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Business Organizations
University of Kansas School of Law
Harper Ho, Virginia

I)       AGENCY
A)    Creation of the Agency Relationship
1)      Agency Definition
(a)    R1.01: The fiduciary relationship that arises when a person (a “principal”) manifests assent to another (an “agent”) that the agent shall act on the principal’s behalf AND subject to the principal’s control, AND
(i) The agent manifests assent or otherwise consents to this
(b)   Basically, there’s 3 elements
(i) Control
A)    (of the agent by the principal)
(ii) Benefit
A)    (to the principal)
(iii) Mutual assent
(c)    Employer-Employee
(i) Always is an agency relationship
(ii) *Still go through the three elements
2)      “Person,” R1.04(5)
(a)    An individual
(b)   An organization w/ the legal capacity to possess rights and incur obligations
(c)    A government/government instrumentality
(d)   Any other entity w/ the legal capacity to possess rights or incur obligations
3)      Labeling Not Controlling, R1.02
(a)    Agency is only created when the elements in R1.01 are met
(b)   Labels don’t matter
4)      Manifestation, R1.03
(a)    A person manifests assent through written/spoken words or other conduct
5)      US v. Cyberheat
(a)    Mutual assent and benefit were obvious
(b)   Court ruled there was enough control to create an agency relationship
B)    Fiduciary Duties of Principal and Agent
1)      Remedies for Breach
(a)    By an Agent, R8.01 Comm. d(1)
(i) Nonmonetary relief through an injunction
(ii) Rescission of K entered with agent or 3rd
(iii) Monetary relief for the loss the breach causes the principal
(iv) Punitive damages
(v) Restitution for unjust enrichment
A)    Even if there’s no loss suffered by the principal, the agent still has to account to the principal for benefit received from breaking a duty
2)      Agent’s Duties of Loyalty
(a)    Generally
(i) R8.01: An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship
A)    Comment B: A must subordinate his interests to P’s in matters within the agency relationship
(b)   Benefit from Position
(i) R8.02: Agents have duties not to acquire a material benefit from a 3rd through actions on behalf of the principal or through the agent’s position
(c)    Acting As/For Adverse Party
(i) R8.03: Duty not to deal w/ principal as/for an adverse party in a transaction connected w/ agency relationship
(d)   Competition
(i) R8.04: Duty to refrain from competing w/ principal and assisting the principal’s competitors
A)    But an agent may prepare for competition following termination of the agency relationship
(e)    Use of Principal’s Property/Confidential Info
(i) R8.05: An agent has a duty
A)    (1) Not to use the principal’s property for agent’s or 3rd’s  purposes
B)    (2) Not to use or communicate the principal’s confidential info for the agent’s or 3rd’s purposes
(ii) Indefinite Time
A)    Rule says nothing about time periods
B)    Thus, this duty is ongoing, even after termination, but probably not forever unless it involves a very sensitive trade secret
C)    This should be contracted around
(iii) This duty can be contractually modified between P and A, but generally fiduciary duties cannot be
A)    Thus, 8.05 is just a default rule
(f)    Principal’s Consent
(i) R8.06: P can consent to actions in R8.01-05 IF
A)    In obtaining the consent, the A
1)      Acts in good faith, AND
2)      Discloses all material facts the A knows/should know/has reason to know would affect the P’s judgment (unless P already knows or doesn’t wish to know), AND
3)      Otherwise deals fairly with P, AND
B)    P’s consent concerns either a specific act/transaction, OR acts/transactions that could reasonably be expected in the ordinary course of the agency relationship
3)      Non-Compete Agreements
(a)    Courts tend to uphold them if they’re reasonable in terms of (p. 14)
(i) Time
(ii) Scope
(iii) Geographic Coverage
4)      Agent’s Duties of Care
(a)    Duty Created by K
(i) R8.07: A has a duty to act in accordance with express AND implied terms of any K between A and P
(b)   Care, Competence, and Diligence
(i) R8.08: A has duty to act with care, competence, and diligence exercised by A’s in similar circumstances
