Cases

Question 1

Agency Factors (3)

Answer 1

(1) MANIFESTATION of consent by principal that agent act on principal’s behalf;
(2) Subject to principal’s CONTROL;
(3) Agent manifests CONSENT.

Totality of circumstances, question of FACT. Look at parties conduct, what was said, even silence can be consent.

Question 2

Liability: Tort vs. Contract

Answer 2

Tort: Who is responsible/liable for harmful conduct?

Contract: Who is bound by conduct?

Question 3

Tort Liability

Answer 3

Did Employer/Employee relationship exist?

(1) Was tort committed by employee within the scope of employment?
(2) Did principal have the right to exert control over the manner and means which the agent performed his duty?

Question 4

Employer/Employee Relationship

Answer 4

Look at:
– extent of CONTROL agent and principal have agreed principal may exercise;
– whether agent is engaged in DISTINCT OCCUPATION/business;
– whether type of work done is USUALLY SUPERVISED?
– SKILL REQUIRED in agent’s occupation;
– whether agent or principal supplies tools required for work and place in which to perform it;
– length of TIME agent is engaged by principal;
– whether agent PAID for job/time worked;
– whether they BELIEF OF PARTIES (creating an employment relationship);
– whether principal is or is not IN BUSINESS.

Question 5

Frolic Exception

Answer 5

When an employee leaves employment to do something for PERSONAL REASONS, principal is not liable.

Question 6

Independent Contractor Liability

Answer 6

Principal not liable unless:
– arises out of AREA PRINCIPAL CONTROLLED
– falls into one of the exceptions such as: INHERENTLY DANGEROUS DUTY/NEGLIGENT HIRING
– NON DELEGABLE DUTY

Question 7

Who can be an agent?

Answer 7

Individual
LLC
Corporation–made personhood for 1st Amendment purposes
Not for profit
Partnership–has no limitation on liability.

Question 8

Types of Authority

Answer 8

ACTUAL
and
APPARENT

Exists when principal communicates (written, spoke, silence, or implied by job) to agent about activities in which agent may engage/obligations may undertake.

Question 9

Actual Authority Rule

Answer 9

Agents acting w/ actual authority in making a contract bind the principal as if the principal had directly entered into the contract.

Question 10

Actual Express Authority

Answer 10

1. Express authorization by principal for agent to act.
2. Express manifestations can always negate implied authority.

EXAMINE PRINCIPAL’S EXPRESS INSTRUCTIONS

Question 11

Actual Implied Authority

Answer 11

1. Authority to do acts INCIDENTAL to express authority.
   –usually accompany it, or are reasonably necessary to accomplish it.

EXAMINE PRINCIPAL’S INSTRUCTIONS and ask what else might be reasonably included in instructions IMPLIED to accomplish the job.

Includes: actions necessary to accomplish principal’s original instructions to agent and also actions that agent reasonably believes principal wishes him to do based on agent’s reasonable understanding of authority granted.

Question 12

Apparent Authority

Answer 12

INJURED 3d PARTY REASONABLY RELIED ON AGENT/PRINCIPAL RELATIONSHIP

specific conduct by the principal in the past permitting the agent to exercise similar powers is crucial

If circumstances led injured 3rd party to reasonably believe that employment or agency relationship existed between principal and alleged agent, and those circumstances existed b/c of some action or inaction on the part of the principal, principal may still be liable even if no employment relationship.

Some courts require injury incurred by 3rd party to be result of their reasonable belief that alleged agent was in fact an agent of principal.

Question 13

Apparent Authority by Position

Answer 13

–Apparent authority to conduct usual tasks/responsibilities of position (I.e. front desk clerk promising 24-hour service).

–Mere position of attorney/other does not create apparent authority to act.

–An agent must be acting within scope of employment to bind principal, but such scope includes actions that are reasonably foreseeable (even if on individual basis).

–A principal is generally not liable for acts of Ind. Contractor unless: negligent hiring, inherently hazardous.

Question 14

Inherent Agency/Undisclosed Principal

Answer 14

Inherent agency power is power of an agent which is derived not from authority, apparent authority, or estoppel, but solely from the agency relationship and exists for the protection of the persons harmed by/dealing w/ servant or other agent.

–Individual performs function that is not permitted by principal/agent relationship but may be considered w/in scope of duties; company is bound (even if principal was not aware.

Question 15

Restatement 3rd: Undisclosed Principal

Answer 15

Principal is liable if the principal, having notice of the agency’s conduct and that it might induct others to change their position did not take reasonable steps to notify them of that facts.

Question 16

Ratification

Answer 16

Individual is not agent, but principal ratifies behavior.
–Company can be bound.

Ratification requires acceptance of the results of the act w/ the intent to ratify, and act w/ full knowledge of the material circumstances.

Question 17

Types of Ratification

Answer 17

EXPRESS

IMPLIED

Question 18

Express Ratification

Answer 18

Express affirmation by principal

Question 19

Implied Ratification

Answer 19

Implied affirmation through acceptance of benefits of a transaction at a time where it was possible to decline.

Affirmance through silence or inaction.

Question 20

Ratification Rules

Answer 20

–If affirmed, law treats as retroactive actual authority.
To be valid, principal must know or have reason to know at the time of alleged ratification the material facts relating to the transaction.

