Business Associations Hill Fall 2017
I. Agency
A. Overview
Agency = relationship. Q = whether relationship exists.
Cast:
Principal (P)
Agent (A) – acts for principal
Third party (TP) – who agent deals with
[In many cases, 3rd party wants recovery from principal]
[Other common cases: A sued by/on behalf of P for disloyalty (bulk of corporate law cases)]
When is A P’s agent?
When they agree to relationship, OR
Via conduct/holding out to others
Disclaimer between A and P not effective
B. Types
Actual
Manifestation by P to A that A should act on P’s behalf (and subject to P’s control?)
A consents
Damages: Expectation damages – K – P would be bound
Equitable determination made by courts
Apparent
Manifestation by P to TP that A is acting on P’s behalf
Often: what did TP reasonably believe re: whether A was acting for P?
Damages: expectation damages – K – P would be bound
OR, agency by estoppel
P fails to prevent A’s claim of authority
TP reasonably believes A is agent of P
Damages: limited to reliance
Agency by estoppel
P creates, intentionally or negligently, appearance of authority in A
TP reasonably and in good faith relies, and changes position in reliance
Damages:
Limited to those incurred in reliance
[for other agency claims, “contract” is honored – P is bound]
Ratification – like actual agency (A consents)
Means by which P can say “my agent didn’t have right to enter K, but I’m glad she did. So I’ll affirm the transaction and agree to be bound by the K.”
Via express or implied acts
C. Authority
Questions:
If actual agent, w/in scope of actual or apparent agency?
If not actual agent, is there apparent authority?
Types:
Actual authority
Express authority
Implied authority/incidental authority
Can be based on A’s reasonable belief given past dealings, etc.
Hogan
Ratification: affirm or accept w/ full knowledge and “intent” to ratify
Express: “I ratify/accept”
Implied:
Accept benefits when could decline
Sue to enforce K
By silence or inaction
Can’t ratify where “unfair” harm to innocent TP
Apparent authority
Related: authority by estoppel
D. Liability of P for acts of A
Types
Liability of P to TP
A “bound” P to P/TP K
If authority by estoppel, liability limited to TP reliance
A made P liable for A’s tort
[see below]
Liability of A to P
A exceeded her authority
A was not loyal agent – breach of “fiduciary duties”
Liability of A to TP
A claims to be able to bind P, when can’t
Otherwise liable to TP as principal
Liability of P to A
Summary
Liability of P to TP
Contracts: liability for P if w/in scope of agency/authority (actual or apparent)
Torts:
If P/A relationship is ER/EE (master/servant) – w/in scope of employment
If A is independent contractor
A is partially an EE/servant (agent-type independent contractor)
P (often, negligently) employed incompetent contractor
Can incompetence include failure to get insurance?
“inherent
rties in this relationship?
EE is performing on behalf of ER
ER has ability to have physical control over how/where EE performs
Parties’ disclaimer not (necessarily) respected. (Or people who say they are ER/EE may be characterized differently)
Same concept for P/A in franchise context
Humble and Sun
If so, is this within the scope?
Act of the sort A is employed to perform?
During workday/at workplace (or close enough)?
Some courts require motive to establish liability:
Actuated at least in part by purpose to serve ER?
ER may be liable for violence of EE if “incidental” to conduct authorized – e.g. bouncer.
Other courts: conduct is foreseeable to ER and arises out of and in the course of his employment of labor – e.g. drunken seaman returning to his ship
If A is NOT EE, P is generally not liable. But exceptions:
P has some control over A’s performance of job even though A is “independent contractor” (more likely for agent-type independent contractor) OR
P (negligently?) employed incompetent A (where incompetence can (?) include not having $$ to pay possible judgments/failure to get insurance) OR
Performance involves “inherently dangerous activity” (and, sometimes, A is negligent) – Majestic
