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Business Organizations
University of Dayton School of Law
Huffman, Mary Kate

Business Organizations Huffman Fall 2017
 
Agency
 
DOCTRINE OF RESPONDEAT SUPERIOR
Umbrella ruleà vicarious liability under respondeat superior
Vicarious Liability- STRICT LIABILITY IF EMPLOYEE & MASTER SERVANT, AND ACTING W/I SOE
Servant or Independent Contractor? à REFER TO 220 FACTORS
CONTROL
DISTINCT OCCUPATION
SUPERVISION
SKILL
SUPPLIES
TIME
PAYMENT
REGULAR BUSINESS
BELIEF
PRINCIPAL IN BUSINESS
If Independent Contractor? à NOT AN EMPLOYEE, NO VICARIOUS LIABILITY
Exceptions 1. Inherently dangerous activity, 2. Non -delegable duties,
SEPARATE DIRECT CLAIM AGAINST MASTER-3. Negligent hiring
Negligent hiring- separate strict liability claim
SCOPE OF EMPLOYMENT ANALYSIS
If Servant? EMPLOYEE, POSSIBLE VICARIOUS LIABILITY -228
Scope of employment- Restatement 229, 230
Frolic vs. Detour (re-entry of work)
Time and Space
Actuated, in part, to Serve Master/purpose
Going & Coming Rule
Exceptionsà special errand, furnished car, driving benefits, driving own car
Intentional force/unexpected
IF MASTER-SERVANT RELATIONSHIP, AND ACTING WITHIN SOE, THEN STRICTLY LIABLE.
Public Policy Considerations
SCOPE OF AUTHORITY- did A have authority? Reasonably understand what P wanted her to do?
Actual-
EXPRESS
Actual authority given specifically/detailed
IMPLIED
Words, customs, relationship, reasonable interpretation (subjective and object)
Apparent
Manifestation from P to 3rd party, reasonable appearance of authority in A
OBJECTIVE AND SUBJECTIVE FOR ALL
Apparent- 8
Directly to T/Communicated to Community
Reasonable reliance
May authorize the A to state that he is authorized
May continuously employ the agent?
Inherent Agency Power- 8A
Flows from agents position/title
Estoppel- 8B
Protects 3rd party from change in position bc of reliance of misrep
Intentional/careless misrep to make 3rd p believe A had auth
OR- P knew about it, did not take reasonable steps
T’s belief must be objectively and subjectively reasonable
T’s change in position (payment $$,labor, loss, legal liability)
RATIFICATION
Affirmance by a person by a prior act which did not bind him but which was done prior to being authorized – Authorization after the Fact
Certain Preconditions & P must embrace previous unauth. Act =affirmance
METHODS OF RATIFICATION- 1 can meet this
WORDS, CONDUCT, FAILURE TO REPUDIATE W/IN REASONABLE TIMERECEIPT/RETENTION OF BENEFITS
Unauthorized act- must have been some transaction or event involving an unauthorized act
BELOW MUST ALL OCCUR FOR RATIFICATION!!!!!!
Capacity- P must have existed and must have had capacity to originally authorize the act
Material facts- purported P must have knowledge of all material facts (of transaction or even tort)
Transaction still available to ratify- third party has not indicated their intention to withdraw from the transaction (to purported P or A)
 
Agent’s Authority
Marriage, business co-owners does not in of itself create a fiduciary duty and principal/agent relationship
Relationships don’t create agency, behavior does!
 
Has a principal agency relationship been created?
If yes go to next
Who can be a principal?
Only one w/ contractual capacity
E.g not a mentor, mental capacity
Person- individual, business corp, govt entity, with legal capacity
An agent not a party to K, does not need legal capacity, as long as P has capacity and can manifest assent
What can an agent do?
Does not take capacity of P
Is simply acting on behalf
Anything you can do for yourself
An agent can have a subagent as long as its not prohibited by subagent
Can only bind what’s within your capacity
Illegal acts- not bound by agent’s illegal acts
Exception- non delegable duties, agent cant do something you must do yourself
Did the agent act within authority?
E.g acting outside of authority
 
TYPES OF AUTHORITY
 
Actual authority
What P specifically telling you to do, parameters of actions?
What did A believe under circumstances?
Express authority- words, conduct
Implied authority- circumstances, behavior
Implication to the agent (e.g past behavior, relationship, context)
End result binds Principal in contract
Apparent authority
3rd party’s belief- what did P manifest to 3P?
3P’s reasonable belief as a result of P’s manifestation
e.g. business cards- manifestation has to emanate from third party
relied on if there is no actual authority
Lingering apparent authority
P must make an effort to end authority, by manifestation to third P
End in a reasonable way, reasonableness based on circumstances
 
 
 
 
 

ratify if no steps taken to stop
TIMELEY- Has to be done before third party can withdraw, or any material change
E.g if ratification is not timely, other person can say no more K and refuse
Nobody bound by K until ratification, no authority to begin w/
No partial ratification allowed either! All or nothing
Alleged principal must have intentionally, carelessly, negligently caused a belief, as result.
Third party induced to change behavior
 
RULES
Implied authority is actual authority, proven which the principal actually intended the agent to possess and includes powers practically necessary to carry out duties delegated.
Actual authority focuses on what agent reasonably believes
 
Liability of Principal to Third Party in Tort- Servant vs. Independent Contractor
 
Respondeat superior- master (employers) is liable for the torts of its servants (employees)
Always personally liable, for own torts- who else is liable?
 
RULES
A master is responsible for torts of a servant. M+S relationship = when 2 parties agree one works on behalf of another party and be subject to control.
Agency existed here with this gas station employee incident, factors such as controlled hours, equipment, and how to repair.
Need day to day control for employee/employer relationship
When an agreement est. an agency relationship, parties cannot disclaim it by formal consent.
TEST FOR AGENCY- Nature and extent of control agreed upon. Simple franchise agreement does not = agency.
 
FACTORS TO DETERMINE CONTROL
Details of the work- who controls? (weighed on their side)
Distinct Business- Same line= employee/employer, distinct=IC
Skill required for occupation (higher the skill= IC)
Industry standards
Materials supplied
Time and place of work- who sets this
Length of time of work- consistency of employment
Form of payment- by job? Salary?
Parties belief