Principal cannot PARTIALLY ratify–all or nothing.

Can’t sit back and wait to see what will happen–longer you wait, more likely the court will find implied ratification.

Question 21

Estoppel

Generally

Answer 21

No existing agency–based on the impression of the 3rd party.

Should the principal be estopped from denying that the false agent was one of the principal’s?

Question 22

Estoppel

Involves?

Answer 22

–Acts or omissions (generally wrongful) by principal which create appearance of authority in the purported agent.
–The third party reasonable, and in good faith, acts in reliance on that appearance of authority.
–Third party changes her position in reliance upon that authority.

Question 23

ESTOPPEL

Who can prevail?

Answer 23

One way street–only party who relies on authority can claim estoppel.

Question 24

When is a principal at fault and should be bound?

Answer 24

1. Intentional or careless; or

2. Notice and principal took no reasonable steps to protect third party.

Question 25

Master-Servant Relationship

Answer 25

Where servant has agreed:
A. to work on behalf of the master.
B. to be subject to master’s control or right to control the “physical conduct” of the servant (I.e. the manner in which the job is performed).

Question 26

Independent Contractor

Answer 26

Agrees to act on behalf of principal, but not subject to control over how the result is being accomplished.

Question 27

Non-Agent Independent Contractor

Answer 27

One who operates independently and simply enters into arm’s length transaction’s with others.

Question 28

Liability in Torts for Independent Contractors

Answer 28

Principal can still be liable for torts of an independent contractor if:
–P retains control over aspect of activity which tort occurs;
–P is negligent in hiring, training, retraining, supervising; OR
–P hires independent contract to perform an inherently dangerous activity.

Question 29

Scope of Employment Considerations

Answer 29

1. Time, place, and purpose of the act
2. Similarity to acts which the servant is authorized to perform
3. Whether the act is commonly performed by servants
4. Extent of departure from normal methods
5. Whether master would reasonably expect such act would be performed.

Question 30

MINORITY vs. RESTATEMENT

Employer Liability

Answer 30

Minority–Foreseeability Test
Respondeat superior imposes liability on the employer if the employer created the risk that the conduct would occur. (Ira S. Bushey v. United States)

Restatement: Employer is liable only if conduct of a servant is within the scope of purpose, at least in part, of serving his master.

Question 31

Statutory Claims

Answer 31

Principals may be liable under applicable laws or statutes for the acts of their agents as long as within the scope of employment.

ILLEGALITY is complete defense unless the agent is acting under the scope of employment.

Question 32

Partnership v. Joint Venture

Answer 32

PARTNERSHIP: Envisions a continuing relationship; association of two or more persons to carry on as co-owners of a business for profit.
–A partnership is generally a longstanding relationship w/ general undertakings designed to generate a profit.

JOINT VENTURE: Association of two or more persons or entities in business for a limited purpose and normally involves less than total merger of businesses assets of the venturers.
–Same duty of loyalty as partners while enterprise continues.
–Courts often apply partnership law to joint ventures although distinct.

Question 33

Joint Venture

ELEMENTS

Answer 33

1. Contribution by parties of money, property, time or skill in some common undertaking but contributions need not be equal or of the same nature.
2. Proprietary interest and right of mutual control over engaged property;
3. Express or implied agreement to share profits and sometimes losses; AND
4. Express or implied agreement to form a joint venture.

Question 34

Duty of Loyalty

Answer 34

A partnership creates a fiduciary duty.
–Requires more than just honesty, this is an extremely high level of responsibility.
–The duty of loyalty is a very high standard; and if it gets to a point to where you are looking at your own interests, you must subordinate your partnership interests in the partnership.

Question 35

Partnership Property

ELEMENTS

Answer 35

Partnership property if:

1. Partnership name;
2. Capacity as partner;
3. Purchased with partnership assets.

Question 36

Partnership Property

Answer 36

The partner’s rights in the specific partnership property are possessor rights only and do not exist without the partnership.

The partnership owns all partnership property, and a partner’s interest is merely a pro rata share of the property’s value or deficit, not the property.

At the end of a partnership, each partner has the right to receive the value of any property whose ownership the partner transferred to the partnership.

Question 37

Rights of Partners in Management

Answer 37

–As a partner, you have equal access between all partners to the books and records of the partnership.

–Without agreement to the contrary, each partner possess equal right to manage partnership affairs, and no partner is responsible for expenses incurred without majority approval.

–Each partner possessed the power to make ordinary business decisions to bind the partnership (difficult with more than 2 members of partnership because unanimous consent).

Question 38

Partner’s Acts Binding

EXCEPTIONS

Answer 38

Every partner’s acts for apparently carrying on in the usual way the partnership’s business binds the partnership UNLESS:

1. The acting partner has in fact NO AUTHORITY to act for the partnership and the person with whom he is dealing knows that he has no such authority;
2. You otherwise agree and then you are stuck to the terms of the agreement.

Question 39

Unanimity vs. Majority

Answer 39

Unanimity: for ordinary course of business
Majority: for extraordinary/unusual business

Question 40

Dissolution

Answer 40

The power to terminate the partnership always exists but not always the legal right to dissolve.

Generally, the partners may dissolve a partnership by unanimous consent.

In the absence of unanimity, a partner may seek a judicial dissolution.