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99 Cards in this Set

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Three types of agency problems
1. liabiliyt of principals for torts of agent to third party

2. contracts entered by agent

3. duties agents owe to principals
Tort agency fact pattern
whether principal will be vicariously liable for torts committed by agent

"The principal will be liable for torts committed by agent if (1) a principal-agent relationsihp exists, and (2) the tort was committed by the agent within the scope of the relationship
Tort vicarious liability test
The principal will be liable for torts committed by agent if (1) a principal-agent relationsihp exists, and (2) the tort was committed by the agent within the scope of the relationship
when does principal agent relationship exist?

(relevant as one part of vicarious liability test for torts)
ABC
1. assent, an informal agreement between the principal and agent

2. Benefit, the agent's conduct must be for the principal's benefit

3. Control, principal must have the right to control the agent by having the power to supervise the manner of the agent's performance
Types of agents
1. agent
2. sub-agent
3. borrowed agent
Sub-agent
1. defined
2. relevant
3. rule
1. enlisted by agent and commits tort

2. relevant in questions where issue is vicarious liability of principal for sub-agent

3. No vicarious liability for a sub-agent's tort unless there is assent, benefit, and the right to control the sub-agent tortfeasor
Borrowed agent
1. defined
2. relevant
3. rule
1. principal borrows another principal's agent

2. relevant in questions where borrowed agent becomes tortfeasor. Is principal liable?

3. No vicarious liability for borrowed agent's tort unless assent, benefit, and right to control the borrowed agent tortfeasor

**Won't find any right to control a borrowed agent, so never vicarious liability for borrowing principal.

**The original principal will retain liability for its agent
Can principal be vicariously liable for independent contract?
No, because no control. Principal has no right to control an independent contractor because no power to supervise the manner of its performance

**Exceptions
1. ultra-hazardous activity exception
2. estoppel
When can principal be held vicariously liable for independent contractor's torts?
1. when ic enganged in ultra-hazardous activities

2. estoppel, when hold out independnet contractor with appearance of agency, principal will be estopped from denying vicarious liability
Torty went to gas station to have brakes reparied. Station had independent contractor arrangement with brake repairer. Repairer negligently repaired Tory's brakes, resulting in accident. Is station liable for tort committed by repairer?
As a rule, there is no vicarious liability for an independent contractor's torts. There are two exceptions: ultrahazardous activities and estoppel. In this case, brake repairer is an ultra-hazardous activity and therefore there will be vicarious liability for the independent contractor's torts.

In ambit of ultra-hazardous acitivities because if screwed up, someone dies.

Moreover, if station has held out its brake repairer with the appearance of agency, it will be estopped from denying vicarious liability on that ground as well.
ultra-hazardous activities of independent contractor
includes activities like brake repair, where screw up can result in big harm
Test for determining scope of principal-agent relationship
Balancing test:

1. Was the tortious conduct of the nature that the agent was hired to perform. E.g. within the job description. If so, likely within scope of agency.

2. Where and when did the tort occur. Likely within the scope of agency if occured on the job. Frolic is a new and independent journey outside the scope of agency. Detour, by contrast, is mere departure from assigned task and is within scope of agency.

3. Did the agent intend to benefit the principal by its conduct? If the agent intended, even in part, to benefit agent with conduct, the conduct is still within the scope of agency.
Frolic
New and independnet journeys outside the scope of agency
Detour
Mere departure from assigned task. Agent on detour is within the scope of agency.
Employer instructs employee to drive across town to deliver files to a branch office. On way back, employee stops to pick up shirts at dry cleaner for work next day. In parking lot of dry cleaner, employee hits pedestrian. Is employer liable?
Principal will be liable for its agent's tort in the scope of agency. In this case, the agent was on a detour, a mere departure from an assigned task because a tort occurred on the way back to work.
Employee and employer in question
Always principal-agent relationship with assent, benefit, and right to control agent.
When tort occurs on agent's way back to work
Detour, within scope of agency, because on the way back to work--basically on the job.
Intentional torts committed by agent
As a rule, intentional torts are outside the scope of agency. There are three exceptions: (motivated, natural, authorized)

