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Business Associations/Corporations
Rutgers University, Newark School of Law
Dickerson, Claire Moore

Business Associations
Fall 2006
Professor Dickerson
a. Analysis of Agency Problems: Must first determine which of the 3 types of problems is involved:
i. Is the problem between the agent and the principal?
ii. Does it involve a third party trying to hold the principal to an agreement based on the agent’s conduct or on an express agreement?
iii. Does it involve a third party trying to hold a principal liable for the agent’s torts?
b. Proving Agency:
i. The person asserting that there is a principal-agent relationship has the burden of proving it.
ii. Whether an agency relationship has been created is not dependent on the intent of the parties involved.
1. An agency relationship can arise even if the parties do not intend to be agent and principal to each other, and may not arise even if the parties so intend if certain conditions are not met.
iii. The formation of an agency relationship depends on the existence of certain factual elements:
1. Agreement between the parties
2. That the agent will undertake some act on behalf of the principal
3. With the understanding that the principal is to remain in control of the undertaking.
c. Fiduciary Relationship:
i. Every agent is a fiduciary.
ii. She owes a high standard of care to her principal.
iii. Fiduciaries must avoid conflicts of interest, self-dealing, disloyal acts, etc.
d. Gratuitous Agents: These are agents who perform their services without gain. Unlike other agents, gratuitous agents cannot be compelled to perform the duty they have undertaken. The principal may, nevertheless, be liable for the torts of gratuitous agents.
e. Principal’s duty to his agent:
i. The principal is under a duty to compensate his agent, including reimbursing her for out-of-pocket costs, unless the parties contract otherwise.
ii. The principal also has a duty to cooperate with the agent and aid her in the performance of her duties.
a. § 1. Agency; Principal; Agent:
i. (1) Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other to so act.
ii. (2) The one for whom action is taken is the principal
iii. (3) The one who is to act is the agent.
b. §2. Master; Servant; Independent Contractor
i. (1) A master is a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.
ii. (2) A servant is an agent employed by a master to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master.
iii. (3) An independent contra

s servants committed while acting in the scope of their employment (vicarious liability/respondeat superior)
ii. (2) A master is not subject to liability for the torts of his servants acting outside the scope of their employment, unless:
1. (a) the master intended the conduct or the consequences, or
2. (b) the master was negligent or reckless, or
3. (c) the conduct violated a non-delegable duty of the master, or
4. (d) the servant purported to act or to speak on behalf of the principal and there was reliance upon apparent authority, or he was aided in accomplishing the tort by the existence of the agency relation.
i. §379. Duty of Care and Skill
i. (1) Unless otherwise agreed, a paid agent is subject to a duty to the principal to act with standard care and with the skill which is standard in the locality for the kind of work which he is employed to perform and, in addition, to exercise any special skill that he has.
(2) Unless otherwise agreed, a gratuitous agent is under a duty to the principal to act with the care and skill which is required of persons not agents performing similar gratuitous undertakings for others.