List of Entities
· corporation
· partnership
· LLP limited liability partnership
· LLC limited liability company
· LLLP limited liability limited partnership
Order of Entities in History
· sole proprietorships
· partnership
· corporation
· corporation + trust
· limited partnership
· limited liability company
· limited liability corporation
o (file records w/ state)
· limited liability partnership
· limited liability limited partnership
4 Characteristics
· continuity of life
o does thing go on if partner dies/ leaves / goes bankrupt?
· transferability
o can owner transfer interest to someone else?
· centralized management
· limited liability
o who is liable if something goes wrong?
o can creditors or shareholders come after you?
·
CHAPTER ONE: AGENCY
1. Who is an Agent?
agency: fiduciary relationship that results from the manifestation of consent that one person (the agent) shall act on behalf of and subject to the control of another person (the principal)
· “manifestation of consent” is objective – it depends on what the agent believed the principal intended
· agency even where principal did not intent one
· agency power to bind principal can arise absent true mutual consent
3 Types of Agency Problems
1) Is the problem b/t agent and principal?
2) Does it involve a third party trying to hold the principal to an agreement based on the agent’s conduct or on an express agreement?
3) Does it involve a third party trying to hold a principal liable for the agent’s torts?
Proving Agency
· Burden of Proof is on the person asserting there is a principal-agent relationship
· No intent required to form agency relationship
Elements
· 3 elements of Agency Relationship
o 1) a manifestation by principal that agent will act for him
o 2) acceptance by the agent of the undertaking
o 3) understanding b/t parties that principal will be in control of the undertaking
o (2d Agency 1 comment b)
Fiduciary
· Every agent is a fiduciary owing high standard of care to the principal
· must avoid: conflicts of interest, self-dealing, disloyal acts
Principal’s Duty to Agent
· duty to compensate his agent
· duty to cooperate with the agent and aid her in the performance of her duties
Creation of Agency Relationship
· By Agreement
· By Ratification
o principal accepts benefit or otherwise affirms conduct of someone purporting to act for principal
· Agency by Estoppel
o principal acts in such a way that a third person reasonably believes that someone is the principal’s agent
Gorton v. Doty Agency Arising From Use of a Vehicle
· Δ allowed football coach to drive her car to a game; wreck occurred, Π injured
· Issue:
o was coach
dealing with Warren? YES
· Reasoning / Holding
o Δ became principal b/c of its control and influence over Δ
o existence of agency relationship can be proved by circumstantial evidence that shows a course of dealing b/t 2 parties
o ** a creditor who assumes (de facto) control of his debtor’s business may become liable as principal for the acts of the debtor in connection w/ the business
o evidence of De Facto Control
· Warren couldn’t make capital improvements
· Warren couldn’t declare dividend
· Warren couldn’t sell or purchase stock w/out Δ permission
· Δ continuously reviewed Warren’s operation and expenses and recommended actions
· Warren drew drafts off of Δ account
· Δ maintained right of entry onto Warren premises
o by directing Warren to implement its operational recommendations, Δ consented to agency relationship
o control viewed in light of all surrounding circumstances (not in isolation)
Rest 2d of Agency §14 O (paraphrased): a creditor who assumes control of his debtor’s business may become liable as a principal for the acts of the debtor in connection w/ the business
