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

Business Associations I
Webb Hecker

X.          Heckerisms

A.             All business relationships turn on
1.            risk (if we lose money, who loses first/most)
2.            return (if we MAKE money, who gains first/most)
3.            control (how much power to I have to leverage my own destiny (i.e.,
mitigate risk and maximize return)

B.             Substance over form

I.           Agency (Restatement).

A.            Principal’s relations w/ third parties
·        Four elements
o       Mutually consenting relationship (either party has power to withdraw at any time; if withdrawn, relationship terminates)
o       Fiduciary relationship (person who has discretionary authority over another’s person/authority R3 1.01, R2 1 (fiduciary defined)
§         NECESSARILY involves high degree of good-faith and loyalty
§         E.g. (of fiduciary relationships)
·        Guardian/ward
·        Trustee/beneficiary
·        P/A Agency
o       Agent acts on behalf of the P (in place of/instead of/for benefit of)
o       If difference of opinion, P wins subject to P’s right of control
·        Two types of agents R2 3
o       General agent: continuity of service
o       Special agent: not involving continuity of service
·        Creation of Agency
o       Need not be formally created
o       ONLY need reciprocal indication that one wishes for another to act on his behalf; acceptance
o       BUT remember: SOF exceptions…
·        Definitions
o       R2 2(1): master
o       R2 2(2): servant
o       R2 2(3): P/A ≠ P/independent contractor
§         IC = person who contracts w/ another to do something for him or her BUT who is NOT subject to the other’s right to control his physical conduct (manner and means) in the performance of the unde

business” = more likely servant
·        whether or not the parties believe they are creating a master‑servant relationship
o       more belief = more likely servant
·        whether principal is or is not in business
o       More likely business = more likely servant
§         Important to know IC or servant for sake of tort liability
·        Power (“inherent agency power) R2 8A
o       Actual authority: P manifests consent to A
§         Words
·        Oral
·        Written (but cf. SOF)
§         Conduct
·        Acquiescence: past conduct by A w/ no objection from P
·        Conduct of P that leads A to believe A can do it again
·        Position
o       Industry custom
Apparent authority: P manifests to T causing T to reasonably believe P authorized A to act