A)    Special skills possessed or claimed by an A are taken into account
(c)    Act Within Actual Authority & Comply With Lawful Instructions
(i) R8.09
A)    A only has duty to act w/in scope of actual authority
B)    A has duty to comply with all lawful instructions from the P concerning A’s actions on behalf of P
(ii) Comment b: If A takes actions beyond the scope of A’s actual authority, A is liable to P for loss suffered by the P
(d)   Good Conduct
(i) R8.10: Duty, within the scope of the agency relationship, to act reasonably and refrain from conduct that is likely to damage P’s enterprise
(e)    Provide Information
(i) R8.11: Duty to use reasonable effort to provide P with facts A knows/has reason to know/should know when
A)    Subject to any manifestation by the P, the A knows/has reason to know the P would wish to have the facts OR the facts are material A’s duties, AND
B)    A can provide facts w/o violated a superior duty A owes to 3rd
(f)    Duties Regarding P’s Property
(i) R8.12: A has a duty, subject to any agreement w/P,
A)    Not to deal with P’s property so it looks like A’s property, AND
B)    Not to mingle P’s property w/ anyone else’s, AND
C)    To keep/render accounts to the principal of money/other property, received/paid out on the P’s account
5)      Principal’s Duties to Agent
(a)    Duty Created by K
(i) R8.13: Duty to act in accordance with express/implied terms of any K between P and A
(b)   Deal Fairly & in Good Faith
(i) R8.15: Duty to deal with A fairly and in good faith, including a duty
A)    To provide info
B)    About risks of physical harm or pecuniary loss
C)    That P knows/has reason to know/should know are present in A’s work
D)    But unknown to A
(c)    Duty to Indemnify
(i) R8.14: P has duty to indemnify A
A)    In accordance with the K between them, AND
B)    Unless otherwise agreed,

lsely represents to 3rd that A does not act on behalf of Pà 3rd may avoid the K IF
A)    P or A had notice that the 3rd would not have dealt with the P
(b)   Representations Attributed to P
(i) R6.11(2): A’s representation made incident to a K is attributed to a disclosed or unidentified P as if the P made the representation when A had actual/apparent authority to make the deal, UNLESS
A)    3rd knew/had reason to know that the representation was untrue, OR
B)    A acted w/o actual authority in making it
(ii) R6.11(3): A’s representation made incident to a K is attributed to an undisclosed P as if the P made the representation, IF
A)    A acted w/ actual authority in making the representation, OR
B)    A acted w/o actual authority in making the statement, BUT HAD actual authority to make true representations about the same matter
E)     Respondeat Superior
1)      Definition
(a)    R2.04: An employer is liable for torts committed by employees while acting w/in the scope of their employment
2)      A’s Liability to 3rd
(a)    R7.01: A is subject to 3rd harmed b the A’s tortious conduct, unless a statute provides otherwise
3)      “Employee Acting w/in Scope of Employment”
(a)    R7.07(2): Employee acts w/in scope when performing work assigned by the employer, OR engaging in a course of conduct subject to employer’s control.
(i) NOT w/in scope when it occurs in an independent course of conduct NOT intended by the employee to serve any purpose to the employer
(b)   R7.07(3): For 7.07,
(i) An employee is an agent whose principal controls/has right to control the manner and means of the agent’s performance of work, and
(ii) The fact that work is performed gratuitously does not relieve P of liability
4)      Definition of Servant (Employee)
(a)    r220(1): A person who is employed to perform services in the affairs of another, and who is subject to the other’s control
(b)   r220(2):  Factors for employee vs. independent contractor:
(i) Extent of control which, by the agreement, the mater may exercise over the details of the work
(ii) Whether the A is engaged in a distinct occupation
(iii) Whether work is supervised
(iv) Skill required for the occupation
(v) Whether the A supplies the tools and office
(vi) Length of employment
(vii) Whether payment is by time or by job
(viii) Whether work is part of P’s regular business
(ix) Whether the parties believe they’re creating an employment relationship
(x) Whether P is a business