1. when conduct was specifically authorized by the principal

2. when conduct was natural from the nature of employment

3. when conduct was motivated by a desire to serve the principal
Exceptions to rule that intentional torts committed by agent outside scope of agency
1. when conduct specifically authorized by the principal

2. when conduct was natural from the nature of employment

3. when conduct was motivated by a desire to serve the principal
Bouncer kicks out patron. Is owner liable for intentional torts in bouncing?
As a rule, intentional torts are outside scope of employment and no vicarious liability. All three exceptions apply: (1) bouncer's conduct natural from nature of employment; (2) authorized by employer; (3) motivated by desire to serve principal
Test for liability of principal for contracts entered by agents
**Liable if authorized

Principal is liable for contracts entered into by its agent if the principal authorized the agent to enter the contract.

In MA, four alternative forms of authority will create vicarious liability.

1. actual express authority
2. actual implied authority
3. apparent authority
4. ratification
Actual express authority to enter contract
1. defined
2. why relevant
3. exception
1. principal uses words to express authority for agent to enter contract.
--Can be oral, private.
--Narrowly construed to actual words used to express authorization.

2. relevant because creates vicarious liability

3. Exception is equal dignitities doctrine. If contract itself must be in writing, then so to equally must the express authority be in writing.
How can express authority to agent to enter into contract be revoked?
1. unilateral act of either party

2. death or incapacity of principal

--but express authority can't be revoked if principal gives agent a durable power of attorney.
--a durable power of attorney means a written expression of authority to enter a transaction or transactions. To be durable, there must be conspicuous survival language. Specifically says survives death.
Agent tells principal that she is expert in negotiating real estate transactions. Principal whispers into Agent's ear at party that principal wants agent to negotiate sale of farm. Agent negotiates sale. Is principal bound on sale?
Principal is liable on its authorized contracts. In this case, because the contract to sell land must have been in writing, express authority must have been in writing as well. Therefore the oral, private whisper did not authorize this contract and the principal will not be liable.
Paula collects rare books. She hires Alice to find a rare book to complete her collection. Alice searches everywhere for rare book. As alice is about to pay for the book, Paula dies. Is Paula's estate bound by the contract?
Principal is liable on its authorized contracts. In this case, actual express authority terminated upon Paula's death. Therefore Paula's estate will not be liable on this sales transaction. Alice is personally liable to pay for the book.
Exception to rule that death or incapacity of principal revokes express authority
--but express authority can't be revoked if principal gives agent a durable power of attorney.
--a durable power of attorney means a written expression of authority to enter a transaction or transactions. To be durable, there must be conspicuous survival language. Specifically says survives death.
Actual implied authority

1. defined
2. relevance
3. rule
1. authority which agent reasonably believes the principal has given

2. creates vicarious liabliity in principal for agent to contract

3. Rule (authority when necessity, custom, prior dealings)

(a) Agent has implied authority to do all tasks necessary to accomplish an expressly authorized task

(b) There is also implied authority to do all tasks customarily performed by persons with agent's title or position.

(c) Agent has implied authority to all tasks which agent believes to have been authorized from prior acquiescence by the principal.
Apparent authority

1. defined
2. relevance
3. rule
4. common examples
1. Appearance of authority

2. Relevant because creates vicarious liabiliy between agent-principal in contracts cases.

3. Two part test:
(a) principal itself must cloak the agent with the appearance of authority

(b) third party to contract must reasonably rely on that appearance of authority

4.
--secret limiting instruction
--lingering authority
Charles owns antique store. Shipment of antique clocks arrives from london. Charles tells employee Dufus not to sell special grandfather clock. Dufus sells clock. Is charles bound on the sales contract?
Principal will be liable on his authorized contracts. In this case, there is no actual express or implied authority to sell the clock. Nonetheless there was apparent authority because (1) charles did cloak Dufus with the appearanc eof authoirty to sell the clocks, and (2) third party buyers coming into the store may reasonably rely on the appearanc eof authority.
Secret limiting instruction
1. defined
2. why relevant
1. agent has actual authority but principal has secretly limited that authority. Agent acts beyond the scope of limitation.

