Chap 1 - Intro/Agency

Question 1

What is an agent?

Answer 1

An agent is a person who is authorized and agrees to act on behalf of and subject to the control of another (their principal)

Question 2

Why does Agency matter?

Answer 2

Principals are vicariously liable for their agents’ actions that are within the scope of the agency relationship

Agents owe fiduciary duties to their principal

Question 3

How does agency law intersect with partnerships?

Answer 3

Partners of general partnerships owe fiduciary duties to one another and to the partnership

Partners of general partnerships are personally liable for other partners’ actions that are within the scope of the general partnership

Question 4

What are the various types of biz orgs?

Answer 4

Sole Proprietorships
General Partnerships
Limited Partnerships & Limited-Liability Partnerships (LLPs)
Limited-Liability Companies (LLCs)
Professional Limited-Liability Companies (PLLC)
S Corporations (a U.S. tax classification, see next slide)
Benefit Corporations – for-profit organizations that are created to benefit society first instead of shareholders
Non-Profit Corporations (not covered in this class, but a valid organizational form)

Question 5

What is an LLC?

Answer 5

A structured business entity that can shield owners from litigation

Question 6

What are the 2 common law business entities?

Answer 6

Sole Proprietorships
General Partnerships

Question 7

What does it mean to be a common law entity?

Answer 7

It means you don’t need to file paperwork with the state to start them. They can arise based on the circumstances.
Every other type of organization is only formed when you file the right paperwork
The first partnership was formed in the 1300s according to historians.

Question 8

What is the most popular state in the US to start a corp?

Answer 8

Deleware, but this is changing

Question 9

What’s the difference between a shareholder and a stakeholder?

Answer 9

Shareholders own at least one share in the company.
Stakeholders are those who have a vested interest in a company and can either affect or be affected by a business’ operations and performance.
Typical stakeholders areinvestors, employees, customers, suppliers, communities, governments, or trade associations.

Question 10

What is stakeholder primacy?

Answer 10

It is the traditional view that companies should prioritize shareholder wealth maximization.

Question 11

What is stakeholder capitalism?

Answer 11

A new approach that suggests that companies should be run for the benefit of all their stakeholders.
Many CEOs, business leaders, and other business think tanks have supported the change to stakeholder capitalism.

Question 12

What are some agency relationships?

Answer 12

Employer/employee

Lawyer/Client

Broker/Client

Real Estate Agents

Board/Officers & Shareholders??

Question 13

How is an agency relationship created?

Answer 13

(1) the principal manifests assent to have the agent act
on the principal’s behalf AND
under the principal’s control, AND
(2) the agent manifests assent or otherwise consents to act

Question 14

Is a written contract necessary to form an agency?

Answer 14

no

Question 15

Is intent necessary to form an agency?

Answer 15

no. agencies can arise entirely by accident

Question 16

What are the 3 ABC elements of the agency relationship?

Answer 16

Assent: mutual assent between the agent & principal
Unexpressed reservations or limitations of the relationship do not prohibit an agency relationship from forming.

Benefit: the agent acts for the benefit of (or on behalf of) the principal

Control: the agent acts subject to the principal’s control

Question 17

Do unexpressed reservations prevent an agency from occuring?

Answer 17

no

Question 18

Do you have to use the word agent to create an agency?

Answer 18

no

Question 19

What is the consequence of agency relationships and its rationale?

Answer 19

Vicarious liability: A principal is liable for the actions of its agents performed within the scope of the agency relationship
“[A] legal fiction by which a court can hold a party legally responsible for the negligence of another, not because the party did anything wrong but rather because of the party’s relationship to the wrongdoer.” Sword v. NKC Hospitals, Inc., 714 N.E.2d 142, 147 (Ind. 1999)

Rationales for vicarious liability:
agent acted (not for its own benefit but) for the benefit of the principal
agent acted upon an implied command from its principal
principal is presumed to exercise control over the agent’s behavior

Question 20

What are the fiduciary duties associated with an agency? Which is them most important?

Answer 20

Notably, the duty of loyalty - An agent must act loyally for the principal’s benefit in all matters connected with the agency relationship (RTA 8.01). The duty of loyalty includes:
a duty not to communicate confidential information of the principal for the agent’s own purposes or those of a third party (RTA 8.05),
a duty not to compete with the principal in any matter within the scope of the agency relationship (RTA 8.04), and
a duty not to act as an adverse party to the principal in a transaction connected with the agency relationship (RTA 8.03).

Question 21

What was the holding of Wabash college case?

Answer 21

The court held that “[t]here is neither evidence that Wabash assented to such an arrangement nor evidence that the local fraternity manifested assent to take action on behalf of Wabash.”

There is no agency relationship so the actions of the local fraternity and its members cannot be imputed to Wabash under a theory of vicarious liability.

The court held that “[t]here is no evidence that the actual management and control over the resident members is a responsibility consensually exercised. . . .The conduct of the local fraternity . . . is not undertaken on behalf of the national fraternity.”
This is “not an agency relationship between principal and agent.”