Chap 1 - Intro/Agency Flashcards
What is an agent?
An agent is a person who is authorized and agrees to act on behalf of and subject to the control of another (their principal)
Why does Agency matter?
Principals are vicariously liable for their agents’ actions that are within the scope of the agency relationship
Agents owe fiduciary duties to their principal
How does agency law intersect with partnerships?
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
What are the various types of biz orgs?
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)
What is an LLC?
A structured business entity that can shield owners from litigation
What are the 2 common law business entities?
Sole Proprietorships
General Partnerships
What does it mean to be a common law entity?
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.
What is the most popular state in the US to start a corp?
Deleware, but this is changing
What’s the difference between a shareholder and a stakeholder?
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.
What is stakeholder primacy?
It is the traditional view that companies should prioritize shareholder wealth maximization.
What is stakeholder capitalism?
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.
What are some agency relationships?
Employer/employee
Lawyer/Client
Broker/Client
Real Estate Agents
Board/Officers & Shareholders??
How is an agency relationship created?
(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
Is a written contract necessary to form an agency?
no
Is intent necessary to form an agency?
no. agencies can arise entirely by accident
What are the 3 ABC elements of the agency relationship?
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
Do unexpressed reservations prevent an agency from occuring?
no
Do you have to use the word agent to create an agency?
no
What is the consequence of agency relationships and its rationale?
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
What are the fiduciary duties associated with an agency? Which is them most important?
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).
What was the holding of Wabash college case?
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.”
