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Business Organizations
Touro Law School
Miller, Meredith R.

BUSINESS ORGANIZATIONS OUTLINE

I. Agency – Rest. 3d of Agency § 1 – The relationship 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 so to act
1. Relationship between principal and agent
i. Contract not necessary to form an agency relationship
ii. Principal’s manifestation must reach the agent and agent must manifest consent while aware of the principal’s manifestation, even if principal is initially unaware of the manifestation.
iii. As a matter of public policy, once one lends one’s car to someone, that person becomes an agent of the car’s owner

2. Authority
Actual authority- an objective manifestation by the principal followed by the
agents reasonable interpretation of that manifestation, which leads
the agent to believe he is authorized to act on behalf of the
principal
2 types:
1. Express – where principal tells agent you are authorized to do this
a. Express statement not to do something can trump implied authority (Ex) Joe owns a house, wants to sell house, gets real estate agent and tells him your authorized to sell my house, therefore agent expressly authorized to sell Joe’s house (were looking at the manifestations of the principal to the agent)

b. Implied authority – Authority to do acts which are incidental to or usually accompany it or are reasonably necessary to accomplish goal… sometimes based on custom or past dealings Agent can make decisions on certain unexpressed aspects of the deal. (Ex) (Joe has said you can sell my house, he didn’t say you could take an ad in the paper, but that is incidental to selling the house, so its part of the act, and its implicit.

c. Incidental
i. E.g. dangerous and impractical for a painter to paint alone
d. Custom
i. E.g. agent hired to sell house
e. Prior dealings
i. E.g hired a certain person in the past
f. Inherent authority – Used to hold principal’s liable when the principal is undisclosed
1. Look to whether agent’s acts were furthering business and benefiting P despite 3rd party not knowing of P

2.Apparent authority
– arises when a principal acts in such a manner as to convey the impression to a 3rd party that an agent has certain powers which he may or may not actually possess We decided that the agent wasn’t authorized to act in this way, but it appeared to the world that the agent had the authority to do what he did

For Apparent Authority look to
1. What did the Principal do or indicate to the third party?
2. Whether it was reasonable for the third party to believe principal had authority?

3. Estoppel
The person who relied on the “AGENT” must have a detrimental change in position because of *their beliefs that transaction was made for the person….*AND
*The principal who intentionally or carelessly caused such belief *OR…..Knowing of such belief and that other might change there
positions because of it, He did *not take reasonable steps to notify
them of the facts

4. Ratification
-Making a manifestation that indicates a choice to treat
unauthorized act as though it had been authorized
Requires affirmance by a person with full knowledge of the material terms of a prior act which did not bind him but which was done or professedly done on his account
-my agent didn’t have the right to enter into this contract, but I’m
glad that he did and I accept it

5. Torts
i. Must at least be agency in order to get tort liability
ii. Employees vs. independent contractors
1. Respondeat superior – employer liable for the torts of employees but not independent contractor
a. Employee – more control – e.g. controls day to day activities, at will contract, set hours, equipment
b. Independent Contractor – uses own tools, sets own hours, etc.
6. Duty

ii. Meinhard v. Salmon – Duty to disclose opportunities one partner is offered
11. Share of profits is prima facie evidence of a partnership
i. Debtor creditor relationship rebuts a presumption that a share of profits creates a partnership
12. Business Judgment Rule – Corporate officers and managers are not liable for business decisions they make that are bad decisions unless they intentionally mismanage or there is fraud
i. Courts presume that managers are acting in good faith and in the best interests of the company and won’t second guess business decisions
13. NY Partnership Law § 40
i. One vote per partner
ii. Section 8
1. Majority of partners needed to make a decision within ordinary course of business
2. Unanimous- outside of ordinary course of business
14. NY Partnership Law § 50 – Partners have three general rights
i. Right to partnership property
1. right to profits
2. can assign rights to profits without consent of other partners to do so
a. limited possessory right – equipment and land held by partnership may only be used for purposes of the partnership
i. not assignable by partner unless in scope of business but assignable by partnership
ii. Cause of action is partnership property
ii. Interest in partnership
iii. Right to participate in management
15. Capital Accounting
i. Capital investments
1. Partnership can raise capital by contributing money
ii. Equity
1. Total amount of capital contributions
iii. Balance sheet
1. Assets = Liabilities + Equity