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Business Associations/Corporations
University of Kansas School of Law
Hecker Jr., Edwin W.

BUSINESS ASSOCIATIONS I
Professor Hecker

I. AGENCY: Deals with the rules that apply when two people agree that one of them will act on behalf of the other.

A. DEFINITIONS
1. Agency: Fiduciary 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 other so to act.

2. Master: Principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in performance of the service.

3. Servant: Agent employed by a master to perform services in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master.

4. Independent Contractor: Person who holds himself out as providing a service (e.g., lawyer in private practice, real estate agent)

B. RULES CAN BE CATEGORIZED AS FOLLOWS:
1. Whether the person doing the acting (agent) can cause the other person on whose behalf she is acting (principal) to be liable in tort to a third party;
2. Whether the agent can cause the principal to become liable to a third party for contracts signed by the agent;
3. What are the rights and obligations between the two parties themselves?

C. VICARIOUS LIABILITY IN TORT (RESPONDEAT SUPERIOR):
1. Elements:
a. Employment relationship is master-servant relationship; AND
b. Servant/employee committed the tort while acting within the scope of his or her employment.

2. Master-Servant Relationship: Is a form of agency (every master-servant relationship is an agency relationship); test is whether the person is an “employee” as the term is commonly understood (“control over physical conduct” is not useful test).
a. Factors: Restatement of Agency § 220
(1) extent of control over result
(2) extent of control over details and means to achieve result
(3) person employed is in distinct occupation or business
(4) kind of occupation – whether work is usually done under direction of employer or as an independent contractor
(5) skill required (more skill=independent contractor)
(6) whether employer supplies tools & place to work
(7) whether employee is paid by hour or by job
(8) length of time
(9) whether service is part of regular business of employer
(10) intent of parties
(11) whether principal is in business or not

3.

d to A that A act; OR
b. P is bound when third party (T) reasonably believes P has consented to A that A act, and T’s belief is attributable to something P did or failed to do.

2. Types of Principals:
a. Fully Disclosed:
(1) Elements: Third person with whom A deals
(a) knows A is acting on behalf of a P; AND
(b) knows the identity of P
(2) Parties to resulting contract: P, T
b. Partially Disclosed:
(1) Elements: Third person with whom A deals
(a) knows A is acting on behalf of a P; BUT
(b) does not know the identity of P
(2) Parties to resulting contract: P, T (A is guarantor)
c. Undisclosed:
(1) Elements: Third person with whom A deals
(a) does not know A is acting on behalf of a P;
(b) thinks A is acting on own behalf
(2) Parties to resulting contract: T, A

3.Agent’s Power to Bind Principal in Contract:
a. Actual Authority:
(1) Scope: P’s manifestations to A
(a) Express: Words
(b) Implied: Conduct
History of this P