Exam 4 Flashcards
Negligence:
- Defendant owed a duty of care to plaintiff, and
- Defendant breached that duty, and
- Breach was actual and proximate cause of the injury experienced by plaintiff
Duty:
“Duty” sometimes arises from the relationship between the plaintiff and the defendant or the defendant’s profession.
– Accountants, lawyers, doctors, etc.
Duty to perform their professional obligations with the knowledge, skill, and care ordinarily possessed and employed by members of the profession
**General idea: your conduct must not create unreasonable risk of harm to others
Foreseeability:
Generally, the defendant is only liable for harms that were reasonably foreseeable as risks of the defendant’s conduct.
The defendant is liable if his conduct created an unreasonable risk of foreseeable harm
Personal injury –
physical or bodily injury
Property damage –
harm to real estate or personal property
Emotional harms –
Emotional damages are sometimes permitted, but are easier to recover if connected with a physical injury
Actual cause:
The injury would not have occurred “but for” the breach. (If the breach had not have occurred, there would not have been an injury.)
Proximate cause:
The injury is a “natural and probable consequence” of the breach
Defenses to Negligence:
- Contributory or comparative negligence
2. Assumption of the risk
Assumption of the risk
Voluntary consent to a known danger.
If the plaintiff knew of the risk and went ahead anyway, the plaintiff may have “assumed the risk” of harm. In such cases, the defendant is not liable for the harm.
**Exculpatory clauses: Contract clause in which the plaintiff expressly assumes the risk of harm
Exculpatory clauses
Contract clause in which the plaintiff expressly assumes the risk of harm
Contributory or comparative negligence
The plaintiff’s own conduct caused some of the harm the plaintiff suffered.
Depending on state law, this either gets the defendant off the hook completely (contributory negligence) or
Requires the plaintiff to take responsibility for some percentage of the damages
Agent’s Duties to Principal
- Duty of Loyalty
- Duty to Obey Reasonable Instructions
- Duty to Act with Care and Skill
- Duty to Account
- Duty to Keep Principal Informed
Principal’s Duties to Agent
- If there is an agreement between the parties, perform according to that agreement
- Duty to compensate? …Not much of one. Depends on the relationship between the agent and principal
- Duty of reimbursement
- Duty of indemnity
- Duty to inform the agent of known risks
Duty of Loyalty
act for the principal’s advantage and not for the benefit of the agent at the principal’s expense
- Avoid conflicts of interest and
- Maintain confidentiality of principal’s information
Agent’s Duty of Loyalty: Conflict of interest Rules
- Agent may not deal with himself (unless the principal consents)
- Agent may not compete with the principal
- Agent may not act on behalf of the other party to the transaction, without consent of both principals
- Agent may not acquire a material benefit from a third party in connection with an agency transaction (except by consent of principal)
Agent’s Duty to Act with Care and Skill
- Use the care, competence and diligence exercised by agents in similar circumstances
- If you say you have higher level of skill, you will be held to higher level of performance
Agent’s Duty to Account
- Segregation: No co-mingling funds or property
- Record-Keeping and Accounting: Keep accurate records of monies handled and provide those records on reasonable notice from principal
Agent’s Duty to Keep Principal Informed
If the agent knows something that the principal would want to know…the agent generally has a duty to tell the principal
Principal’s Duty to Compensate
- An agent may be gratuitous – no compensation.
- Compensation may be dependent on result.
- Principal need not pay for undertakings principal did not request
Principal’s Duty of Reimbursement
Principal reimburses agent for expenses agent makes while acting on the principal’s behalf
Principal’s Duty of Indemnity
- If the agent incurs losses that should fairly be borne by the principal, the principal must bear those losses.
- – Examples:
- – payments made by agent on behalf of principal
- – contract or tort liability borne by agent for acts the principal authorized the agent to do.
***Limits: no duty to indemnify for unauthorized acts or when a loss is solely the agent’s negligence or other fault
4 ways a principal becomes liable on a contract made by an agent:
- actual express authority,
- actual implied authority,
- apparent authority, and
- ratification
Actual Express Authority
– Sometimes authority is very clear from words the principal says or writes to the agent
Actual Implied Authority
– principal’s authorization of the agent is implied…
- from the conduct of the parties or - from the position of authority granted to the agent by the principal or - by the principal’s acquiescence
When/for what is actual authority implied?
when the agent is acting the way she reasonably believes the principal wants her to act, authority is usually implied
Test based on questions of fact:
- Was the agent doing the sort of activity that would be expected of a person in that role?
