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Agency and Partnerships
South Texas College of Law Houston
Carson, Loftus C.

Agency and Partnership- Professor Carson

Chapter 1: Introduction to Business Associations

Default rule: if do business with others you are jointly and severally liable
Corporations changes this rule if complying with proper statutes are satisfied

– obligations are for corporation rather than the agents.
– Can freely change corporate interest

Characteristics of Corporation:
1. Legal Personality
2. Limited Liability
3. Free transferability of interests
4. Centralized management
o Default Rule: Management is equally voiced

– No limited liability
– For Tax purposes, only has to fill out form. Not separately taxed, so void double taxation

Limited Partnership
– general partner, and one or more limited partner
o limited partner- limited to their voluntary contributions of capital
o general partner- generally liable
– limited utility until 1985
o limited partners were sued b/c were acting as general partners
o no summary judgment

Two options that have come about:

CHAPTER 2: Agency: Definition and Basic Categories

All questions are resolved in favor of the principal
Agents cannot compete with principal. Penalty is not only the loss of overreaching, but all potential salary, compensation. Will only be permitted if FULL disclosure and permission by the principle
– Often Agent may claim there was silent assent or ratification, but are often able to be defeated b/c of lack of full disclosure


– Restatement defines “agency” as “the fiduciary relation which results from
o 1) the manifestation of consent by one person to another
o 2) that the other shall act on his behalf and
§ Part of the relationship
o 3) subject to his control, and consent by the other so to act”
§ Actual control not requisite RIGHT OF CONTROL suffices
o (3 ½) = Expectation of duty
§ Fiduciary duty is the consequence of the relationship
§ Look for the expectation that there will be a duty of care
– Law of master/servant
– Principal may/may not be master
o But all masters are principles
– independent contractor

Consensual relationship that may be established by inference and implication

Douglas v. Steele (7) 1991
– involves travel agent
– An agent carries with it duties and obligations
o Failure can render the agent liable to the principle
o The issue therefore can be whether the relationship exists b/w the agent/principal
– arms length relationships implies few duties and obligations
o still have some, but are affirmative duties that extend beyond purposely doing harm to another
– Fiduciary duties broken down into two sections:
o 1) Care
§ skillfulness
o 2) Loyalty
§ Honesty
§ Described as more exacting, less forgiving for the dishonest
– Facts:
o Douglasses were offered a selection of trips to chose from by the agent
o Small claims court stated that Steele was acting as “agent” for the Douglasses. She was sued as an individual, and acted as individual. Travel agent found liable to pay money back
– Once court found relationship, then have the fiduciary duty of “agent”
o Care
§ What’s reasonable under the circumstances (will vary from industry to industry) Want to balance risks and concerns involved
· Travel agents- have to be sensitive to the fact that there are circumstances in which the travel plans are cratered
· Travel agents are looked to by customers to meet the unique needs of the customers.
· A typical travel agent may be a special agent when preparing the trip for

is area b/c then there would be more lawsuits (which would result in higher than 6% commissions)
– This ruling and rulings like this keep the residential real estate market from having a lot of litigation. Assuming risk that will get out bid, assuming some risk that some might not be playing straight with you. Looking at industry to police itself, take complaints.

Notes Page 19
– (1) In Real Estate, mere fact that facilitate an offer, does not transfer you into an agent for the offeror. You are still the listing agent for the seller. That service is incident to the listing agents obligation to the seller. So just b/c help facilitate buyers efforts, it does not convert you into agent for the buyer
– (2) Real Estate agent can be agent of both buyer and seller, but is conflict so must be fully disclosed. That consents to that arrangement (agent being on both sides)

Palmer and Cay/Carswell v. Condominium/apartment Insurance Services (20) 1991
– Facts: refund check from insurer to policy holder through middlemen (brokers 1 &2) didn’t get to broker2 because broker1 pocketed it.
– Broker2 is now suing because it has already made refund to policy holder and it has failed to obtain reimbursement from broker1.
– Lessons
o factual inquiry is usually going to be necessary to establish agency (so summary judgment is not proper here).
o This case shows that establishment, for question of agency, will rarely be one that can be determined as a matter of law.