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

Business Associations I


A. Generally

Agency Defined – §1

i. Agency is the fiduciary relation which results from the manifestation of consent by one person (the principal) to another (the agent) that the other (the agent) shall act on his (the principal’s) behalf and subject to his (the principal’s) control, and consent by the other (the agent) so to act.

Agency applies to a relationship between two people (principal – agent) in which:

i. By mutual consent (formal or informal, express or implied)
1. §15 – agency exists ONLY if there has been a manifestation by the principal to the agent that the agent may act on his account, AND consent by the agent so to act.
2. §1.03 – a person manifests assent or intention through written or spoken words or other conduct.
ii. One person or entity (agent)
1. §1.04(6) – person is (a) an individual; (b) an organization or association; (c) a governmental entities; or (d) any other entity that has legal capacity to possess rights and incur obligations.
iii. Undertakes to act on behalf of another person or entity (principal)
1. §13 – agent is a fiduciary w/ respect to matters w/in the scope of his agency.
iv. Subject to the principal’s control.
1. §14 – principal has the right to control the conduct of the agent w/ respect to matters entrusted to him.

Broad Applicability of Situations where agency is created

i. Hired as employees
ii. If partnership has employees
iii. Law firms hires associates
iv. Corporation or partnership can be principal or agent

Main Areas of Inquiry

i. Circumstances where A causes P to be liable in tort
ii. Circumstances where A causes P to be liable in contract
iii. Mutual Rights and Duties between Principal and Agent

Tort Liability – Respondeat Superior (Vicarious Liability)


i. Agency law contains rules for attributing an agent’s tort to its principal, even though the principal has not itself engaged in any wrongful conduct
ii. The actual tortfeasor remains primarily liable to the victim for his own tort acts (the tortfeasor’s always liable)

§219(1) Respondeat Superior imposes liability on principle when:

i. The employment relationship is “master-servant” AND
ii. The tortious conduct occurred “while in the scope of employee’s employment”

Master-Servant Relationship

i. §2 – Defining Master, Servant, Independent Contractor
1. (1) Master – A principal who employs an agent to perform service in his affairs and who controls the physical conduct of the agent in the performance of the service
2. (2) Servant – An agent employed by a master to perform service 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
3. (3) Independent Contractor – A person who contracts with another to do something for him but is NOT controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking. Not all independent contractors are agents.
ii. Servant v. Independent Contractor
1. §250 – A principal is not vicariously liability for physical, negligent conduct of an independent contractor IF he neither intended nor authorized the result NOR the manner of performance, UNLESS he was under a duty of due care. §220(1)
a. Th

i. Generally
1. This requirement separates personal torts from “on the job” torts, which the employer is liable for
ii. §228(1) Conduct of Servant is within scope of employment ONLY if (exclusive):
1. (1) It is of the kind (of work) he is employed to perform
a. It does not have to be the exact conduct employed to perform
b. It will be considered “within the scope of employment” if it is of the same general nature as that authorized
2. (2) It occurs substantially within the authorized time and space limits
a. A servant’s Travel


Factors which can establish travel was w/in scope: (1) providing servant a vehicle for travel (2) reimbursing the servant for travel expenses and (3) paying the servant for travel time.

Traveling to and from work are not within the scope of employment

ii. If the servant, at the master’s request, does an errand for the master while going to or from work, the entire trip will become part of the scope of employment
3. (3) It is actuated, at least in part, by a purpose to serve the master AND
The Motive must be of furthering the employer’s business. However, mixed motive will be sufficient to be considered “w/in the scope.” For example, a delivery man speeding because he wants to get done early will be sufficient to fall within sufficient motive