Agency

Front 1

What is agency?

Back 1

Legal relationship whereby an agent is authorized to represent a principal in business dealings with third parties.

Front 2

When will the principal be liable for TORTS committed by the agent?

Back 2

If: 1) a principal-agent relationship exists 2) the tort was committed by the agent within the scope of that relationship

Front 3

What 3 things does the principal agent relationship require?

Back 3

ABC: 1) Assent 2) Benefit 3) Control

Front 4

What is Assent?

Back 4

An informal agreement between a principal that has capacity and an agent

Front 5

What is Benefit?

Back 5

The agent's conduct must be for the principal's benefit

Front 6

What is Control?

Back 6

"The Principal must have the right to control the agent by having the power to supervise the manner of the agent's performance"

Front 7

What is a subagent?

Back 7

When P instructs A to do a task, and A hires another agent, A2, that commits a tort

Front 8

Is there Vicarious Liability for Subagents?

Back 8

NO VICARIOUS LIABILITY FOR SUBAGENTS, unless there is A, B, and right to C the subagent tortfeasor

Front 9

What is a borrowed agent?

Back 9

When P1 borrows P2's agent who then commits the tort

Front 10

Is there Vicarious Liability for Borrowed Agents?

Back 10

NO VICARIOUS LIABILITY FOR BORROWED AGENTS, unless there is A, B, and right to C the borrowed agent tortfeasor

Front 11

What is the difference between agent and independent contractor?

Back 11

There is no right to control the independent contractor because there is no power to supervise the manner of his performance

Front 12

Is there Vicarious Liability for Independent Contractors?

Back 12

NO VICARIOUS LIABILITY FOR INDEPENDENT CONTRACTORS --

Front 13

What are the 2 exceptions to independent contractor liability?

Back 13

1) The Ultra-Hazardous Activity Exception: if they commit a tort while engaged in ultra-hazardous activity, there WILL BE VL (brake repair) 2) Estoppel: If they are held out wit the appearance of agency, you will be estopped/prevented from denying VL

Front 14

How to write essay on ICs

Back 14

Always start with the rule: “As a rule, there is no VL for IC’s torts.” Then state the exceptions, but … Then apply facts: “In this case…”

Front 15

What is the 3-part test for Agency Scope?

Back 15

1) Was conduct "of the kind" agent was hired to perform/within the job description? (was conduct within job description – if so, likely to be within scope) 2) Did the tort occur "on the job? (distinguish frolic and detour in next card) 3) Did the agent intend to benefit the principal (if the agent, even in part, intended o benefit the principal by its conduct, that is enough to be in the scope)?

Front 16

What is Frolic?

Back 16

A new and independent journey, outside the scope of agency

Front 17

What is Detour?

Back 17

A mere departure from an assigned task, within the scope of agency

Front 18

Is partial benefit enough to satisfy the 3rd prong of scope?

Back 18

YES, in NY, partial benefit is enough to be within the scope of agency

Front 19

Are intentional torts within the scope of agency?

Back 19

Generally, NO intentional torts are generally outside the scope of agency

Front 20

What are the 3 exceptions to intentional torts?

Back 20

Intentional torts are within the scope if the conduct was: 1) intentional conduct that was specifically authorized by the principal 2) if it was natural from the nature of employment 3) if it was motivated by a desire to serve P

Front 21

Are P's vicariously liable for torts committed by the agent?

Back 21

Generally, YES

Front 22

Are P's liable for contracts entered into by the agent?

Back 22

Generally, YES Principal is liable for contracts entered into by its agent if P authorized the agent to enter into the contract

Front 23

What are the 4 types of authority?

Back 23

1) Actual Express Authority 2) Actual Implied Authority 3) Apparent Authority 4) Ratification

Front 24

Liability of P for Ks entered A: What is Actual Express Authority? What are the general parameters of AEA? What is the exception?

