not liable.
o Exception – undisclosed principal – if principal is partially disclosed (only the identity of principal concealed) or undisclosed (fact of principal concealed), authorized agent may nonetheless be liable at the election of the third party
• Duties Agent Owes to Principal
o Duty of Care
o Duty to Obey Instructions that are reasonable
o Duty of Loyalty (can’t self-deal, usurp principal’s authority, secret profits)
• General Partnership Formation
o Formalities – none
o Definition – GP is an assn of 2 or more persons who are carrying on as co-owners of a business for profit;
o Sharing of Profits is Key Factor – Contribution of $ or Svcs in return for a share of profits creates a presumption that a GP exists (no salary, no lending)
Liabilities of GPs to 3rd Parties
o Agency Principles Apply – partners are agents for apparently carrying on usual partnership business. Therefore, GP is liable for each other’s torts and authorized contracts
o Each GP is personally liable for all debts of the partnership and for each co-partners torts
Pre-existing debts – incoming partner not liable, but $ paid in can be used to satisfy prior debts
Dissociating partner’s liability for subsequent debts – dissociating partners retain liability on future debts until actual notice of dissociation given to creditors or until 90 days after filing notice with state
o GPs Liability by Estoppel – One who reps the 3rd party that a GP exists will be liable as if a GP exists
Rights and Liabilities B/W GPs (duties, breah, liquidity, management, $)
o GPs are fiduciaries of each other and the partnership – GPs owe each other duty of loyalty (no self-dealing, never usurp partnership opportunities, and never make a secret profit).
o Accounting for action – partnership can recover losses by the breach and also can disgorge
o Partners’ Rights in Partnership and Liquidity –
Specific partnership assets – land, lease, equipment – owned by partnership and can’t be transferred w/o authority
Share of profits – personal profits may be transferred
Share in Management – owned only by partnership itself and can’t be transferred by individual partner to 3rd party
Test is whose $ was used to buy the property. If partnership $ used, it’s partnership property
o Management – absent agreement, each partner entitled to = control vote. 1 partner = 1 vote – majority governs ordinary matters, but UC needed for fundamental stuff
o Salary – absent agreement, partners get no salary, unless winding up a business.
o Partner’s share of Profits and Losses – absent agreement, profits shared equally; absent agreement – losses shared like profits.
General Partnership Dissolution (liabilities, priority of distribution)
o Definition
Dissolution – in absence of express agreement setting forth events of dissolution, GP dissolves upon notice of the express will of anyone general partner to dissociate
Termination is right word
Winding – period b/w dissociation and termination – remaining partners liquidate partnership assets to satisfy partnership’s creditors
o Partnership’s liabilities
Old business – Indiv. GPs retain liability on all transaction entered into to wind up old business by satisfying creditors
New Business – GPs retain liability on brand new transactions during winding up until actual notice of dissolution is given to creditors or until 90 days after filing a stmt of dissolution with the state
o Priority of distribution
1st, Partnership must pay all creditors (includes partners who loaned $ to partnership)
2nd, partnership must repay all capital contributions paid into the partnership by partners
Profits/losses – shared equally w/o agreement
o Limited Partnerships
Defined – partnership with at least one GP and one limited partner
Formation – must file with state a ltd partnership certificate that includes name of all GPs
Liability and control
• GPs – liable for all ltd partnership obligations
• Ltd Partners – have ltd liability, not liable for obligations of ltd partnership. Ltd partners may not control without giving up lts partnership status (changed in Uniform Ltd Partnership Act)
o Registered LLPs (RLLPs)
Must register with state by filing stmt of qualifications and annual report
No partner liable for obligations of partnership