- Was the agent doing something that helped accomplish the goals of the agency?
- Did the principal know about and acquiesce in (not do anything to stop) the agent’s acts?
- Was the agent acting reasonably in an emergency?
Apparent Authority:
– principal’s conduct/words (or failure to let others know an agent is terminated) lead a third party to reasonably believe that an agent has authority to act for the principal
The third-party is then entitled to rely on the apparent authority of the agent.
- Principal will be liable to the third-party on the contract made by the agent.
- But the principal can sue the agent for exceeding his authority
Termination of the Agency – when does it end?
- Object (goal) of the agency is accomplished or the agreed term of the agency has passed.
- The parties agree to terminate.
- Death of either the principal or the agent
- Changes in the law that make the business of the agency illegal terminate the agency by operation of law
- Either party always has the power to terminate the agency on his own, but not always the right to do so
Apparent Authority of the agent will continue unless…
the principal gives notice to third parties that the agency has terminated
- Direct notice by statement or writing to third parties with who have previously dealt with the agent
- Constructive notice (i.e. newspaper, website) to other parties
Ratification
Occurs when a principal voluntarily decides to honor an agreement, even though the agent was not authorized to enter the agreement
Contract Liability of the Agent
Agent’s liability on a contract made for the principal depends on what the third party knows about the principal:
- Disclosed principal (third party knows that the agent is working for a principal, and knows who the principal is) = agent not liable on contract. [normal situation]
…but …
– If agent does not disclose the identity or fact of the principal to the third party, or
– If the principal does not exist at the time the deal is made, then…
** AGENT is personally liable on the contract. **
2 ways a principal may be liable for an agent’s tort:
- Respondeat Superior
2. Direct Liability
Respondeat Superior
– Employer liable when employee commits tort within the scope of the employment.
- The employee, in addition to the employer, may be liable to the third party
- The doctrine does not apply to non-employee agents.
Direct Liability
- Principal is directly liable for agent’s tort if the principal directly authorized the tortious conduct.
- Much narrower scope of liability than respondeat superior, and applies to both employee and non-employee agents.
- Negligent hiring: Principal may be directly liable for the principal’s own negligence in hiring the agent
Negligent hiring
Principal may be directly liable for the principal’s own negligence in hiring the agent
Independent contractor (def)
a person hired to undertake a contractually defined result (not an employee but sometimes an agent – e.g. realtor, lawyer).
Employee versus Non-employee Agents
- Principal’s right to control the manner and means of the agent’s performance;
- Skill required
- Source of tools
- Location of the work
- Duration of the relationship
- Principal’s right to assign additional projects to the agent
- Agent’s discretion over when and how long to work
- Method of payment
- Agent’s role in hiring and paying assistants
- Whether the work performed by the agent is part of the regular business of the principal
- Whether the principal is a business
- Tax treatment of the hiring party
Agent’s Tort Liability
General rule: Agent is liable for her own torts
Who is liable for agent’s tortious conduct?
- IF the agent is an employee
- Was employee acting within the scope of her employment?
If YES: Principal liable (respondeat superior). Agent also liable, but may be entitled to reimbursement from principle. - Did the principal authorize the tortious conduct?
YES: Principal may also be directly liable for the tort. (principal may be both directly liable and liable under respondeat superior) Agent is also liable but may be entitled to reimbursement from P. - Was the principal’s own conduct negligent in some way (hiring, supervising)?
YES: Principal directly liable for negligence. Agent also liable (unless had no reason to know of defective tools)
Who is liable for agent’s tortious conduct?
- IF the agent is NOT an employee
- Did Principal actually authorize the agent to commit the tortious conduct?
- If YES – Principal directly liable. - Was the principal’s own conduct negligent in some way (e.g. negligent hiring)?
- If YES – Principal directly liable for her own negligence.
- If No to both of the above, the principal is not liable for a non-employee agent’s tort
4 Basic Forms of Business
- Sole Proprietorship
- Partnership
- – Variations: partnership, limited liability partnership (LLP) - Corporation
- – Variations: Regular C Corp, Subchapter S Corp - Limited Liability Company (LLC)
Sole Proprietorship (def)
- A sole proprietorship has only one owner. The business is just an extension of its owner.
