Business Associations OUTLINE à Prof. Michael
I. Agency
a. Creation
i. Manifestation / consent
1. a principle appoints an agent to interact with 3rd parties.
2. must have manifestation of consent (by words or conduct) to act on behalf
3. agent acts on principles behalf & subject to principle’s control.
ii. Termination at will
1. agency is over as soon as one side says “I quit”
2. manifestation of consent can be terminated by either party.
b. Fiduciary Duties
i. Of agent to principle
1. no self-interest à while working for employer, employee must prefer interests of employer over his own. (CCS v. Riley)
a. no competition on own or w/ others
b. can’t take opportunities that belong to employer
c. must obey principle’s instructions
2. full information (candid info) must be given to employer
3. due care (not a fiduciary duty really) à to do job as well as you can do it.
a. Skill & prudence
b. can’t use trade secrets once you’ve left, but can use general knowledge.
c. Can make merely logistical arrangements while an employee. (Hamburger v. Hamburger)
d. Can use remembered info.
ii. of principle to agent
1. compensation
2. indemnification
c. Ability of agent to bind principle
i. In contract – authority (one kind manifested in many ways)
1. actual (incl. Express, implied and inherent)
2. apparent à no agency relationship
a. arises when person who would be principle makes manifestation to 3rd party to make 3rd party believe he’s agent when he isn’t
ii. In tort
1. respondeat superior (employees)
a. employer is obligated for actions of employee if in scope of employment (although employee is liable too)
b. all employees are subject to physical control by employer (all employees are agents, but not all agents are employers.
2. failure to sup
a partnership (Bailey v. Broder)
b. Fiduciary duties
i. Full information §403 (c)
ii. No self-interest § 404 (b) – duty of loyalty, no self dealing
iii. Due care § 404(c) – strictly speaking not a fiduciary duty à cannot be grossly negligent or act in knowing violation of the law.
iv. Judicial additions § 404(d) (Meinhard v. Salmon) à partners and joint venturers owe fiduciary duties to one another à can have judicial additions.
v. Contractual obligations – can make contractual changes.
c. Management
i. Rights §§ 401(f), (j)
1. each partner has equal rights in the management and conduct of the partnership business.
majority of partners can decide a difference arising from ordinary course of business.
