New York Bar Exam: Agency

Front 1

Liability of P to 3P for torts of A: How to determine whether P will be vicariously liable for torts committed by A?

Back 1

P will be liable for torts committed by A if:

1) a P-A relationship exists, and

2) the tort was committed by the A w/in the scope of that relationship

Front 2

Liability of P to 3P for torts of A: What does a P-A relationship require?

Back 2

P-A relationship requires: (all 3 must be true)

1. Assent - an informal agreement b/t P who has capacity and A

2. Benefit - A's conduct must be for P's benefit and

3. Control - P must have the right to control A by having the power to supervise the manner of A's performance

Note: This rule also applies to sub-agents and borrowed agents. Sub-agents will be missing A, and borrowed agents will be missing C. There can be no vicarious liability for A, Sub-A, or Borrowed-A's tort unless there is Assent, Benefit, and right to Control

Front 3

Liability of P to 3P for torts of A: What's the difference between A and IC?

Back 3

There is no right to control IC b/c there is no power to supervise the manner of IC's perfomanc. No RTC, no power. w/o RTC, no VL.

Front 4

Liability of P to 3P for torts of A: What's the rule on holding P liable for IC's torts.

Back 4

General Rule: There is no VL for IC's torts. [If P only neg in selecting IC, P liable only for her own neg in selection]

Exceptions:

1. NY Ultra hazardous activity exception. If IC commits tort while engaged in above, there will be VL for IC tort. (brake hypo) "In this case, (hazardous activity) is an ultra hazardous activity and therefore there will be VL for IC's torts."

2. NY Estoppel - if you hold out your IC w/ appearance of agency, you will be estopped from denying VL. "Moreover, if Estop-L has held out its IC w/ appearance of A, it will be estopped from denying VL, even for IC's torts.

Front 5

Liability of P to 3P for torts of A: What are the factors in analyzing the scope P-A relationship? (3)(2nd prong of P VL for A torts test)

Back 5

1. Was conduct "of the kind" agent was hired to perform? Was conduct w/in job description? If so, it's w/in scope.

2. Did the tort occur "on the job?" Frolic v. Detour:

- A frolic is a new and independent journey and if A is frolicking, A is outside scope.

- A detour is a mere departure from an assigned task. If A detour, still w/in scope of Agency.

3. Did the A intend to benefit the P? If A even in part intended benefit to P, enough to be w/in scope of Agency.

Dry cleaner hypo - P-A relationship (ABC), A on way back to work (scope).

Front 6

Liability of P to 3P for torts of A: What's the rule on holding P liable for A's intentional torts.

Back 6

As a rule, intentional torts are generally outside the scope of the agency.

Exceptions. Intentional torts are w/in the scope if the conduct was:

1. Specifically authorized by the P.

2. Natural from the nature of employment.

3. Motivated by a desire to serve P.

Ex: Bouncer in a bar. P liable? As a rule, no, but all 3 exceptions will be applicable.

Front 7

Liability of P for Ks entered A: What will be the issue?

Back 7

Whether P is liable for Ks entered into by it’s A.

Front 8

Liability of P for Ks entered A: What is the test to always start with?

Back 8

P is liable for Ks entered into by it’s A if the P authorized the A to enter the K.

Front 9

Liability of P for Ks entered A: What are the 4 types of authority?

Back 9

1. Actual express authority (AEA).

2. Actual implied authority (AIA).

3. Apparent authority (AA).

4. Ratification (R).

Front 10

Liability of P for Ks entered A: What is AEA?

Back 10

When P uses words to express authority to agent.

(a) Rule: Oral, Private (whisper), Narrow (narrowly tailored construed narrowly to words used)

(b) Except: Lank K. If K involves conveyance, the express authority must be in a signed writing.

Front 11

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

Back 11

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 12

Liability of P for Ks entered A: What is AIA?

Back 12

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 13

Liability of P for Ks entered A: What's the AA test?

What are the 2 types?