- It is not a legal entity and cannot sue or be sued, so creditors/claimants sue the owner directly.
- Often is the form of business just by default – the owner simply opened the business and started operating
Sole Proprietorship (advantages)
- no formalities,
- owner takes all profit and control,
- not taxed as business before flowing through to proprietor
Sole Proprietorship (disadvantages)
- Owner bears all risk of loss
- Organization cannot continue past the owner’s life
- Not amenable to outside investor/outside ownership
Objective test for determining whether partnership exists:
- Two or more people who
- Have a common interest in business
- And share profits and losses
What are the consequences creating the partnership?
- The default arrangement by law is that partners share profits and losses equally. AND
- Partners in a general partnership are individually (personally) liable for the torts of the partnership (torts committed within the scope of the business).
General Partnership (advantages)
- relatively easy to create
- individual taxation
- partners control the business
- flexible structure without a lot of formality
General Partnership (disadvantages)
- sometimes too easy to create (can form general partnership by default)
- general partners bear all risk of loss jointly and severally
What is a “joint venture”?
- A partnership for a limited purpose.
- Sometimes courts find a joint venture has been created when the arrangement is limited to a single project rather than an ongoing business.
- Treated mostly like a general partnership, but the joint venturers may have more limited scope of authority to bind the venture in contracts
Limited Liability Partnership (LLP) (def)
- it is a partnership in which the partners’ liability is limited.
- As a partner in an LLP, you do not have personal liability for the LLP’s torts.
- – You do, however, have unlimited liability for your own wrongful acts.
- – Eliminates the problem of a partner being on the hook for his partner’s malpractice.
- Often used by professionals (e.g. lawyers, auditors)
- LLPs can elect to be taxed either like a partnership or like a corporation
How are LLPs taxed?
LLPs can elect to be taxed either like a partnership or like a corporation
What is a corporation?
- A corporation is owned by shareholders who elect a board of directors to set the goals of the business. Board then may hire officers to run the company.
- So: ownership & management of a corporation may be separate from each other.
- – Note that is not the case with the partnership – the partners both manage and own the partnership
Corporations: The Basic Formula
Limited liability for owners (i.e. shareholders)
Free transferability of shares of ownership (can sell shares)
Separation of management from ownership
Legal status distinct from owners and managers (corp is a fictitious “person”)
Why do we have corporations?
Limit the liability and management responsibility for investors –>
More willing investors –>
Greater capital-raising ability –>
Economies of Scale
What are shareholders of a corporation liable for?
only liable to the extent of their investment in the corporation
Corporation – Tax consequences
- The corporation is a distinct legal and tax-paying entity for federal income tax purposes.
- Corporation itself pays taxes on corporation’s income.
- Partnerships, sole proprietorships, LLPs and LLCs that elect to be taxed as partnerships do not pay taxes on their profits at the entity level. [“pass-through entity”]
Corporation (advantages)
- shareholders enjoy limited liability,
- perpetual existence – existence doesn’t depend on the owners’ lives
- ability to raise large amounts of capital
Corporation (disadvantages)
- greater formality required for formation and operation
- “double-taxation” [though there are some tax advantages, too]
- complexity of structure and reporting requirements
What is a Limited Liability Company (LLC)?
A limited liability company (LLC) combines the limited liability and management advantages of corporations with the favorable tax treatment of partnerships.
- limited liability for members;
- can elect to be taxed like a corporation or like a partnership
- can separate ownership from management to some degree
Who owns the LLC?
An LLC is owned by members, who may manage themselves or retain a manager to run the business.
- They create an operating agreement to determine issues like whether the members will manage, how they will share profits, how members can withdraw from the LLC, etc.
- Non-managing members do not owe fiduciary duties to the LLC.
- Unlike a partnership or LLP, an LLC can have a single owner (one member) or multiple owners (multiple members)
What is the liability of members of the LLC?
- Members have limited liability for the obligations of the LLC.
- Member’s liability limited to the member’s capital contribution, except for the member’s own torts
STEPS to form a corporation
- Draft articles of incorporation.
- Incorporators sign the articles.
- File the articles with the secretary of state, and pay fees.
- Get “Filed” copy back from Secretary of state.
- Hold organizational meeting to adopt bylaws and elect officers (and maybe other business too).
