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25 Cards in this Set

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DETERMINING LIABILITY OF PRINCIPAL FOR TORTS OF AGENT: Factors
RESPONDEAT SUPERIOR OR VICARIOUS LIABILITY:
1) Principal-Agent relationship exists (“ABC”)
2) Tort was committed by agent within the scope of that relationship (3-part weighing test)
DETERMINING LIABILITY OF PRINCIPAL FOR TORTS OF AGENT: Whether Principal-Agent relationship exists (part 1 of test for liability)
a) Assent, meaning informal agreement between a principal who has capacity and the agent.
b) Benefit, meaning the agent’s conduct must be for the principal’s benefit.
c) Control, meaning the principal must have the right to control the agent by having the power to supervise the manner of the agent’s performance. Two typical fact patterns:

Sub-agents: there can be no vicarious liability for sub-agent’s tort unless there is assent, benefit, and the right to control that sub-agent tortfeasor. And we’re not going to find these things.

Borrowed agent: one person goes out and borrows another’s agent, and the borrowed agent commits the tort. The q is whether the borrowing principal is responsible. Recite the rule. It might be a close call—we might find assent, some benefit, but will never find the right to control the borrowed agent.

Moral of the story: it doesn’t matter what they give us, b/c we can always give the rule.
PRINCIPAL FOR TORTS OF AGENT: Rules for Subcontractor liability
a) Factors: There’s no right to control an independent contractor b/c there is no power to supervise the manor of an independent contractor’s independent performance.

b) Rule: In general, there can be no vicarious liability for independent contractor’s torts.

c) Exceptions:
-Ultra-hazardous Activity exception: If independent contractor commits a tort while engaged in ultra-hazardous activity, there will be vicarious liability.
-Note: brake-repair is an ultra-hazardous activity.
-Estoppel: if you hold out your independent contractor with the appearance of agency, you will be estopped from denying vicarious liability.
-If Gas Station says “gas station and brake repair” and question asks about independent brake repair contractor working for them, it’s likely that the gas station held out the independent contractor w/ appearance of agency.
DETERMINING LIABILITY OF PRINCIPAL FOR TORTS OF AGENT: Whether Tort was committed by agent within the scope of that relationship (part 2 of test for liability)
(3-part weighing test):

Was tortious conduct “of the kind” agent was hired to perform? If conduct was in the job description, it’s likely to be w/in the scope.

**Did the tort occur “on the job”? (Frolic as opposed to Detour); A “frolic” is a new and independent journey. So not w/in employment; A “detour” is a mere departure from an assigned task. Yes, w/in employment.
o Did the agent intend to benefit the principal? In NY, if we find agent even in part intended to benefit the principal, that’s enough to call that conduct inside the scope.

Note: whenever you have employer-employee relationship, you have agent-agency relationship.

So, when tort occurs “on the way back” to work, it is merely a detour.
LIABILITY OF PRINCIPAL FOR TORTS OF AGENT: Intentional Torts (rule, exceptions)
Rule: As a rule, intentional torts are outside the scope of agency.

Exceptions: Intentional torts are w/in the scope if the conduct was:
1) Specifically authorized by the principal.
2) Natural from the nature of employment. e.g. security guard.
3) Motivated by a desire to serve the principal.

So, while as a rule bar owner is not liable for intentional torts, the question is likely to fit within at least one (if not all) of these three for tort of its bouncer.
LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS: General Rule
Principal is liable for contracts entered into by its agent if the principal authorized the agent to enter the contract. So, begin question: “In general, a principal will be liable on its authorized contracts....”
LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS: Types of Authority (4)
Actual Express Authority: Principal used words to express authority to agent.

Actual Implied Authority

Apparent Authority. Two-part test: (1) principal cloaked agent w/ the appearance of authority, and (2) 3d party reasonably relies on appearance of authority

Ratification: authority can be granted after the contract has been entered, if: (1) Principal has knowledge of all material facts regarding the contract, and (2) Principal accepts its benefits; ratification must be COMPLETE
LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS: Grant of Actual Express Authority
Rule: Oral and private are ok, but narrow construction.

