NON CORPORATE FORMS
AGENCY
· Definition
Agency is the fiduciary relation, which results from:
1. a manifestation of consent by principal to agent that
2. agent shall act on his behalf and subject to his control
3. and consent by the agent so to act
*Basile – parties’ limited relationship for purposes of tax filing did not make defendant
plaintiffs’ agent for purposes of obtaining loans.
· Duty
Principal’s Duties
1. performance of contract obligations
2. good conduct
3. noninterference
4. cooperation
5. indemnification under certain circumstances
§ Agent’s Duties
1. duty of loyalty (fiduciary duty)– Restatement 387 – the agent must act solely for the benefit of the principal in all matters with the agency
a. duty to keep information belonging to principal confident
b. duty not to compete with principal in any matter within the scope of the agency relationship
c. duty not to act as an agent for another within interests that conflict with the principal’s interests.
*Food Lion – since the reporters were at-will employees, the reporters intended to act
against the interests of plaintiff and were liable in tort for employee disloyalty.
Although they were not breaching their duty to one employer (the newspaper) they
were breaching it to the other employer (the grocery store)
2. duty of care
3. duty of disclosure
4. duty to obey
5. duty to act within the scope of authority
· Principals of Attribution
§ Justification for Principal Accountability:
1. principal’s ability to select and control the agent and to terminate the agency relationship &
2. the fact that the agent has agreed expressly or implicitly to act on the principal’s behalf.
§ Authority
o Types of Authority
1. Actual authority – created by a manifestation from the principal to the agent that the principal consents to the agent taking actions on the principal’s behalf.
a. express – conveyed orally or in writing
b. implied – the power to do those things (expressly agreed) necessary to fulfill the agency
*Castillo – Express actual authority exists where the principal has made it clear to
the agent that he wants the act under scrutiny to be done. Further, giving an
agent express authority to undertake a certain act also includes the implied
authority to do all things proper and necessary to exercise that express authority.
2. Apparent authority – exists where a third party reasonably believes, based on manifestations by a purported principal, that the apparent agent is authorized to act on behalf of the purported principal.
*Manifestation – a person manifests consent or intention through written or
spoken words or other conduct if the person has notice that another will infer
such consent or intention from the words or conduct.
*Bethany – Authority is not created by statements of the apparent agent alone,
without some manifestation from the purported principal.
Apparent authority may be the basis for liability in two situations:
a. where persons appear to be agents, even though they do not qualify under the regular agent definition (when they are not actual agents) AND
b. where agents act beyond the scope of their actual authority.
3. Estoppel – non-agency principal that looks a lot like apparent authority in th
(when the business fails, or in beginning.)
*Holmes – an express agreement to divide profits is not a prerequisite to prove the
existence of a partnership.
*Waugh – Even if there is a written document stating that there is no partnership,
partnership can still be formed.
· Benefits of General Partnership
1. Easy to form
2. Flexible in organization
3. Favorable tax treatment.
· Liability – RUPA 306
1. one partner may be bound to third parties by the act of another partner
2. partners are personally liable for obligations of the partnership
3. all partners are severally and jointly liable for the acts of the partnership
*First American – all law firm partners were held liable for one lawyer’s
misrepresentation, even the partner who did not know of the misrepresentation.
*In Re Keck – defendants could not escape liability by leaving the firm after the
malpractice was committed, but before the client won a malpractice claim. They were
held severally and jointly liable.
Management – RUPA 401 (f) (j) –all partners have equal rights in the management and conduct of the partnership business. If the partners disagree about ordinary mattes within the scope of the partnership business, the vote of the majority of partners controls. When an extraordinary transaction occurs, then unanimous consent is required.
