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

I. Agency ‑ The legal rules that apply when two people agree that one is to act in place of the other
The fiduciary relationship which results from (1) manifestation of mutual consent (2) by one to have another act on his behalf (3) subject to control (4) with consent of the other to act. Restatement of Agency §1.

A. 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’s Liability if:
(1) Employment relationship is “master‑servant” and tortuous conduct occurred while in the scope of employee’s employment. (R.2d §219(1)).
(2) Direct liability.

(1) “Master/Servant Relationship”
(1) R.2d: Master §2(1) ‑ controls physical conduct of another.
(2) Servant §2(2) ‑ Conduct is controlled by another. Every master is a principal and every servant is an agent. Only look at scope of employment question if “servant” If there’s no right to control conduct, then employer’s not liable.
(3) 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.
1) Independent Contractor Examples:
1) Attorney in private practice has clients, K relationship. Not thought of as employer employee, even though client can tell attorney what to do, attorney’s physical conduct not subject to client’s control.
2) Real estate agent, stock broker, independent building contractor are nonservant agents = independent contractors.
2) Servant or Independent contractor?—consider R.2d 220(2)(a-j):
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

(2) “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 have to be the exact conduct employed to perform ‑ enough if of the same general nature as the authorized ‑ R.2d 229(1)
(2) Substantially within authorized limits of time and space.
***note: commuting is not within scope ‑ considered personal
*** if A is driving for employer and takes slight detour off route, still within scope
*** if A goes off the route, he’s on a frolic, and not within scope of employement.
(3) Acting at least in part by a purpose to serve the master (motive of furthering the employer’s business); mixed motive enough ‑ does not have to be exclusive motive; delivery man speeding b/c wants to get done so he can get home early enough motive
(4) Use of force must not be wholly unexpected by employer (if intentional force is used). (If intentional, considered w/I scope only if intentional force is part of the job; bouncer, repo man, security guard) (also, did Master supply instrument of harm)
1) Forbidden acts may be within scope: §230
2) Conscious criminal/tortuous acts may be within scope. §231

(3) Situations where there is direct liability for the principal:
(1) Principal intends conduct
1) Authorization of tort by P ‑ Servant/scope status irrelevant if employer authorizes the commission of a tort. R.2d 212 (photocopy) (ex) hire a “hit man”
2) Ratification of authority to commit tort. R.2d 218. Servant/Scope irrelevant. A retroactive conferral of authority for a tort previously unauthorized

(2) Negligent or Reckless conduct by P: P liable for his own negligent or reckless conduct. R.2d 219(2)(b)
1) Negligent Employment ‑ Hiring unfit agents. Personal fault from unreasonably hiring or failing to fire a human dangerous condition with notice. R.2d 213
1) Comment a) special application of rules R. of Torts doesn’t exhaust ways mater is negligent in conduct of his business
2) Comment b: Dangerous Agent: dangerous quality b/c of incompetence or reckless disposition. If principal without exercising due care in selection, he’s subject to liability. Such propensities may be visciousness, thoughtlessness, or playfulness.
3) Examples:
ex) Delivery driver w/ DUI’s ‑ co. knows or should know ‑ co. liable regardless of servant/scope considerations
ex) Pre‑school hires convicted child molester

an be no implied conduct of actual authority (see pg. 11 text)
1) Industry Custom

2. Apparent authority: P’s manifestations to T causing T to reasonably believe that P had authorized A to act, and A acting for P. (See page 11 text) (from 3rd person’s point of view; impossible if undisclosed P)
(1) Words:
(1) Written or
(2) Oral; or (SOF may apply ‑ see above)
(2) Conduct (SOF)
(1) Acquiescence: past individual history; T has dealt with A before = manifestation from P to T that A has to do this or else P would have fired A, or
1) Previous actions establishing a company custom
(2) Position (incidental: usually accompanies or is reasonably necessary to A in this

1) Industry Custom
**Important if A lacks actual authority ‑ note: impossible if P undisclosed
just as effective in creating a binding obligation as actual authority

3. Inherent Agency Power ‑ R.2d 8A (Redundant and Useless)
(1) General agent has power to do Incidental, usual or necessary conduct, Even if forbidden
(2) Only implicated if P is undisclosed!
(1) B/c by definition A can not have apparent authority b/c non professedly acting on behalf of a P
(2) Policy is to hold P bound b/c A is P’s agent after all; P should bear the risk of a disobedient A even if T had no idea that A acting on behalf of a P.
(3) Apparent authority presupposes that A will act as A. If undisclosed principal A cannot have apparent authority according to section 8 b/c he is really acting as a P

4. Estoppel ‑ R.2d 8B
(1) Is not power ‑ last resort
(2) “Estopped to deny that A was your agent” if someone out there is purporting to be you’re a and enters a K on your behalf:
(1) W/o knowledge of purported A out there, P intentionally, carelessly, or negligently caused such belief; or
(2) With knowledge of purported A, P failed to take reasonable steps to notify T’s that no agency existed
(3) T liable to P, too ‑ R.2d 292
Note ‑ Trade custom = both actual & apparent authority thru incidental/usual/customary