Except: land—any interest in real estate lasting more than one year. If K involves land, then the express authority to enter the K must be in writing.

Express Authority will be revoked by:
-Unilateral act of either party; or
-Death or incapacity of the principal.

BUT, Durable power of attorney: Express authority cannot be revoked if principal has given agent this. POW is written expression of authority to enter into a transaction or transactions, and conspicuous survival language makes it durable (e.g. “survives death,” “survives incapacity”).
LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS: Grant of Actual Implied Authority
Authority which agent reasonably believes has given, because:

1) Necessity: There is implied authority to do all tasks which are necessary to accomplish an expressly authorized task (i.e. all smaller tasks required to do the bigger one are impliedly included).
2) Custom: There is implied authority to do all tasks which are customarily performed by persons with the agent’s title or position.
3) Prior dealings between the principal and the agent. There is implied authority to do all tasks which the agent believes to have been authorized from prior acquiescence by the principal.
LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS: Apparent Authority
Rule: (1) principal cloaked agent w/ the appearance of authority, and (2) 3d party reasonably relies on appearance of authority

Two types of questions:
-Secret Limiting Instruction question: agent has actual authority, but the principal has secretly limited that authority. Agent acts beyond the scope of the limitation.
-Lingering Authority: Actual authority has been terminated. Afterwards, agent continues to act on principal’s behalf.

NOTE: customers can rely reasonably on the appearance of authority until they receive notice of termination.
LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS: General liability rules
1) If no authority, principal not liable on the K. If no authority, agent is liable on the contract.
2) If authority, principal is liable on the K. If authority, agent is not liable on the K.
Exception: If principal is partially disclosed (only the identity of the principal concealed) or undisclosed (fact of principal concealed), authorized agent may nonetheless be liable at the election of the third party.
Duties agent owes to a principal
(1) Duty to exercise reasonable care.
(2) Duty to obey reasonable instructions
(3) **Duty of Loyalty, i.e.
-No self-dealing; agent cannot receive a benefit to the detriment of the principal
-No usurping the principal’s opportunity; or
-No secret profits.

Remedies:
Principal may recover losses caused by the breach; and
Principal also may disgorge profits made by the breaching agent as well.
PARTNERSHIP FORMATION
Formalities: There are no formalities to becoming a general partnership. Thus a general partnership is unique among forms.

Definition: General partnership is an association of two or more persons who are carrying on as co-owners of a business for profit. NOTE: almost always we will have a close call.

Sharing of Profits: Contribution of money or services in return for a shared of the profits, if any, is prima facie evidence of a general partnership.
LIABILITY OF PARTNERS TO THIRD-PARTIES: Who bound by contracts
Agency Principles Apply.

o Partners are agents of the partnership (principal) for carrying on usual partnership business.
o Partnership is bound by torts committed by partners in scope of partnership business.
o Partnership is bound by contracts entered by partners w/ authority.

ALSO General Partnership Liability by Estoppel—one who represents to a 3d party that he is a partner in a partnership will be liable as if partnership exists
LIABILITY OF PARTNERS TO THIRD-PARTIES: Partnership Debts
Each individual General Partner is Personally liable for all debts of the partnership

Incoming partner’s liability for pre-existing debts? As a rule, incoming partners are not liable personally for prior debts, EXCEPT any money paid into the partnership by an incoming partner may be used by the partnership to satisfy prior debts.

Outgoing partner’s liability for subsequent debts? Outgoing partners retain liability even on future debts until notice of their withdrawal has been given to all known and even potential creditors. BUT liability terminates upon their death.
Partnerships Other than General Partnership: 3 types
Limited Partnerships: Partnership w/ at least one general partner and at least one limited partner.