2. Relevant bc apparent authority sufficient to create vicarious liability of agent-principal in contracts case.
Lingering authority
1. defined
2. relevance
1. actual authority has been terminated. Afterwards, agent continues to act on principal's behalf.

2. relevant bc is apparent authority sufficient to create vicarious liability
For many years, Agnes has sold goods as Priscilla's agent. Priscilla finds out that Agnes has been stealing money and fires her. Agnes continues selling to customers and runs away with their money. Is priscilla bound?
Principal will be liable on its authorized contracts. In this case, actual, express and implied has been terminated.

Nonetheless, apparent authority lingers because (1) the principal did cloak the agent with the lingering appearance of authority, and (2) customers may continue to rely reasonably on the lingering authority until they receive notice of termination.
Ratification

1. defined
2. relevance
3. rule
4. exception
1. authority conferred by princiapl after the contract entered

2. Relevant bc creates vicarious liability between principal-agent in contracts cases

3. Rule
(a) when principal has knowledge of all material facts regarding the contract and
(b) principal has accepted the benefits of the prior contract

4. Exception: ratification cannot alter the terms of the contract. Principal must accept prior contract in full
Priscilla gives Agnes a written power of atty to purchase steel drums. Agnes enters into contract to purchase 11000 wooden barrels. Priscilla tells agnes "great job, love wooden barrels, but I only need 10,000" Is priscilla bound?
Principal will be liable for its authorized contracts. In this case, there is no actual express or implied authority to buy wooden barrels. Nor is there evidence of apparent authority because the power of attorney was for steel drums not wooden barrels. Nonetheless, priscilla arguably ratified the contract through knowledge and acceptance of its benefits. However, ratification was not valid because it was not complete. Priscilla said that she only needs 10,000 which is evidence that she wanted to change terms of deal. Ratification cannot alter the terms of the contract. Therefore this is not an authorized contract and Priscilla has no liability for her agent's contract. The agent is liable on her own for this contract.
Rules of liability on contract
1. If no authority, principal is not liable on contract. If no authority, agent is liable on contract.

2. If authority, principal is liable on contract. If authority, agent is not liable on the contract.

3. exception: if principal is partially disclosed (only identity of principal concealed) or undisclosed (fact of principal concealed),
authorized agent may nonethiless be liable at teh election of the third-party.
What duties does agent owe principal?
1. duty to exercise reasonable care

2. duty to obey reasonable instructions

3. duty of loyalty
--no self dealing
--no usurping the principal's opporunity
--no secret profits
What are aspects of duty of loyalty of agent to principal?
1. No self-dealing--agent can't receive benefit to detriment of princpal

2. no usurping principal's opportunity

3. no secret profits
Priscilla authorizes agnes to buy diamonds. Agnes spots choice diamonds and secretly buys for self for 1 million and resells for 2 million.

1. What duties, if any, has agnes breached?

2. What remedies, if any, does priscilla have against agnes?
1. Agnes, the agent, has breached the duty of loyalty by (1) self-dealing, by benefiting herself to detriment of principal; (2) by usurping the principal's opportunity to buy those diamonds; (3) making a secret undisclosed profit at the principal's expense

2. The principal may recover losses caused by the breach and also may disgorge profits made by the breaching agent.
Four issues areas in partnership
1. partnership formation
2. liabilities of partners to third parties
3. rights and liabilities between partners
4. partnership dissolution
90% of partnership on general partnership formation.

