Agency I. Liability of Principal to TP for Torts of Agent Respondeat Superior or Vicarious Liability a.

Issue: Whether the Principal will be vicariously liable for torts committed by agent b. Two Part Test: Principal will be liable for torts committed by its agent if: (1) a principal-agent relationship exists, and (2) the tort was committed by Agent within scope of Relationship i. The Principal Agent Relationship Exists 1. Requires: (ABC) a. Assent, informal agreement between Principal and Agent b. Benefit, Agent s conduct must be for the Principal s benefit c. And Control, Principal must have the right to control Agent by having the power to supervise the manner of the agents performance i. Sub-agents tortfeasor if Agent seeks help of sub-agent, There can be vicarious liability for a sub agents tort if ABC control the torfeasor 1. Assent: usually there is no assent 2. Benefit: is there 3. Control: No control over sub-agent 4. BAR no vicarious liability ii. Borrowed Agents tortfeasor Employer 1 will borrow Employer 2 Is the borrowing Employer 1 liable for the borrowed Agent No vicarious liability for a borrowed Agent unless ABC 1. Assent: May find assent 2. Benefit: may find benefit 3. Control: never any right to control a borrowed agent 4. BAR there is liability for Borrowed Agents ii. Contrast Agent with Independent Contractor (IC) 1. Factors -- no right to control IC, because no power to supervise manner of its performance 2. Rule - There is no vicarious liability for independent contractors torts 3. Exceptions: a. Ultra Hazardous Activity Exception: there will be vicarious liability for that tort b. Estoppel: if hold out IC with appearance of A estopped from denying vicarious liability 4. HYPO As a rule, there is no vicarious liability for independent contractor. Except: a. 1. Ultra Hazardous Activity Exception b. 2. Estoppel c. In this case, brake repair is an ultra hazardous activity and therefore, there will be vicarious liability even for IC. Moreover, E-Stoppe-L has held out its independent contract w/appearance of agency, therefore will be estopped from denying the vicarious liability c. Scope of Principal-Agent Relationship Factors: i. Conduct that Agent was hired for Was the conduct within the job description? ii. Tort occurred on the job Where and when on the job? 1. Frolic is a new and an independent journey outside scope 2. Detour mere departure from an assigned task within scope iii. Agent s intend to benefit principal If A even in part intended to benefit P - enough to be in scope of A iv. HYPO Principal is liable for torts committed by its Agent in the scope of Agency 1. In this case, A was on detour a mere departure from assigned task because, a tort occurred on the way back to work; Therefore there will be vicarious liability here/ d. Intentional Torts i. Rule: intentional torts are generally outside the scope ii. Exceptions: Intentional torts are within the scope if the conduct was: 1. Specifically authorized by the Principal 2. Natural from the nature of employment paid to assault people 3. Motivated by a desire to serve the principal iii. HYPO a bouncer in a bar is the Bar owner liable? 1. Generally, no liability but there are exceptions

II. Liability of Principal for K Entered by agents a. Issue: Whether principal is liable for K entered into by its Agent b. One Test: Principal is liable for K entered into by its Agent if the principal authorized the Agent to enter the K c. There Four types of Authority: Actual express, actual implied, apparent or ratification i. Actual Express Authority: Principal used words to express authority to Agent 1. Rule: Oral, Private, Narrow. 2. Exception For land (K involves conveyance of land ) Express Authority must be in writing a. HYPO is Principal liable for the sale of land? i. Principal is liable on its authorized K ii. In this Case, because K involved conveyance of Land, express authority must have been in writing and therefore the oral whisper did not authorize this transaction. 3. Express Authority: will be revoked by: a. Unilateral act of either party; OR b. Death or incapacity of Principal i. HYPO: Is Paula s estate liable to pay for the book? 1. Principal is liable on its authorized K 2. In this case, actual express authority terminated upon Paula s death and therefore there was no authorization to pay for the book. If Paula s estate is not liable therefore Agent is liable c. NOTE: If Agent does not have actual express authority then Agent is liable d. EXCEPT: Express authority cannot be revoked if: i. Principal gives Agent a durable power of attorney 1. PoA a written expression of authority to enter a transaction 2. Durable conspicuous survival language ii. Actual Implied Authority 1. Authority which agent reasonably believes the principal has given, because: a. Necessity: there is implied authority to do all tasks: i. Which are necessary to accomplish an expressly authorized task b. Customs: There is implied authority to do all tasks: i. Which are customarily performed by persons with the Agent s title or position c. Prior Dealings: Between Principal and the Agent. There is implied authority to do all tasks: i. Which the Agent believes to have been authorized to do from prior acquiescence iii. Apparent Authority 1. Not real or actual authority, P is still liable 2. Two Part Test: (1) P Cloaked A w/appearance of authority and (2) TP reasonably relies on appearance of authority a. Secret Limiting Instruction A has actual authority, but P has secretly limited that authority. Agent acts beyond the scope of limitation i. HYPO P is liable on its authorized K 1. In this case, there is no actual express or implied authority to sell clock 2. Nonetheless, there was apparent authority, because: a. P did Cloak A with appearance of authority and b. TP relies on appearance of authority b. Lingering Authority Actually authority has been terminated. Afterwards, agent continues to act on principal s behalf. iv. Ratification: 1. Authority can be granted after the K has been entered, if: a. Principal has knowledge of all material facts regarding the K, and b. Principal accepts its benefits c. Except: Ratification cannot alter the terms of the K d. Rules of Liability on K i. General Rules 1. If no Authority, P is not liable on the K A is liable on K

