Business Associations Flashcards
Agency Formation
A relationship that arises when one person (principal) manifests an intention that another person (agent) act on principal’s behalf
Agency Formation Elements
1) Capacity
2) Consent
3) Control
4) Agent isn’t otherwise disqualified to be an agent
Actual Authority - Express
Agent has the express authority from the principal to act
Actual Authority - Implied
Nature of agent’s position implies authority to act in a particular matter, either from custom/usage, acquiescence, or because of emergency or necessity
Apparent Authority
Principal communicates by some statement or act to a 3rd party that the agent’s apparent authority to act on principal’s behalf with respect to that 3rd party
Ratification
Principal agrees to be bound by the unauthorized acts of the agent after the fact
Agent’s Duties to Principal
1) Undivided loyalty
2) Obedience to principal’s instructions
3) Reasonable care (in light of local community standards & taking into account any special skill of the agent)
Principal’s Remedies for Agent’s Breach
Damages, disgorgement of secret profits, withholding of compensation
Principal’s Duties to Agent
1) Reasonably compensate and reimburse
2) Contract duties
3) Cooperate in carrying out the agency’s purpose
Agent’s Remedies for Principal’s Breach
Damages for K breach, agent’s lien in any property agent holds
Termination of Agency Relationship
Lapse of time, happening of an event, change of circumstances, breach of fiduciary duty, unilateral act, death/incapacity
Termination of Authority
Actual authority terminates when agent knows or should’ve known of the termination
Principal can’t unilaterally terminate if
1) Agency coupled with an interest, or
2) Power given as a security
Vicarious Liability - Intentional Torts
Vicariously liable if agency authorizes the force, friction generated, or the tort furthers principal’s business
Vicarious Liability - Negligence
If 1) employee or 2) IC involved in inherently dangerous activity or non-delegable duty, vicariously liable if negligence occurred during activity within course and scope of employment
Disclosed Principal
3rd party knows principal’s identity
Agent not liable
Principal liable even when agent acts for an improper purpose unless 3rd party knows agent is acting contrary to principal’s interest
Partially Disclosed Principal
3rd party knows that principal exists, but not identity
Agent and principal liable
Undisclosed Principal
3rd party thinks agent is the contracting party
Agent liable
Principal liable unless agent acts for an improper purpose
Secret Limiting Instructions
Principal bound even if agent acts beyond the instruction’s scope
Agency and Partner Liability
Partnership liable for the acts and omissions of a partner acting in the ordinary course of the partnership or with authority of the other partners
Agency and Corporate Liability
When considering the authority of a corporate officer to bind the corp, analyze all 3 authority types
General Partnership Formation
1) An agreement among two or more persons 2) to carry on as co-owners a business 3) for profit