Back 24

When P uses words to express authority to agent. (a) Rule: Can be Oral or Private (whisper), but construed narrowly to words used (b) Except: Lank d. If K involves conveyance, the express authority must be in a signed writing (SOF)

Front 25

Liability of P for Ks entered A: How may AEA be revoked?

Back 25

Rule: AEA will be revoked by: (a) Unilateral act of either party, or (b) Death or incapacity of the P. (P hires A to find rare book. As A buys book, P dies. P's estate not bound. Exception: AEA cannot be revoked if P gives A a durable power of atty (DPOA) DPOA is a written expression of authority to enter a transaction. To be durable needs conspicuous survival language.

Front 26

When can express authority NOT be revoked?

Back 26

If P gave the agent durable power of attorney (the written expression of authority to enter into a contract with conspicuous survival language)

Front 27

Liability of P for Ks entered A: What is Actual Implied Authority?

Back 27

Authority which A reasonably believes the P has given, b/c: 1. Necessity: There is implied authority to do all tasks which are necessary to accomplish an expressly authorized task. 2. Custom: There is implied authority to do all tasks which are customarily performed by persons w/ A's title or position. 3. Prior dealings b/t P and A: There is implied authority to do all tasks which the A believes to have been authorized from prior acquiescence by P.

Front 28

Liability of P for Ks entered A: What's the Apparent Authority test? What are the 2 types?

Back 28

2 part test: 1. Principal "cloaked" agent w/ the appearance of authority, and 2. 3P reasonably relies on appearance of authority. 2 types: (i) Secret Limiting Instruction: A has actual authority, but P has secretly limited that authority. A acts beyond the scope of the limitation. P's A sells clock Nonetheless, there was AA b/c a) P did cloak A w/ appearance of authority and b) 3P may reasonably rely on A's appearance of auth. (ii) Lingering Authority: AA has been terminated, but A continues to act on P's behalf. P bound? P liable on authorized K. In this case, AEA and IA have been terminated. Nonetheless, there is AA b/c a) P has cloaked A w/ lingering appearance of authority, and also b) customers may continue to rely reasonably upon her ongoing lingering authority until they receive notice of her termination.

Front 29

Liability of P for Ks entered A: What's Ratification?

Back 29

Authority can be granted after K has been entered, if: (a) P has knowledge of all material facts regarding the K, and (b) P accepts its benefits. (c) Except: Ratification cannot alter the terms of the K. NY: P must ratifiy entire K as is.

Front 30

Can there be partial ratification for P to still be liable?

Back 30

NO, Ratification cannot alter the terms of the contract. It must be a ratification of the complete, entire deal, as-is

Front 31

Liability of P for Ks entered A: Ratification Hypo: P gives A POA to buy steel drums. A enters K to buy 11k wood barrels. P tells A great job, love wood barrels, but only need 10k.

Back 31

Rule: P will be liable on its authorized Ks. In this case, there was no AE or IA or even AA to buy wood barrels, only steel drums. Nonetheless, P arguably ratified it thru knowledge and acceptance of its benefits. But in NY, ratification was not valid b/c it was not complete, therefore, there will be no liability to P on this unauthorized K.

Front 32

Liability of P for Ks entered A: What are the rules of liability on the K? In other words, who is liable on the K if there is authority? If there is not authority? What is the exception to the general rules?

Back 32

General rules: 1. If no authority, P is not liable on the K. If no authority, A is liable on the K. 2. If auth, P liable on K. If auth, A not liable on K. EXCEPTION: If P is partially disclosed (only the identity of P concealed) or undisclosed (fact of P concealed), auth A may nonetheless be liable at the election of the 3P.

Front 33

Duties A owes to P: What duties does A owe to P? [1, 2, 3, (a), (b), (c)]

Back 33

1. Duty to exercise reasonable care 2. Duty to obey reasonable instructions (i.e., not lie or break the law) 3. Duty of loyalty: The following are prohibited: a) Self dealing - A can't receive a benefit to the detriment of the P. b) Usurping the P's authority c) Secret profits

Front 34

Duties A owes to P: A duty to P hypo:P auth A to buy diamonds. A spots choice diamonds, and secretly buys them for herself for 1M, then resells the diamonds for 2M. What duties has A breached?