- Going forward: Corp must file annual report with secretary of state and pay any franchise fee/tax to avoid dissolution
Employment Law:
Rules that govern the relationship between employees and employers
Employment-at-Will Doctrine (Strict, historical version):
Either the employer or the employee may terminate the employment relationship at any time and for any reason, no reason, or even a bad reason
Employment-at-Will Doctrine (Modern version):
Employment at will…except (3 Ps):
- Public policy – (most states)
- Promises by employers – (some states)
- Protective Statutes – (all states – federal laws and some state law)
Employment at will exceptions: Public Policy
In many states, workers cannot be fired for acts such as:
- refusing to commit an unlawful act
- performing a public duty (e.g. jury duty or whistle-blowing)
- exercising some lawful right (e.g. making a workers’ comp claim, taking federally protected family leave time after the birth of a child)
Employment at will exceptions: Promises by employers
Courts may hold employers to promises made in hiring process, employee orientation, employee manuals, handbooks, benefit plans, etc.
Employment at will exceptions: Protective Statutes
Statutes protect various aspects of work life…
Workers Compensation – who does it protect?
Limited to employees (not independent contractors)
When applicable, worker’s compensation laws allow injured employees to recover under …
strict liability:
- Injured Employee does NOT need to prove employer negligence
- Eliminates employer defenses: Employer can’t claim…
- That the injury was result of employee’s own negligence, or
- That the employee assumed the risk of injury, or
- That the injury was caused by one employee’s conduct toward another
What defenses are eliminated by workers comp?
- That the injury was result of employee’s own negligence, or
- That the employee assumed the risk of injury, or
- That the injury was caused by one employee’s conduct toward another
Workers comp: What does the injured worker get?
(1) hospital and medical expenses,
(2) disability benefits,
(3) specified recoveries for loss of certain body parts, and
(4) death benefits to survivors and/or dependents
Employees recover only for work-related injuries in workers’ comp – covered injuries:
- Were accidental; and
- Arise out of the employment (related in some way to the employment) and happen in the course of employment
- Injury is related in some way to the employment and
- Occurred within time, place, and circumstances of employment
Family Medical Leave Act of 1993 (FMLA)
Employers of 50 or more workers must provide employees up to 12 weeks of unpaid leave annually for:
- Their own serious illness
- Birth or adoption of a child
- Care of a seriously ill child, spouse, or parent
Family Medical Leave Act of 1993 (FMLA)
– Events for which leave may be taken
- Their own serious illness
- Birth or adoption of a child
- Care of a seriously ill child, spouse, or parent
To be eligible for FMLA leave, employee must:
- Have worked for that employer for more than 1 year, and
- For a minimum of 1250 hours annually (basically 25 hrs/week).
- Employer can exempt the top 10% of its work force
FMLA Nursing Mother provisions
FLSA requires employers to
- allow reasonable time (does not need to be paid time) for nursing moms to pump breast milk during the work day (for the first year after birth of a baby)
- provide a space shielded from view of public/co-workers to pump breast milk
- NOT a bathroom
- Employers with fewer than 50 employees are exempt if compliance would impose a hardship
Fair Labor Standards Act (FLSA): Minimum Wage
- FLSA establishes the federal minimum.
- Does not apply to independent contractors
- States and some cities have other laws that may require more.
- FLSA also requires employers to pay “time and a half” (1.5 x the regular hourly wage) for any hours worked “overtime” (over 40 hours/week)
Fair Labor Standards Act (FLSA): Reduction for equivalent rewards
- Can REDUCE the wage by equivalent rewards in the form of food or lodging.
Fair Labor Standards Act (FLSA): Tipped employee rule
- For TIPPED employees, employer can pay just $2.13/hour but must make up the difference if tips + wage together do not meet the minimum
Fair Labor Standards Act (FLSA): Exemptions
- Small seasonal businesses (e.g. small agriculture and fishing operations)
- Salaried workers…Paid a statutory weekly minimum amount per week and fit criteria for an exempt category:
- - Executives – primary duty is management of at least 2 other employees, and have ability to hire/fire.
- - Professionals – intellectual work requiring specialized education (lawyers, doctors, teachers, accountants, engineers, clergy)
- - Administration – high-level support work (not manual office work) requiring exercise of independent judgment (e.g. high-level HR, PR, benefits department…)
Fair Labor Standards Act (FLSA): Enforcement
- Secretary of Labor can sue for 2x back pay and/or injunction. Willful violation can lead to fines and imprisonment.
- Private parties can also sue for back pay, penalty and attorney’s fees
