Bus. Org Outline
Agency Relationships
– Agency
o The fiduciary relationship that 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 so to act.
o Elements
§ Fiduciary Relationship
§ Between Parties (an agent and a principal)
§ Formed by mutual consent
§ In which the agent agrees to act on behalf of the principal; and
· Implied = Failure to Object. Existence may exist if evidence shows a course of dealings.
· Express = Contract saying they can act on their behalf.
§ In which the agent is subject to the principal’s control.
o Scope
§ Principle is liable for the acts of his agent which are committed within the scope of his agency.
o Look at the Conduct of the parties NOT THE INTENT.
– Authority
o Is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestation of consnt.
§ Objective Standard – Whether a “P” has manifested his/her consent is determine by asking what a reasonable person would infer the authority of the agent to be.
o Principle is Liable to 3rd Party: if agent had actual authority, apparent authority, inherent authority, or if Principle ratified the act.
§ Some say Prin. Liable for unauthorized acts.
o Agent is Liable to 3rd Party: If no agency exists. (misrepresent by agent)
§ Agent is liable if P is undisclosed or partially disclosed.
o 3rd party is Liable to Principle: If “P” would be liable to third party.
§ Determine Liability by 3 Q’s
· Agency Relationship Exist
· What type of agency?
· If an employee, were acts w/in the scope of employment?
Ways to Create Agency Relationship
– Actual Authority: Principle Communicates with agent which a reasonable person would determine allows agent directly to do certain acts and BIND “P”.
o Look at:
§ Beliefs of Agent
§ Scope: Authority to conduct a transaction, implies authority to do acts that are incidental to it.
§ 3rd party does not have to know that principal exits to crate a binding K with him.
– Apparent Authority: Principal Communicates through written or spoken words or any conduct by P to a 3rd party which reasonably leads the 3rd Party to think the Agent can act on their behalf. (reasonable belief, and actions/inactions by “P”)
o Look at:
§ Scope: Authority to conduct a transaction, implies authority to do acts that are incidental to it.
§ An agent can not create this power on his own
o Must be reasonable, it is authority the agent is held out by the Principal as having.
o Exists only to the point that the 3rd party dealing w/ the agent reasonably believes that the agents is authorized by the principal.
– Inherent Authority: Principal is liable for all acts of the agent which are w/in the authority usually confided to an agent of that character.
o Exists solely for the protection of persons harmed by an agent’s FALSE statements to a 3rd party
o Exists When:
§ Principal is disclosed or partly disclosed to the 3rd party.
§ The Agent makes false statements that would have been truthful if w/in the Agent’s Authority
§ It was reasonable for a 3rd party to rely upon those statements.
– Ratification: When the agent acts w/out authority of any kind, the “P” is bound only if the ratify the K.
o Person is not really an agent, but Ratification allows the “P” to take someone who is not an agent and make them an agent.
o Requires acceptance of the result of the act with an INTENT to ratify with FULL knowledge of ALL of the material circumstances.
§ Ways to Ratify
· Expressly
· Implied by acceptance of the benefits
· Implied by silence of inaction (don’t get to wait forever)
· Trying to enforce the K against the 3rd party.
– 5 Ways to demonstrate Principle-Agent Relationship
o Actual, express authority
o Actual, implied authority
o Apparent authority
o Ratification
o Inherent Agency Power
– Fiduciary Duties of Agent
o Duty of Care = Agent must act in the “P” best interest, no self-dealing
§ Principle is
.
o While one Partner wants their part to be transferable, they don’t want the other Partners to be transferable so they will block any transfer.
– Profit/Loss
o Divided up Per Capita/Per Person according to the agreement
o Split Evenly between the partners if no agreement
– Life Span
o It Lasts until someone Dies, Withdraws, goes Bankrupt (1914)
o Under 1997 Act…a Partner can leave the Partnership w/out it ending or dissolving. (Uniform Partnership Act 1997)
– Financing
o Partners put in Assets (can be money OR services OR ideas OR hybrid)
§ Decide what each asset is worth (important for services)
– Fiduciary Duties (all should be executed with good faith and fair dealings)
o Duty of Loyalty
§ Account to the partnership and hold as trustee any property/profits
§ Refrain from dealing on behalf of a party having an adverse interest to the Partnership
§ Refrain from competing w/ the Partnership before Dissolution.
o Duty of Care
§ Refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.
o Good Faith and Fair Dealing
o Duty of Candor
§ Duty to disclose opportunities that are material to the partnership.
– Voting
o “Ordinary Decisions” (day to day) require a majority vote of the partnership
o “extraordinary” decisions require unanimous assent
§ Transfer of interest in the Partnership
§ Addition of a new partner
§ Change in the Partnership Agreement
– Dissolution of the Partnership
o 3 Ways
§ Dissolution: Designates the point in time partners cease to carry on the Bus. together.
