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

I. AGENCY
GENERALLY
a.        Principle/agent. (1) Fiduciary relationship between two people; (2) that requires mutual assent or consent (either party can terminate at anytime despite contrary contract); (3) in which one person (agent) acts on behalf of another person (principal); and (4) is subject to the principal’s right of control.
PRINCIPAL’S RELATIONS WITH THIRD PARTIES
In Tort.
i.      Tortfeasor’s liability. Tortfeasor always is liable for tortious conduct.
ii.      Vicarious liability / respondeat superior. Employer is liable for employee’s tortious conduct if: R2d § 219
1.        Employment relationship. Employment relationship must be “master/servant.”
a.        Master/servant. A master is a principal who has the right to control the physical conduct of the other. R2d § 2(1). A servant is an agent whose physical conduct is controlled or subject to the right to control by the master. R2d § 2(2). Every master is a principal; every servant is an agent.
b.       Independent contractor. A person who contracts to do something for another but is not subject to the other’s right to control of his physical conduct. May or may not be an agent. R2d § 2(3).
i.      Factors. Crucial factor is whether principal has right to control physical activity. Other considerations to determine M/S or IC include: extent of control master may exercise over details of work, length of time for which person is employed, method of payment (by time or job), etc. R2d § 220.
ii.      Non-liability. A principal or contractee is not liable for physical harm caused by an IC unless the principal/contractee was under a duty of due care. R2d § 250.
2.        Scope of employment. Tortious conduct occurred within the scope of employment. Factors to consider: R2d § 228
a.        Is the conduct of the kind the servant is employed to perform? R2d § 229
b.       Did it occur substantially within the authorized time and space limits?
i.      Commuting is not within scope; considered personal time.
c.        Is it motivated, at least in part, by a purpose to serve the master?
i.      Mixed motive is enough to justify liability (“at least in part”).
ii.      Independent frolic vs. slight detour. Employer is still liable for conduct on slight detours (vs. conduct obviously outside the scope).
d.       For intentional torts, is the use of force expectable given the scope of employment?
iii.      Direct liability. Situations in which there is direct liability for the master even when the servant is outside the scope of employment.
1.        Master intends conduct. R2d § 219(2)(a)
a.        Authorization. Employer authorizes commission of a tort (usually comes up in the context of contracts—e.g., pie contract). R2d § 212 (pcopy. 12)
b.       Ratification. Retroactive conferral of authority for a tort previously unauthorized. R2d § 218 (pcopy. 15)
2.        Master’s conduct is negligent or reckless. E.g., hiring improper persons or giving improper orders. R2d §§ 219(2)(b), 213 (pcopy. 13)
3.        Conduct violated master’s non-delegable duty. If master delegates duty of care to servant, master is liable for harm (e.g., highly dangerous situations). R2d §§ 219(2)(c), 214 (pcopy. 14)
4.        Reliance on apparent authority. Servant purported to act or speak on behalf of the principal and/or was aided in accomplishing the tort by the existence of the agency relation. R2d § 219(2)(d)
In Contract.

ity.
2.        Apparent authority. Principal’s manifestations to third party causing third party to reasonably believe that P had authorized A to act and A is acting for P (seen from third party’s point of view). R2d § 8 Not inferior to actual authority; can be just as binding.
a.        Creating apparent authority. P’s manifestations can be made by: R2d § 27
i.      Words
1.        Written
2.        Oral
ii.      Conduct. Based on:
1.        Past individual history (acquiescence). If the third party has dealt with this particular A in the past, his continued presence is a manifestation by P that he still has power to represent P.
2.        Position (usual/customary). Created by appointing a person to a position that carries with it generally recognized duties in the trade or profession. T must know it is usual or customary before he can rely on it.
b.       Undisclosed. Apparent authority is impossible if principal is undisclosed. (There can be no manifestation from an unknown P upon which third party can rely.)
Imposter/Agency by estoppel. A principal who is not otherwise liable as a party to a transaction purported to be done on his account, is subject to liability to persons who have changed their positions because of their belief that the transaction was entered into by or for him, if: R2d § 8B(Imposter example: Imposter valet at hotel would result in liability of hotel by estoppel because of reliance. Contrast this with