Back 34

A has breached the D of L to P by: 1. self dealing - benefiting herself to P's detriment 2. usurping P's opportunity to buy choice diamonds and 3. by making a secret undisclosed profit at P's expense

Front 35

Duties A owes to P: What remedies does P have against A?

Back 35

P may recover losses caused by the breach and also, may recover profits made by breaching A as well. Disgorge ill-gotten profit.

Front 36

Partnership: What will be the issues?

Back 36

1. P-ship formation 2. Liabilities of Ps to 3Ps 3. Rights and liabilities between Ps 4. P-ship dissolution

Front 37

Partnership: What formalities are required to form a P-ship?

Back 37

None. There are no formalities to becoming a general P-ship. GP is truly unique among all forms. P-ship can even be deemed to be made after the fact.

Front 38

Partnership: What's the definition of a GP?

Back 38

An association of 2 or more persons who are carrying on as co-owners of a business for profit.

Front 39

Partnership: How are profits viewed w/ regard to whether a P-ship exists?

Back 39

The contribution of money (capital) or services in return for a share of the profits is prima facie evidence of a GP. NOT for a wage, common interest, payment, etc.

Front 40

Partnership: What principles are used in determining liabilities of Ps to 3Ps?

Back 40

Agency principles: 1. Ps are As of the P-ship for carrying on usual p-ship business. 2. P-ship is bound by torts commited by Ps in scope of P-ship business. 3. P-ship is bound by Ks entered by partners w/ authority.

Front 41

Partnership: How are General Ps held liable for debts of the P-ship?

Back 41

GPs are personally liable for debts of the P-ship.

Front 42

Partnership: What is an incoming P's liability for pre-existing debts?

Back 42

As a rule, incoming Ps are not liable for prior debts, but any money contributed to P-ship by incoming P can be used to satisfy prior debts.

Front 43

Partnership: What is an outgoing P's liability for subsequent debts?

Back 43

In NY, an outgoing P retains liability on future debts until they die unless notice of their withdrawal has been given to all known and even potential creditors.

Front 44

Partnership: What is G P-ship Liability by Estoppel?

Back 44

One who represents to a 3P that a Pship exists will be liable as if a P-ship exists. Paula and Peter yacht hypo. Paula liable for Peter's torts as is she were a P.

Front 45

Partnership: What are 3 keys to answering potential P-ship Qs?

Back 45

1. Formation 2. Liability 3. Estoppel

Front 46

Partnership: What's a limited P-ship?

Back 46

A P-ship w/ at least 1GP and at least 1 Ltd. P. By definition, a 2 tier structure. Thus, there will be some measure of limited liability

Front 47

Partnership: How is a limited P-ship formed?

Back 47

Must file a ltd P-ship cert that includes names of all GPs. (b/c of ltd liability, have to have file notice w/ state)

Front 48

Partnership: How is liability and control distributed in a ltd P-ship?

Back 48

General Partners: GPs are still liable personally for all ltd P-ship's obligations, but they may excercise control over the business. Ltd Partners: Have ltd liability. They aren't liable for obligations of ltd P-ship. But b/c ltd Ps, w/ litd control, they may not exercise control of business w/o forfeiting ltd P status.

Front 49

Partnership: What's a Registered Limited Liability P-ship (RLLP)

Back 49

General P-ship engaged in professional practice.

Front 50

Partnership: How to form RLLP?

Back 50

Must file a cert of regis w/ in Department of State in NY which includes professions to be practiced.

Front 51

Partnership: Liabilities in RLLP?

Back 51

No Partner is liable for P-ships debts and obligations. BUT Ltd Ps are always liable for their own wrongdoing

Front 52

Partnership: What is the purpose of an LLC?

