Agency & Partnership

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Agency

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A relationship

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I. Agency

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exists when there is mutual assent btw Pr and A that A will act on behalf of Pr and subject to Pr’s control.

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II. Liability in K?
a. Principal

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i. P’s are liable for the acts of their agents only when the agents are acting with actual authority, apparent authority, and inherent authority.

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1. Actual authority

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can be expressed (written, oral) or implied (inferred by conduct of the principal). Actual authority comes from manifestations made from Pr to A that would lead a reasonable person in A’s position believe that Pr has given him the power to so act.

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a. Equal dignity requirement

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AR requires that agency relationship for conveyance of real estate must be in writing

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2. Apparent authority

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occurs from manifestations of the P to X that lead a reasonable person in X’s position to believe that the Pr had authorized the agent to so act.

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3. Inherent Authority

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occurs merely by the principal putting the agent in a position. Usually occurs when the agent had power and Pr took it back but X did not know there was even a Pr.

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4. Estoppel

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Liability by estoppel occurs when undisclosed Pr acts in a way that induces X to act and X relies to his detriment and Pr having notice that it might induce reliance fails to take reasonable steps to notifyX. Remedy is damages suffered.

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5. Ratification:

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P is liable to X when (1) he affirms the prior act (2)know all material facts (3) the actor acted or purported to act on behalf of P and (4) P existed at the time of the act and had capacity to ratify on the day of ratification. NOTE: There can be no partial ratification. Ratification must precede the occurrence of circumstances that will cause the ratification to have adverse effects on X. Ratification relates back to the time of the act.

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b. Agent’s liab in K.:

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i. Generally A is not liable to X. A will be liable to X if A agrees to it, fails to reveal Pr, or A exceeds actual/ apparent authority.

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a. Exceptions to A’s liability

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i. If P ratifies
ii. The person gives notice that she doesn’t know if she has authority to do it
iii. X knows that the agent does not have authority

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the elements of fraud

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1. Misrepresentation of material fact on which the person reasonably relies and it causes damage.
2. If it is omission, then you have to show there was a duty to disclose.

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III. Liability in Tort

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b. An employer is subject to liability for torts committed by employee while acting within scope of their employment.

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i. Er-ee relationship

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exists when the ee is an agent whose principal has the right to control the manner and the means of the agent’s performance of work or controls the physical conduct of the agent.

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1. Factors to determine Er-EE relationship existed

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2. Extent over control of details
3. Employed someone in distinct occupation
4. Kind of occupation (done by specialist without supervision)
5. Skill required (more less likely employee)
6. Who supplies the instrumentalities, tools, place of work
7. Length of time (working for long-term more likely employee)
8. Of payment (on salary may be employee)
9. Part of regular business (if not a part of your business then likely indep.
10. Whether parties believe they are creating an employer relationship
11. Whether principal is in business of his own.

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ii. Scope of employment:
1. 2nd restatement

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kind of thing she is employed to do
b. doing it for the employer. (Dual purpose counts too)
c. authorized time and space limit.

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3rd restatement regarding scope of employment

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an EE acts within the scope of employment when performing work that is assigned by employer or engaging in a course of conduct subject to the employer’s control
a. Independent course of conduct not intended by the employee to serve any purpose of the employer is not in the scope.
b. Was it within the time and space?

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i. Detour

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occurs when there is no substantial deviation and still in the scope.

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ii. Frolic

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is when there is a substantial deviation and outside the scope.

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c. A zone of risk

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Was it foreseeable

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3. Exceptions to non-liability for acts of Independent K

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a. (1)Principal authorizes the tort Ratification Pr. liable for his own tort Pr. liable for own tort due to special relationship where the Pr puts the agent in a position wherePr can reasonably foresee that the agent could harm X. Nondelegable duty where principal has a duty to protect people or a duty under statuteRespondeat superior
g. (7)Tort committed within apparent authority

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franchisor liable in tort

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i. Only if you can establish that it was an ee-er relationship

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borrowed servant

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Whoever controlled the person at the time will be liable

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IV. Fiduciary duties:
a. Agent owes Principal

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i. Duty of obedience: the agent has to obey the lawful instructions that are oral or written. (ex. Job descriptions).

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ii. Agent: Duty of Care

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1. An agent must act as an ordinary prudent person under similar circumstances.

