Business Associations

Question 1

Formation by Act of Parties

Answer 1

An agency relationship results from assent by one entity (principal) to another (agent) that the agent shall represent and act on the principal’s behalf in dealing with the third parties and subject to the principal’s control, and assent by the agent so to act. This principal is responsible for the acts of his agency.

i. P must have contractual capacity (minor’s appt voidable), but no consideration is required.

Question 2

Formation by Estoppel

Answer 2

An agency may be created through estoppel, which requires third-party reliance on P’s communication

Question 3

Duties owed by A:

Answer 3

fiduciary duty of loyalty, duty of obedience to reasonable directions, duty of care under the circumstances (e.g., disclosure of all relevant information), express contractual duties

i. Remedies to P: K remedies if A compensated, tort remedies, action for secret profits, withhold comp

Question 4

Duties owed to P:

Answer 4

duty to reasonably compensate or reimburse expenses, duty to cooperate (not unreasonably interfere with A’s performance), express contractual duties

Question 5

Agency Authority - a.

Answer 5

a. To determine if P is bound by the contract, A must have had authority to enter into the contract and bind P

Question 6

Actual Express Authority

Answer 6

Authority through express manifestations to A contained within the 4 corners of the agreement

Question 7

Actual Implied Authority

Answer 7

Authority that A reasonably believes that A has as a result of P’s actions.

e.g. incidental to express authority, customary, prior acquiescence by P, emergency measures, buy or sells goods, manages investments

Question 8

Termination of Actual Authority

Answer 8

Termination occurs by -lapse, occurrence of event, change in circumstances, breach duty, unilateral termination (subject to breach of K), operation of law (death or incapacity unless irrevocable, or by filing a statement of authority with the Secretary of State to terminate partner’s authority

Question 9

Apparent Authority (P-3P)

Answer 9

Arises from manifestation of A’s authority due to P holding out as such via P’s words, actions, or failure to act, thereby inducing 3P to reasonably but mistakenly rely on that authority

i. Imposters: If P negligently lets imposter appear to have agency, P is liable for imposter’s actions
ii. Lingering Apparent Authority: If A’s actual authority has terminated (unless by death or incapacity), he has apparent authority to act on P’s behalf as to 3P with whom P knows he dealth with, unless 3P received notice of termination

Question 10

Ratification

Answer 10

If an “agent” acts for P w/o any authority but P subsequently validates the act (exp/impl), P is bound.

i. P must 1) know or have reason to know all material facts, 2) accept the transaction, and 3) have capacity

Question 11

Agency Contract Formation

3P v P

Answer 11

P liable to 3P on K entered into by A if A had valid authority

Question 12

Agency Contract Formation

Disclosed

Answer 12

P is always liable on K. A is not liable, unless K intended A to be liable

Question 13

Agency Contract Formation

Unidentified P

Answer 13

P is liable. A is liable, unless he discloses P’s identity

Question 14

Agency Contract Formation

Undisclosed P

Answer 14

P is liable if, having notice of A’s conduct and that it might induce others to change their positions, did not take reasonable steps to notify them of the facts. A is liable, unless he discloses to P

Question 15

Agency Contract Formation

3P liability

Answer 15

Disclosed P may enforce K but not A. Unidentified/undisclosed P and A may enforce K (P still benefits)

Question 16

Agency Tort Liability

P is liable only for torts committed by A who is employee, not Indy Cont.

Answer 16

P is liable only for torts committed by A who is employee, not independent contractor. If A not liable, P not liable

Question 17

Agency Tort Liability

Employee/IC factors

Answer 17

P’s control over manner and method of A’s performance, characterization by parties, customs lengthy of employment (short more likely to be IC, indefinite more likely to be employee), basis of compensation (project basis vs. time basis), understanding of parties, whether hired to further P’s business (nonbusiness purpose; e.g., mowing lawn, more likely IC)

Question 18

Ageny Tort Liability

Relationship by estoppel

Answer 18

If P creates the appearance of employer-employee relationship that 3P relies on, P is estopped from denying the relationship and will be liable under respondeat superior

Question 19

Agency Tort Liability

Scope of Employement

Answer 19

If employer-employee relationship exists, employer will be liable for employee’s torts if they were committed within the scope of employee’s employment.

i. Factors: same general nature of job, proximity to time and place of authorized employment, motivation to serve employer
ii. Intentional torts are not within the scope of employment, unless it’s a natural part of duties or misrepresentation