Sometimes ask to compare with what two other forms of partnerships?
Registered limited liability partnerships

Limited partnerhips
Uniform partnership act
Act applied in MA (NOT revised upa)
How to form a general partnership?
There are no formalities to becoming a general partnerhips.
Formalities to becoming a general partnership
No formalities, no filing, no writing
General partnership defined
An association of two or more persons who are carrying on as co-owners of a business for profit.
sharing of profits rule

1. defined

2. relevance
1. Contribution of money or services in return for a share of the profits, if any, is prima facie evidence of a general partnership.
--not in return for wage

2. relevance because indicates that general partnership has been formed
liabilitites of general partners to third parties for torts and contracts
1. make sure general partnership formed

2. Apply agency principles bc partners are agents of partnership
(a) partners are agents of the partnership for carrying on usual partnership business

(b) partnership is bound by torts committed by partners in scope of partnerhip business

(c) partnership is bound by contracts entered by patrners with authority
Who is liable for debts of general partnership
Each individual general partner is liable for debts of partnerhips.

It is possible to sue Partner A for Partner B's torts.

General partners have huge potential personal liability.

--except incoming partner is not liable for pre-existing debts

--except dissociating (withdrawing) partners are not liable for subsequent debts of general partnership after notice given to all known and potential creditors
Incoming partner's liability for pre-existing debts of a general partnership
No direct personal liability for prior debts

Except any money paid into partnersihp by incoming partner may be used by partnership to satisfy prior debts
Dissociating partner liability for subsequent debts of general partnership
A dissociating (withdrawing) partner retains liability on future debts until notice of dissociation is given to all known and potential creditors
General partnerhip liability by estoppel

1. defined
A person who represents to a third-party that a general partnership exists

will be liable as if a general partnership exists
Paula convinced her friend Peter to start a sailing school and agreed to lend Peter money to purchase a boat for that purpose. At a party, Paula told a wealthy friend: My partner Peter and I are starting a sailing school and we need a boat. The wealthy friend offered to sell paula nd peter a boat, and agreed to allow peter to take for test ride.

Later, peter and paula fight and decide to drop sailing school idea. Next day peter takes boat for ride and destroys it.

May wealthy friend sue Paula for loss of boat?
- Wealthy friend is third party victim of tort victim

As a rule, general partners are liable personally for all partnership obligations including co-partner's torts.

In this case, however, Paula and Peter never really formed a partnership because theirs was a lending arrangement not based on sharing profits.

Under partnership by estoppel, however, Paula has represented to that wealthy friend that she is a partner in a partnership with Peter. Therefore she will be liable for Peter's torts as if she were a partner.

--hits formation, liability, and estoppel
Compare law of formation liability applied to

1. general partnerships

2. limited partnerships

3. registered limited liability partnership
1. No formation requirements

2. Must file limited partnership certificate including the names of all general partners.

3. must register with state by filing a statement of qualification plus annual reports
Limited partnership

1. defined

2. liability
1. A limited partnership is a partnership in which there is at least one general partner and at least one so-called limited partner.

2. General partners are liable personally for all partnership obligations, but may manage the business. Liability
Liability in

1. general partnerships

2. limited partnerships

3. Registered limited liability partnership
1. personally liable for partnership obligations

2. General partners are liable personally for all partnership obligations, but may manage the business. Limited partners have limited liability but cannot manage the business

3. no partner liable for partnership obligations, but can be liable for own wrongdoing
Registerd limited liability partnership

1. defined
2. formation reqs
3. liability
2. must register with state by filing a statement of qualification plus annual reports

3. no partner liable for partnership obligations, but can be liable for own wrongdoings
Rights and liabilities between parties
General partners are fiduciaries of each other and the partnership
--duty of loyalty
Duty of loyalty between general partners
1. can't engage in self-dealing

2. can't usurp partnership obligations

3. can't make secret undisclosed profit at partnership expense
Remedies for partnership when partner has breached duty of loyalty
Action for accounting is only form of action that can be brought by partnership against own breaching partners
Action for accounting
1. defined
2. remedies
1.
only form of action that can be brought by partnership against own breaching partners

