1) Is the principal contractually liable to the third party?
a) An agent has the right to bind the principal to the extent that the Principal and agent have agreed, i.e. the agent has authority. Rest. 2d 7
(1) Actual
(2) Apparent
(3) Inherent
(4) No authority, Ratification
(5) Principal is estopped from disclaiming authority
ii) Actual authority (based on P’s manifestation to agent)
(1) Express
(a) P expressly specifies the A’s task
(b) Actual authority contained in the agency agreement (written or oral)
(2) Implied (not limited to the 4 corners of the document)
(a) from words or conduct between the principal and agent.
(b) Incidental to express authority
(c) from past conduct – Mill street church of Christ v. Hogan
(d) from custom or usage
iii) Apparent authority (based on principal’s manifestation to third parties)
(a) Test
(i) Some act by P causes a 3rd party to reasonably believe that the A has authority; and
(ii) 3rd party reasonably relies on the manifestation of authority. (Lind v. Schenley Industries)
1. Reliance: what a reasonable person under the circumstances would have believed
(b) A has Apparent authority to
(i) Do things usual and proper to type of business agent is employed to conduct (Three-Seventy Leasing Corp. v. Ampex Corp.
(ii) Act within customary powers (Kidd v. Thomas Edison, Inc)
iv) Inherent authority (court’s reluctant to use)
(1) Where you have a totally secret principle, so there is no manifestation by the principal. (Watteau v. Fenwick:).
(a) It’s a situation where the principle would only reveal itself where the fact pattern appears to be beneficial
v) No authority: Principal Ratifies the action
(1) ratification requires – Botticello/ Rest. 2d 82
(a) 3rd party must know the A is acting on the P’s behalf
(i) thus, general rule is that only a disclosed principal can ratify
(b) A principal’s acceptance of the result of a prior act with an intent to ratify; and
(c) Full knowledge of all the material circumstances
(i) Example: Observing P using the property and making improvements, is not enough to indicate that D had full knowledge of the terms of agreement
(d) Exam tip: Ratification could lead to manifestation of apparent authority
vi) No authority: Principal is Estopped from disclaiming contract when…
(1) P negligently/intentionally causes 3rd party to believe that his A has authority that he doesn’t have; and
(2) Detrimentally reliance by 3rd party (Hoddeson v. Koos Brothers)
(a) Hoddeson: The owner of a place of business has a duty of care for the safety and security of its customers…the doctrine of agency by estoppel should apply in cases which involve a tortuous dereliction of duty to an invited customer
(b) Estoppel is different then apparent authority
(i) Doesn’t makes the P a contracting party with the 3rd party with right and liabilities on both sides
(ii) Estoppel only compensates the third party for losses arising from reliance;
1. it creates no enforcement rights in the principal against the third party.
2) Tort Liability: principal is liable for torts committed by employee in the scope of employment.
a) Is the agent an employee/servant or independent contractor?
i) Servant/employee: renders service under the control of master
ii) Independent Contractor: P retains no right of control over the IC as to how work is performed.
(1) Key factor is level of control (Humble oil refining co. v. Martin &Hoover v. Sun Oil Company)
(a) The regulatory provisions aren’t sufficient control if merely provide
(i) a system-wide standardization of the business identity,
(ii) uniformity of service; and
(iii) optimum good will…. Murphy v. Holiday Inns (franchise contracts)
(b) Agency relationship exists if control over daily operations – Billops v. Magness Construction Company
b) If employee/servant, doctrine of Respondeat Superior applies
i) If employee is SOHO
(1) employee directly liable for his tort
(2) employer is vicariously liable for the employee’s tort
(a) if found liable, can attempt to get indemnification from employee
(3) plaintiffcan only get recovery from one
ii) Is employee/servant’s act SOHO OR FOHO (Aguello v. Conoco Inc)?
