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Business Organizations
UMKC School of Law
Luppino, Anthony (Tony) J.

Business Organizations Midterm Outline
Fall 2007
Professor Tony Luppino


1.      AGENCY èPerson who acts on behalf of and subject to the control of another.
agent acts under the control of the principal
relationship need not be in writing (unless subject to statute of frauds)

Independent Contractorà differs b/c no right of control as with agent/employee in the actual performance of the undertaking.
·                    Less control over IC than over agent

Duty of AGENT to PRINCIPAL à FIDUCIARY OBLIGATIONS
Duty of Care – Agent must exercise the diligence, care & skill of a reasonable person in carrying out his duties.
·        Business Judgement Rule – agent must use good faith in exercising his business judgment given the agent’s experience, expertise and familiarity with the principal’s affairs.
·        Special Skills or Knowledge – Agent who possesses greater skill or knowledge than a reasonable person must utilize that higher level of ability or expertise in performing his duties as agent.

Duty of Loyalty – Agent must act to further the interests of his principal rather than primarily to further his own interests.
·        Agent may NOT:
a.      Self-deal – take advantage of a business opportunity within the scope of his agency w/o giving the principal the opportunity to act first.
·        R-Agency § 387 à
·        Unless otherwise agreed, an agent is subject to a duty to his principal solely for the benefit of the principal in all matters connected with his agency.
·        R-Agency § 388 à
·        Unless otherwise agreed, an agent who makes a profit in connection with transactions by him on behalf of the principal is under a duty to give such profit to the principal.
·        Test is NOT how the principal has been damaged – agent must be disgorged of profit to discourage such conduct.
b.      Commingle funds with those of the principal
c.       Withhold material facts which the agent learns relating to the substance of the agency OR use confidential information acquired during the course of his agency relationship for his own benefit.
d.      Act simultaneously for more than 1 principal w/o consent of all principals involved.
Duty of PRINCIPAL to AGENTà
Compensat

or dealing with a servant or other agent.
e.g. restaurant meal with moot court team
principals point of view (2 requisites):
1.      MUST be actual agent to bind the principal 4
2.      Was it reasonably foreseeable by the principal that agent would do as he did?
can impose L just b/c there is an agency relationship

Argue ALL 3 for exam purposes44

Trade Secretsè 6 Factor Test
1.      The extent to which the information is known outside of his business
2.      The extent to which it is known by employess and others involved in the business
3.      The extent of measures taken by him to guard the secrecy of the information
4.      The value of the information to him and his competitors
5.      The amount of effort or money expended by him in developing the information
The ease or difficulty with which the information could be properly acquired or duplicated by others