Registered Limited Liability Partnerships (RLLP)

Limited Liability Corporation (LLC)
Partnerships Other than General Partnership: Limited Partnerships
Limited Partnerships: Partnership w/ at least one general partner and at least one limited partner.

Formation: You must file a limited partnership certificate that includes the names of all general partners.

Liability and control:
1. General partners: still personally liable for partnership obligations. BUT as general partners, they have the right to manage the partnership.
2. Limited partners: not liable for partnership’s obligations. BUT they may not generally manage the business.
Partnerships Other than General Partnership: Registered Limited Liability Partnerships (RLLP)
Formation: You must register w/ the department of state by filing a certificate of registration that includes the profession that you are practicing. (So, this is just for professions)

Liabilities: No partner will be liable for the debts and obligations of this biz form. But partners are always liable for their own personal wrongdoing.
Partnerships Other than General Partnership: Limited Liability Corporation (LLC)
Purpose: To give to owners to same plus the beneficial tax treatment of a tax treatment of a partnership.

Formation: By filing the articles of organization in and publish a summary of the articles once a week for six weeks in a row in two newspapers.

Liabilities: Owners not liable for debts and obligations of the corporation itself.

Partnership Characteristics:
1) Members control, but may delegate to managers
2) Limited Liquidity—member interests are not freely transferable.
3) Limited Life—events of dissolution.
LLC: limited liability plus limited liquidity plus limited life plus limited tax
RIGHTS AND LIABILITIES BETWEEN PARTNERS: Generally
1. Partners are fiduciaries of each other and the partnership

2. Partners’ rights in partnership property

3. Absent agreement, each partner entitled to equal control

4. In absence of agreement, partners get no salary (EXCEPT: partners get compensation for winding up partnership business)

5. Absent agreement, partners share profits equally; share losses in same way as profits.
RIGHTS AND LIABILITIES BETWEEN PARTNERS: Mutual fiduciaries
Duty of loyalty: General parties may never engage in self-dealing, may never usurp partnership opportunities, and may never make secret undisclosed profit at partnership’s expense.

Action for accounting. Only action that can be brought by partner against partner. Partnership may recover losses caused by the breach and also may disgorge profits made by the evil breaching partner as well.
RIGHTS AND LIABILITIES BETWEEN PARTNERS: Rights in Partnership Property
Specific Partnership Assets. Things like land, leases, or equipment owned only by the partnership as partnership assets. Therefore no individual partner may transfer those assets without partnership authority.

Share of profits and surplus. Profit’s share is personal property. Therefore, individual partners may transfer their share of profits and surplus to third parties.

Share in management. It’s asset owned only by the partnership itself. Therefore, no individual partner may transfer his share to third parties.

Conflict between specific partnership assets and personal property: Our tie-breaking test. Ask whose money was used to buy the property. If partnership money was used to buy the property, it becomes partnership property. See the hypo: If partner bought with his own money, he may freely transfer through inheritance.
PARTNERSHIP DISSOLUTION: Overview
Dissolution: Any material change in the partnership caused by the death or withdrawal of any single general partner causes an automatic dissolution.

Winding up: This is period between dissolution and termination in which the remaining partners liquidate the partnership’s assets to satisfy the partnership’s creditors.

Termination: This is the real end.
PARTNERSHIP DISSOLUTION: Compensation and liability for winding up
partners do receive compensation for helping to wind up the partnership.

Partnership’s liability for winding up.
-Old Business: The partnership and therefore the its individual general partners retain liability on all transactions entered into to wind up old business with existing creditors.
-New Business: 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.
PARTNERSHIP DISSOLUTION: Priority of distribution
Each priority level must be fully satisfied before beginning the next level in this order
a) First, all outside non-partner trade creditors plus all inside partners who had made loans to the partnership and become creditors must be paid.
b) Second, capital contributions by partners must be paid.
c)Third, profits and surpluses, if any.

Rule: Each partner must be repaid his or her loans and capital contributions, plus that partner’s share of the profits or minus that partner’s share of the losses.