Back 52

Originally to give to its owners (members) same rights and Ltd L of S in corp and also the benefits of P-ship tax status. Best of both worlds (Partnership tax is good, corp tax is bad)

Front 53

Partnership: How LLC formed?

Back 53

Must file articles of organization (not articles of incorporation) and also publish a summary of articles once a wk/6wks in a row in 2 newspapers.

Front 54

Partnership: Liabilities in LLC?

Back 54

The member owners won't be liable for any obligations of company itself (just like S) Members of LLC even have right to maintain a derivative suit on behalf of the company.

Front 55

In order to have P-ship tax benefits, what characteristics must an LLC have?

Back 55

must have 2 of the following 3 P-ship characteristics: 1. Members control, but may delegate to managers, 2. Ltd Liquidity: Member interests not freely transferable 3. Ltd Life: events of dissolution.

Front 56

Partnership: LLC in a nutshell?

Back 56

Equal Ltd liability + Ltd liquidity + Ltd life + Ltd tax liability.

Front 57

Partnership: What duties do partners (Pts) owe?

Back 57

Pts are fiduciaries of each other and the P-ship. 1. Duty of loyalty: GP may never: a) engage in self dealing b) usurp P-ship opportunities c) have secret undisclosed opportunities 2. Action for accounting: In action for accounting, P-ship may recover losses caused by breach and also may disgorge profits made by the breaching Pts.

Front 58

Partnership: What rights do Pts have in P-ship property?

Back 58

1. Specific P-ship assets: Land, or leases, or eqpt owned only by the P-ship as specific P-ship assets. Therefore no individual P may X-fer these assets w/o P-ship authority. 2. Share of profits and surplus: Only thing individually owned. Each P owns their share of profits as personal property. Therefore, each P may X-fer their share of profits to some 3P. 3. Share in management: This is an asset owned only by P-ship itself, and not individual Ps. Therefore individual Ps may not X-fer their share in management to some 3P. Close call 4. Conflict between spec P-ship assets and personal property: Whose money was used to buy the property? If personal $, personal property. If P-ship $, P-ship property.

Front 59

Partnership: To what control is each Pt entitled in regards to management?

Back 59

Absent an agreement to the contrary, equal control (vote). In NY, Pts can negotiate terms of management.

Front 60

Partnership: What salary do Pts get?

Back 60

Absent an agreement to the contrary, Pts get no salary. Exception: P gets compensation for helping to wind up P-ship's business.

Front 61

Partnership: How are profits and losses shared?

Back 61

Independent rules: 1. Absent agreement, profits shared equally. 2. Absent agreement, losses shared like profits. Analyze each separately. (In other words, say “Absent agreement, profits shared equally” and “Absent agreement, losses shared like profits”).

Front 62

Agreement is silent on profits and losses. How are the profits shared?

Back 62

“Absent agreement, profits shared equally” and “Absent agreement, losses shared like profits” (in this case, equally)

Front 63

In the agreement it says that profits are shared 60/40. How are the losses shared?

Back 63

“Absent agreement, losses shared like profits” – thus, losses are shared 60/40

Front 64

Partnership: What is dissolution? What triggers P-ship dissolution? When can a partnership be dissolved by decree of an equity court on request of a partner?

Back 64

Dissolution is a change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business. Any material change in P-ship caused by death/withdrawal of any single GP works an automatic dissolution of GP-ship. Same is true in the event the business becomes illegal or there is a bankruptcy of a partner or the partnership. a partnership can be dissolved by decree of an equity court on request of a partner if breach of the partnership agt, unprofitability, or misconduct, incompetence or incapability of a partner.

Front 65

Partnership: What is the termination of a P-ship?

Back 65

The real end of the P-ship

Front 66

Partnership: What is the winding up of a P-ship?

Back 66

The period between dissolution and termination in which remaining Ps must liquidate P-ship's assets to satisfy P-ship's creditors.

Front 67

Partnership: What is compensation for winding up?

Back 67

An exception to the no-salary rule, Ps receive compensation for helping to wind up.

