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

BUSINESS ASSOCIATION I
HECKER,

1.      AGENCY ‑ The legal rules that apply when two people agree that one is to act in place of the other
1.      Tort Liability
1.      Vicarious liability/Respondent Superior ‑ Liability on faultless person ‑ Rationale is cost allocation
1.      Actual tortfeasor remains primarily liable to the victim
2.      Employer is also liable if:
(1)   employment relationship is “master‑servant” and
(2)   tortuous conduct occurred while in the scope of employee’s employment. (R.2d ‘219(1))

(2)   Master/Servant Relationship
(1)   R.2d ‑ Master ‑ controls physical conduct of another
Servant ‑ Conduct is controlled by another. Every master is a principal and every servant is an agent
(2)   Difference between employee/servant and Independent contractor – R.2d ‘2(3): An independent contractor is a person who contracts with another to do something for him but who is not subject to the others right to control his physical conduct in the performance of the undertaking (i.e. NOT a servant). He may or may not be an agent
‑Servant or Independent contractor?Cconsider R.2d 220(2):
1)      extend of control by master over details of work
2)      whether or not the one employed is engaged in a distinct occupation or business
3)      Kind of occupation which is usually done under direction of employer or by specialist w/o supervision
4)      Skill required in the particular occupation
5)      Whether employer or workman supplies the instrumentalities, tools, and place of work
6)      length of time for which person is employed
7)      whether method of payment is by time or by the job
8)      whether or not the work is a part of the regular business of the employer
9)      whether or not the parties believe they are creating a master‑servant relationship
10)  whether principal is or is not in business

‑Note: “servant” the key (includes most employees) B employer liable; if employer not to control physical conduct, employer not liable. Only look at scope of employment question if “servant”.

Ind. K’er ex: Atty in private practice has clients ‑ ind. K relationship! Not thought of as employer‑employee. Even though client can tell Atty. what to do (Atty. an agent), Atty.’s physical conduct not subject to client control.

‑other ex: real estate agent, stock broker, independent bldg contractor = nonservant agent = indep. K’er

(3)   Servant acted within the scope of his employment when tort was committed used to separate personal from “on the job” torts; employer not liable for personal torts of an employee
‑R.2d 228 ‑ Is within the scope of employment if:
(1)   Is kind of conduct that the servant employed to perform ‑ does not hav

on‑delegable duty. R.2d 214
1)      Inherently dangerous/Ultra hazardous Activities: P liable for any harm that occurs even if hired an independent contractor to do it. If an employee causes such activities to be engaged in, he is liable for the resulting injuries period. (Fact re: what is an inherently dangerous activity: building demolition, crop dusting)
2.      K LIABILITY
1.      Issue: Power = ability of A to bind P to T
2.      power to make, break and modify K’s
2.      In General
1.      Contract liability includes all agents
(1)   servant and non‑servant
2.      Problems occur when agent creates contract between third party and principal

3.      Two types of Agents ‑ R.2d 3
1.      General Agent: continuity of service
2.      Special Agent: not involving continuity of service

4.      Three types of principals ‑ R.2d 4
1.      Disclosed Principal
(1)   3rd party knows agent works for principal and knows identity of principal
(2)   agent is facilitator
(3)   K between: principal and 3rd party
(4)   Can have both apparent and actual authority