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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



(a) employment relationship is “master-servant” and tortuous conduct occurred while in the scope of employee’s employment. (R.2d §219(1)).
(b) Direct liability.

(22741) “Master/Servant Relationship”

(22742) “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

(a) R.2d: Master §2(1) – controls physical conduct of another.
(b) 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.
(c) 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.

i) Independnet Contractor Examples:

ii) Servant or Independent contractor?—consider R.2d 220(2)(a-j):

a) extend of control by master over details of work
b) whether or not the one employed is engaged in a distinct occupation or business
c) Kind of occupation which is usually done under direction of employer or by specialist w/o supervision
d) Skill required in the particular occupation
e) Whether employer or workman supplies the instrumentalities, tools, and place of work
f) length of time for which person is employed
g) whether method of payment is by time or by the job
h) whether or not the work is a part of the regular business of the employer
i) whether or not the parties believe they are creating a master-servant relationship
j) whether principal is or is not in business

a) 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.
b) Real estate agent, stock broker, independent building contractor are nonservant agents = independent contractors.
Employer’s Liability if:Actual tortfeasor remains primarily liable to the victim
-R.2d 228 – Is within the scope of employment if:

(a) 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)
(b) 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.

(c) 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
(d) 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)

i) Forbidden acts may be within scope: §230
ii) Conscious criminal/tortuous acts may be within scope. §231

(22743) Situations where there is direct liability for the principal:
i) 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”
ii) Ratification of authority to commi

– R.2d 3


Special Agent: not involving continuity of service or a single transaction
22609. Three types of principals – R.2d 4

a. 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

b. Partially disclosed principal
(1) 3rd party knows agent is or may be acting for a principal, but 3rd party does not know principal’s identity
(2) Can have both apparent and actual authority

c. Undisclosed principal

(1) 3rd party, at the time of the K’al conduct, is not aware the agent is acting for a principal
(2) Agent represents that he is acting alone
(3) K between: agent and 3rd party
(4) Can be no apparent authority

22610. Power of A to bind P(need one of the following; P must be source of agent’s power)

a. Actual authority

(1) Words: express (actual) authority.

(a) Written or
(b) Oral; or (SOF may apply – see above)

(2) Conduct (SOF): implied (actual) authority

(a) Acquiescence

(b) Position (incidental: usually accompanies or is reasonably necessary to A in this business-customary practice). However, if A is told he cannot do something, there can be no implied conduct of actual authority (see pg. 11 text)

i) Industry Custom

i) Past conduct w/no objection from P
ii) conduct of P that leads A to believe A can do it again,

a) Previous actions establishing a company custom
: P’s manifestations of consent to AGeneral Agent: continuity of serviceDoes not have to be formalContract liability includes all agents