Front 68

Partnership: What is P-ships liability for winding up?

Back 68

Old business: The P-ship, and therefore its individual GPs, still retain liability on all X-actions entered into to wind up old business with existing creditors. New Business: The P-ship and therefore its ind GPs still retain liability even on brand new X-actions until notice of dissolution is given to all existing and even potential creditors.

Front 69

Partnership: What is the priority of distribution to creditors in winding up?

Back 69

Each level of priority must be fully satisfied b/f beginning the next level in this order: 1. First, creditors must be paid. a) all outside non-P trade creditors must be paid b) All inside Pts who have loaned P-ship money also must be paid. 2. Second, capital contributions by Pts must also be paid, in addition to the loans made in step 1. 3. Profits and surplus, if any: Whatever's left after 1 and 2. Profits, if any, are shared equally w/o agreement.

Front 70

Partnership: Rule for partner repayment in windup?

Back 70

Each Pt must be repaid his or her loans and capital contributions, plus that Pt's share of the profits or minus that Pt's share of the losses.

Front 71

Partnership: Good news distribution hypo: A and B dissolve AB P-ship. In windup, they liquidated the P-ship assets and have a total of 1M to distribute. How should that amt be distributed, if (1) the P-ship owes 600k to trade creditors, (2) Pt A loaned the P-ship 100k, and (3) Pt B made capital contributions of 200k?

Back 71

1. First all creditors must be paid: Outside trade creditors 600k, and A for his loan of 100k. 2. Second, P-ship must repay 200k to B for B's capital contributions. 3. 100k leftover in profits. A B share equally in profits w/o agreement, A 50k, B 50k.

Front 72

Partnership: Bad news distribution hypo: What if all facts are same except now, AB P-ship only has 700k to distribute?

Back 72

1. All outside and inside Cs must get paid, 600k to trade creditors, 100k to A 2. No more money to pay back B's capital contribution of 200k. Its a loss, but B must be paid back. 3. Individual GP still liable for 200k loss. 4. w/o agreement, profits shared equally, and losses shared like profits, so losses here will be shared equally. A must pay 100k in, and B must do the same. P-ship then will have 200k to repay B.

Front 73

Mini-review:Agency: P's liability for A's torts?

Back 73

1. Assent Benefit Control plus scope. 2. No VL for IC's torts unless exceptions apply. 3. Intentional torts generally outside scope, unless exceptions apply.

Front 74

Mini-review:Agency: P's liability for A's Ks?

Back 74

1. EA auth: oral, except land. Revocable, unless durable. 2. IA: Necessity, or custom, or prior dealing 3. AA: P cloaks A w/ auth + 3P relies. 4. Ratification = Knowledge + full acceptance of benefits 5. Authorized As not liable unless undisclosed P.

Front 75

Mini-review:Agency: Duties A owes P?

Back 75

1. Care 2. Obedience 3. Loyalty (disgorge profits inside)

Front 76

Mini-review:Partnership: Formation?

Back 76

1. No GP formalities 2. Association, 2 or more persons carrying on as co-owners of a business for PROFIT

Front 77

Mini-review:Partnership: Liabilities to 3Ps?

Back 77

1. GPts liable for all P-ship obligations 2. Estoppel: Representers are liable as if GPts 3. Ltd Pts, RegLL Pts and LLC members have ltd liability

Front 78

Mini-review:Partnership: Relations b/t Pts?

Back 78

1. Fiduciaries >>> accounting for profits 2. Only share of profits is liquid, transferable personal property 3. w/o agreement: equal control, no salary, equal profits, and losses like profits.

Front 79

Mini-review:Dissolution: Dissolution, Priority, Distribution rule?

Back 79

1. Dissolution = any material chang including death or withdrawal 2. Priority: Outside Cs, inside Cs, capital contributions, profits, if any, shared equally w/o agreement. 3. Distribution Rule: Each Pt receives their loans and capital contributions plus their share of profits, but also minus their share of losses.