2.
Can recover losses caused by breach and disgorge profits made by breaching partner
Partners rights in partnership propert
1. specific partnership assets (no partner may transfer w/out partnership authority)

2. share of profits and surplus (personal property owned as such by individual partners--can be transfered by individual partners to third parties)

3. Share in management (owned by partnership itslef and cant be transferred by individual partners to third parties)
Specific Partnership Assets
land, leases or equipment owned only by the partnership as partnership assets

Therefore, no individual partner may transfer these assets without partnership authority
Share of profits and surplus
Partner's share is personal property owned as such by individual partners

Result is that can be transfered by individual partners to third parties
Share in management
Asset owned only by the partnership itself and not by any individual partner

Therefore, no individual partner may transfer share in management to third parties.
What property can be transferred freely by indivdiual partners in general partnership?
Property in general partnership is relatively illiquid.

Only share of profits and surplus is liquid personal property.
How to distinguish between partnership assets and personal property?
Ask whose money was used to buy the property?

- If partnership money was used to buy property, it is partnership property.

- if personal money used to buy property, it becomes personal property.
John buys a car in John's own name wiht John's money which John uses in partnership business. John dies. Does John's spouse Yoko get car or is it a specific asset of partnership?
In this case, because John bought car with John's own money, it becomes John's own car. Therefore, he is free to leave the car to Yoko through inheritance.
How is management and voting allocated in general partnership?
Absent an agreement, each partner is entitled to equal control
A B and C agree to contribute money and share profits 60-30-10. How do they vote?
Absent an agreement, each partner is entitled to equal control
How is salary allocated in general partnership?
Absent an agreement, partners get no salary.

--EXCEPT, partners receive compensation for helping to wind up the partnership business

--Partnership not based on wage, based on share of profits.
A and B are partners. A works 96 hours/week. B sleeps all day. Does A get salary?
Absent an agreement, partners get no salary.
How do partners share profits?
losses?
Absent an agreement, profits are shared equally.

Absent an agreement, losses are shared like profits.
If agreement in genreal partnership is silent on profits and losses?
First, in absence of agreement on profits, they are shared equally. Second, absent an agreemnet on losses, losses are shared like profits.
If agreement in general partnership says "profits are shared 60/40". How are losses shared?
Absent an agreement on losses, losses are shared like profits. In this case, losses will be shared 60/40 as well.
If general partnership agreement says "losses shared 60/40". How are profits shared?
Absent an agreement on profits, profits are shared equally.
Partner A puts up all the money. Partner B does all the work. Partner C gives the partnership its fine name. Partner D does nothing. How are profits shared?
Absent an agreement on profits, profits are shared equally.
Partnership dissolution defined
Any material change in the general partnership caused by the death or dissociation of any single general partner works an automatic dissolution of the partnership.

Dissolution begins process of ending partnersihp. Just because partnership dissolves doesnt mean dead. Not ended until termination
Termination defined in context of general partnership
Officially ends partnership.
After dissolution and winding up.
Winding up in context of general partnership
Winding up is the period between dissolution and termination in which

the remaining partners must liquidate the partnership's assets to satisfy the partnership's predators.
What is compensation for winding up general partnerships?
This is exception to no salary rule for partners absent agreement.

Partners do recieve compensation for helping to wind up partnership (liquidate assets and satisfy creditors)
Partnership's liability for winding up:

1. old business?

2. new business?
1. The partnership and therefore its individual general partners still retain liability on all transactions entered into to wind up old business with existing creditors.

2. The partnership and therefore its individual general partners still retain liability even on brand new business transactions until notice of dissolution is given to all known and potential creditors.
What is the priority of distribution to creditors upon dissolution of general partnership?
1. All creditors are paid first
--outside non-partner trade creditors
--inside partner creditors who have loaned money to partnership

2. Capital contributions made by partners
--partnership becomes liable to own partners for full repayment of their capital contributions

3. Profits and surplus
--shared equally in absence of agreement
What are rights and liabilities of partners in dissolution of general partnership.
Each partner must be repaid his or her loans and
capital contributions plus
that partners share of profits or minus that partner's share of the lossess.
A and B dissolve the Partnership. In winding up, they liquidate the partnership assets and have a total of 1 million to disttibute.