Back 13

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 14

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

Back 14

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 15

Liability of P for Ks entered A: Ratification Hypo:

Back 15

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. 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 16

Liability of P for Ks entered A: What are the rules of liability on the K?

Back 16

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 17

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

Back 17

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

Hint 17

Duty of C,O,L

Front 18

Duties A owes to P: A duty to P hypo:

Back 18

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?

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 19

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

Back 19

P may recover losses caused by the breach and also,

may recover profits made by breaching A as well. Disgorge ill-gotten profit.

Front 20

Partnership: What will be the issues?

Back 20

1. P-ship formation

2. Liabilities of Ps to 3Ps

3. Rights and liabilities between Ps

4. P-ship dissolution

Front 21

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

Back 21

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 22

Partnership: What's the definition of a GP?

Back 22

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

Front 23

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

Back 23

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 24

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

Back 24

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 25

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

Back 25

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

Front 26

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

Back 26

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 27

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

Back 27

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 28

Partnership: What is G P-ship by Estoppel?

Back 28

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 29

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

Back 29

1. Formation

2. Liability

3. Estoppel

Front 30

Partnership: What's a limited P-ship?

Back 30

A P-ship w/ at least 1GP and at least 1 Ltd. P. By definition, a 2 tier structure.

Front 31

Partnership: How is a limited P-ship formed?

Back 31

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 32

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

Back 32

GPs: As GPs still liable personally for all ltd P-ship's obligations, but they may excercis control of the business.

Ltd Ps: 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 33

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

Back 33

General P-ship engaged in professional practice.

Front 34

Partnership: How to form RLLP?

Back 34

Must file a cert of regis w/ DoS which includes professions to be practiced.

Front 35

Partnership: Liabilities in RLLP?

Back 35

No P liable for P-ships debts and obligations.

BUT

Ltd Ps are always liable for their own wrongdoing

Front 36

Partnership: What is LLC?

Back 36

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.

Front 37

Partnership: How LLC formed?

Back 37

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

Front 38

Partnership: Liabilities in LLC?

Back 38

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. In order to have P-ship tax benefits, 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 39

Partnership: LLC in a nutshell?

Back 39

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

Front 40

Partnership: What duties to Pts owe?

Back 40

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 accting: In action for accounting, P-ship may recover losses caused by breach and also may disgorge profits made by the breaching Pts.

Front 41

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

Back 41

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 b/t 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 42

Partnership: To what control is each Pt entitled?

Back 42

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

Front 43

Partnership: What salary do Pts get?

Back 43

Absent an agreement to the contrary, Pts get no salary.

Exception: P gets compensation for helping to wind up P-ship's business.

Front 44

Partnership: How are profits and losses shared?

Back 44

Independent rules:

1. Absent agreement, profits shared equally.

2. Absent agreement, losses shared like profits.

Analyze each separately.

Front 45

Partnership: What triggers P-ship dissolution?

Back 45

Any material change in P-ship caused by death/withdrawal of any single GP works an automatic dissolution of GP-ship

Front 46

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

Back 46

The real end of the P-ship

Front 47

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

Back 47

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

Front 48

Partnership: What is compensation for winding up?

Back 48

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

Front 49

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

Back 49

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 50

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

Back 50

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 51

Partnership: Rule for partner repayment in windup?

Back 51

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 52

Partnership: Good news distribution hypo:

Back 52

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?

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 53

Partnership: Bad news distribution hypo:

Back 53

What if all facts are same except now, AB P-ship only has 700k to distribute?

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 54

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

Back 54

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 55

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

Back 55

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 56

Mini-review:Agency: Duties A owes P?

Back 56

1. Care

2. Obedience

3. Loyalty (disgorge profits inside)

Front 57

Mini-review:Partnership: Formation?

Back 57

1. No GP formalities

2. Association, 2 or more persons carrying on as co-owners of a business for PROFIT

Front 58

Mini-review:Partnership: Liabilities to 3Ps?

Back 58

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 59

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

Back 59

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 60

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

Back 60

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.