(a) Time, place, and purpose of act
(b) Whether Similar to acts which the employee is authorized to perform
(c) Whether act is commonly performed by employees
(d) Extent of employee’s departure from normal methods
(e) Whether the employer would reasonably expect such acts to be performed
1. Liability for acts (i.e. battery or assault) committed in response to conduct interfering with the employee’s ability to perform his duties – Manning v. Grimsley
2. Liability for actions that are reasonably foreseeable – Ira S. Bushey & Sons
c) If an IC, Employers cannot be held liable for their torts on vicarious liability
i) Exception – Majestic Realty Associates
(1) Employer retains control of the manner and means of doing the work;
(2) Engages an incompetent contractor; or
(3) The work contracted for constitutes a nuisance per se.
(a) i.e. activities that are inherently dangerous
3) Fiduciary obligations of agents…Every agent owes a fiduciary duty
a) Duty of loyalty (obligation of faithful service)
i) Agent owes a duty to be loyal to the principal on all matter connected with the agency
(1) Duty of loyalty: charged with Loyalty to principal
(a) Can’t compete or act on behalf of competitor
(b) Using/disclosing confidential information
(c) Anything A obtains as a result of his employment belongs to P,
(i) No secret profits, or advantages and benefits without the principal’s consent.
1. If A unjustly enriches himself by virtue of his services without P’s consent, enrichment belongs to P – Reading v. Regen
2. Drawing business away from principal without disclosing breaches fiduciary duty (General Automotive Manufacturing Co. v. Singer)
(2) Duty of care: Basically a negligence standard
4) Fiduciary duties After termination of agency
a) Retains some duties owed to P, i.e., duty not to use confidential trade secrets (Town & Country House & Home Services Inc v. Newberry)
i) Post termination is ok, can’t us trade secret though
(1) List of customers was a trade secret because it was painstakingly compiled
(a) Would be ok if D had gone out and solicited new customers from a pool of potential customers available to both P and D.
) employee v. partner
(a) partners can get indemnification
7) Fiduciary obligations of partners
a) Duty of care: gross negligence standard
b) Duty of loyalty
A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of honor the most sensitive, is then the standard of behavior – Meinhard v. Salmon
– This is the standard court’s would take if not addressed in Partnership agreement.
i)
ii) Duty to disclosure
(1) Partners must disclose new business opportunities with close nexus to partnership business (Meinhard v. Salmon)
(a) Requirment: disclosure of actions + something maybe
(i) Cardozo Waffles on ONLY disclosure
(2) Expulsion of a partner – Lawlis v. Kightlinger & Gray
(a) Expulsion must be in the manner prescribed by the partnership agreement
(b) Must be in good faith
(3) After leaving partnership
(a) Duties owed to partnership by ex-partner
(i) May plot secretly to leave and may take clients, Can’t use deception to obtain unfair advantage over partnership (Meehan v. Shaughnessy)
1. Delaying giving notice to partner’s separation committees, etc. (or lying)
iii) Duties owed to ex-partner by partnership
(1) No fiduciary duty is due to a former partner (Bane v. Ferguson)
(a) A party ceases to be a partner upon retirement
8) Partnership property (Putnam v. Shoaf)
i) If acquired in the name of the partnership RUPA (204(a)(1))
ii) If acquired in name of partner with indication of partnership RUPA 204(a)(2)
iii) Purchased with partnership assets RUPA 204(c)… creates rebuttable presumption
iv) If fails to indicate the persons’ capacity as partner, the existence of a partnership, or use of partnership assets….
(1) Property presumed to be separate, even if used for partnership purposes
b) A partner’s interest in the partnership:
i) Share of the profits and surplus, as well as losses (treated as personal property) RUPA 502
ii) when a partner conveys her interest in a partnership, only convey’s her interest in the partnership
iii) When interest is conveyed, partner doesn’t have a specific interest in unknown choses in action
iv) creditor has no right to execute or attach partnership assets or property
(1) The creditor’s sole remedy is to prosecute her claim to judgment against the debtor-partner, and thereafter obtain a charging order against the debtor partner’s interest in the partnership. RUPA 504