How shoudl that amoutn be distributed if
(1) the partnership owes 600,000 to trade creditors
(2) partner A loaned the partnership 100,000, and
(3) Partner B made capital contributions of 200,000
First, all outside trade creditors must be repaid 600,000 and all inside parnters must be repaid their loans. A must be paid 100,000 for its loan to the partnership.

Second, the partnership must fully repay Partner B his capital contribution of 200,000.

Third, in the absence of an agreement profits are distributed equally. Therefore partners A and B each get 50,000 of the leftover 100,000 profit.
What if dissolved partnership doesn't have enough money to repay partners capital input?
Partnership is liable to partners for capital input. Therefore, partners must pay losses according to rule: losses are shared in the same way that profits are shared. Absent agreement on profit sharing, profits are shared equally. Thus each partner must pay in equally to cover liability to partners for capital input.
Principal's liability for agent's torts
1. assent, benefit, control + scope

2. no vicarious liability for independent contractor's torts

3. intentional torts are generally outside the scope
Principal's liability for agent's contracts
1. express authority
- oral, except land
- revocable unless durable

2. implied authority
- necessity, custom, prior dealings

3. apparent authority
- (1) principal cloaks
- (2) third party relies

4. ratification = knowledge + acceptance of benefits

5. authorized agent not liable unless undisclosed principal
Duties agent owes principal
1. care

2. obedience

3. loyalty
- disgorge profits
Partnership formation
summary
1. no general partnership formalities

2. general partnership is association of two or more persons carrying on co-owners of a business for profit
Liability to third-parties
summary
1. general partners are liable for all partnership obligations

2. estoppel
- representers are liable as if general partners

3. limited partners and registered limited liability partners have limited liability
relations between parties
summary
1. fiduciaries
- accounting for profits

2. only the share of profits is liquid personal property

3. absent an agreement, equal control, no salary, equal profits, and losses like profits
dissolution summary
1. dissolution = any material change caused by death or dissociation

2. all outside plus inside creditors, then capital contributions, then profits if any shared equally in absence of agreement

3. each partner must be repaid for loans and capital contributions plus their share of profits minus their share of losses
As agents of teh partnership, partners have apparent authority to:
bind partnership to any contract within the scope of the partnership business.


If contract outside scope, parthernsihp not bound unless actual authority
tort liability for partners
liable for all partners and employees torts committed within ordinary course of business
liability of incoming partner
liable for prior obligations only to extent of her capital contribution
liability of outgoing partner
liable for all partnership obligations incurred while partner

UNLESS
payment
release
novation

liable for acts dones after retirement UNLEESS notice of withdrawal
Liability of partners in:

1. limited liability partnerships

2. limited partnerships
1. generally not liable for co-partner's tort

2. limited to capital contribution UNLESS
(a) general partner
(b) participates in control of business so that person dealing reaosnably believes is general partner--can vote but not take day to day control
(c) partners hame is in partnership name
What is necessary to start limited partnership?
MUST file with state to comply with statute
Sharing of profits and losses in:

1. general partnership

2. limited partnership
1. absent agreement, profits shared equally. absent agreement, losses shared like profits

2. profits adn losses shared according to contributions
Differences between limited partnership and general partnership
1. Formation of limited partnership requires certificate of limited partnership filed with state. General partnership requires no writing.

2. In general partnerhsip, absent agreement, profits shared equally. absent agreement, losses shared like profits
--in limited partnerhsip, profits adn losses shared according to contributions

3. General partners have manament rights. Limited partners do not.

4. Limited partnership names must include words "limited partnerhsip". No req for general partnership.

5. Liability limited to contribution for limited partners. General partners always personally liable for acts in ordinary course of business.