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iii. Agent: Duty of Loyalty

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a. Must communicate knowledge
b. Must account for property or money given by principal
c. Must act only for principal
d. Must not act as an adverse party herself or on behalf of someone adverse.
e. Must not reveal or use any confidential info she gets from P
f. Must not usurp the principal’s opportunities (not to acquire a material benefit from third persons).

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3. Breach of fiduciary duties of Agent

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i. You can sue for breach of K (if she is your employee)
ii. You can sue for restitution
iii. You can create a constructive trust: whatever money she has will be held in trust.
iv. Injunction
v. Accounting (allows you to go through the books and figure out how much is owed.
vi. Self-help without breaching the peace
vii. Refuse to pay for breach of K

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iv. What can be recoverable for breach of duties

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1. Atty fees for K suit (but not for tort)
2. You can recover the secret profit…just show that agent wrongly benefited.

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b. Principal owes fiduciary

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i. Owe duty to be bound by K (Duty to pay)
ii. Duty to indemnify
iii. Duty of fairness and good faith

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i. Notification:

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manifestation made in a reasonable manner with the intention of affecting the legal rights and duties of the notifier in relation to rights and duties of persons to whom notification is given

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ii. Notice to Agent of Fact

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1. A person has notice if he knows the fact, has reason to know, has received notification, or should know to fulfill a duty owed.

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1. Notification imputed to Pr

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a. A notification given to agent is effective as notice to P if the agent has actual or apparent to receive that kind of notification.
i. Unless the person who gives the notification knows or has reason to know that the agent is acting adverse to the interests of P.

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3. Notice of fact imputed

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a. If agent knows or has reason to know a fact with the scope of his authority, the fact is imputed to P unless the agent acts adversely (acting solely for himself) or unless the agent is subject to a duty to someone else not to disclose.

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V. Termination of Agency:

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1)the agent’s death
 (2)the Pr’s death
• At CL Pr death immediately revoked agency power/ Rest. 2nd approach.
• Rest. 3rd says termination is only effective once agent has notice of the death.
• Don’t know what AR would do.
 (3)the Pr’s loss of capacity (notice probably required)
There has to notice that the loss is permanent or that lack of capacity is adjudicated• Capacity test:
o A person has capacity to act a Pr if at the time the agent acted he could have done it himself. Same capacity to do the act himself.
o Agent: any person may be empowered to act this includes agents with mental disability.an agreement bw the agent and Pr (This can implied as well).
 (5) a manifestation of revocation by the Pr to the agent (unilateral)
 (6)Renunciation by the agent (unilateral) (7) if the legislature has interfered

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Agency Survives in AR

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 Durable powers of atty survives incapacity: It must be in written in order to trump the CL rule.
• Incapacity under the statute is the inability to manage property or business affairs because the person has an impairment or you cannot make or communicate your decision to other people.
• You are incapacitated if you are missing, detained (in prison), outside the US and unable to return.

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o Written POA

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If it is written but non-durable, it only terminates when the agent has actual notice.

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ii. Power coupled with an interest

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a power coupled with a stake in the underlying subject matter of the transaction and the interest is not revocable, will survive death and incapacity, and no fiduciary duties owed.

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a. Co-agents

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agents who have agency relationships with the same principal. They do not owe fiduciary duties to one another and don’t bind each other

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b. Subagent

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is person appointed by agent to perform functions that the agent has consented to perform on behalf of the agent’s PR. The appointing agent is responsible to for the conduct of the subagent. ii. Both the agent and the subagent owe duties to principal and the subagent owes duty to the agent

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I. Sole Proprietorship:

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no formal meeting or filing requiredFinancial rights/ capital raising: It does not create any other source of capital, the amount of money you put in or what you borrow.Management: you make all the decisions, unless you hire.
d. (4) Liability: you are solely liable and the creditor can get at all of your assets even personal assets.
i. Also, your personal creditor can get at your business assets.
e. (5)Continuity: If something bad happens to the person it will drastically impact the business. If death, then it might pass through probate etc.
f. (6)Transferability: you cannot give a piece of the business away. Very difficult to transfer it. No vehicle to do that.
g. (7)Tax: Business income is reported the same as business owner’s personal income. All is taxed in one document at the individual rate. You just report it as income. h. NOTE:
i. You have to file an assumed name file (D/B/A filing). You have to file with the county clerk. 25 dollars