2. If Authority, P is liable on K A is not liable on K ii. Exception 1. P is partially disclosed (only the identify of P concealed) or undisclosed (fact of principal concealed) authorized agent may nonetheless be liable at the election of the TP 2. Authorized agents are not liable unless undisclosed principals. III. Duties Agent Owes to Principal a. Duty to exercise reasonable care b. Duty to obey reasonable instructions c. Duty of Loyalty i. Self Dealing Agent cannot receive a benefit to the detriment of the P. ii. Usurping the P s opportunity; OR iii. Secret Profits iv. Remedies P has against A 1. P may recover: a. Losses caused by breach b. Disgorging Profits made by breaching A Mini Review - Agency a. Principal s Liability for A s Torts: i. Assent, Benefit, Control + Scope ii. No vicarious liability for independent contractors torts iii. Intentional torts generally outside scope b. Principal s Liability for A s K i. Express authority oral, except for land, revocable unless durable ii. Implied authority necessity, custom, prior dealings iii. Apparent authority (1) Principal Cloaks + (2) TP relies iv. Ratification Knowledge + Acceptance benefits v. Authorized Agents are not liable unless Partial/undisclosed principal c. Duties of A owes to P i. Care ii. Obedience iii. Loyalty (Disgorge profits) Partnership I. General Partnership Formation a. Formalities Not required for GP b. Definition GP is an association of two or more persons who are carrying on as co-owners of a business for profit c. Sharing of Profits - Contribution of money/services in return for share of profits is prime facie evidence of GP Liabilities of Partners to TP a. Agency Principles Apply i. Partners are A of the partnership for carrying on usual partnership business ii. Partnership is bound by torts committed by partners in scope of partnership business iii. Partnership is bound by K entered by Partners with authority b. General Partners are Personally liable for Debts and obligation of Partnership i. Incoming Partner s liability for pre-existing debts Not liable for prior debts, but, any money contributed to the Partnership by an incoming partner can be used to satisfy any past debts ii. Out-going Partner s liability for subsequent debts Retains liability for future debts until they die, UNLESS notice of their withdrawal has been given to all known and even potential creditors c. GP Liability by Estoppel A Person who represents to TP that partnership exists will be liable as if Partnership exists i. Answering HYPOS Formation, Liability and Estoppel

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ii. HYPO general partners are personally liable for all partnership obligations including co-partner s torts. 1. In this case, P and P never really formed a general partnership because theirs was just a lending arrangement no agreement to sharing profits 2. Nonetheless, Under Partnership by Estoppel P will be liable because she has represented to that TP that she is a partner of P and will be liable as if she were therefore liable for Co-partner s torts

Contrast Formation and Liability Within Other Unincorporated Business Organizations iii. Limited Partnerships 1. Defined Partnership w/at least 1 general partner + at least 1 limited partner - two tier partnership 2. Formation NY requires that you file LP Certificate including Names of all General Partners 3. Liability and Control a. General Partners i. Liability GP are still liable personally for all LP obligation ii. Control May exercise control b. Limited Partners i. Liability LL, not liable for obligations of LP, must pay full price for their interest ii. Control May not exercise control of business without forfeiting LL status iv. Registered Limited Liability Partnership (RLLP) 1. Defined GP engaged in Professional services 2. Formation a Filing Certificate of Registration with D. of State includes Profession practice 3. Liability and Control - No P is liable for its debts/obligations; Each P is liable for own wrongdoing v. Limited Liability Companies (LLC) 1. Defined - Give to its owners - called members same rights and liabilities of shareholders in a Corporation and the benefits of P tax status a. P tax good, C tax bad 2. Formation - file Articles of Organization and also you must publish a summary of Articles once a week for 6 weeks in a row in two newspapers to comply for compliance 3. Liability and Control - members are not liable for any obligation of the Co. itself 4. Partnership Characteristics (2 of 3) a. Member control, but may delegate to managers; b. Limited liquidity Member interests are not freely transferred c. Limited Life events of Dissolutions 5. LLC Limited Liability, liquidity (Member interests not freely transferable), life, tax Rights and Liabilities Between Partners a. Partners are FIDUCIARIES of each other and the partnership i. Duty of Loyalty (No Self Dealing; Usurping Opportunities; Secret Profit) ii. REMEDY: Action for Accounting 1. Partnership may recover: i. losses cause the breach; ii. Disgorge profits b. Partner s rights in Partnership Property i. Specific Partnership Assets 1. Property (land, leases, equipment) owned only by the Partnership as specific partnership assets, therefore no individual P may transfer these assets without Partnership authority ii. Share of Profits and surplus 1. Partner owns share of profit as personal property-each partner may transfer profits to some TP iii. Share in Management

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1. Asset owned by only Partnership itself individual partners may not transfer their share in management to some third party. iv. Conflict BTW Specific Partnership Assets and Personal Property 1. Test: Whose money was used to buy the property? Internal Affairs if there is no Agreement, Default Rules c. Management i. Absent an agreement each partner entitled to EQUAL control (vote) ii. If parties agree to contribute different & WIHTOUT AGREEMENT ON CONTROL, equal control is default d. Salary i. Absent an agreement, partners get NO SALARY (regardless of disproportionate efforts) ii. Exception: Partnership receive compensation for helping to WIND UP the Partnerships business

Partner s Share of Profits and Losses iii. Absent an Agreement, PROFITS SHARED EQUALLY iv. Absent an Agreement, LOSSES SHARED LIKE PROFITS v. HYPOs 1. If Agreement Silent on profits and losses a. Profits shared equally; Without an agreement on losses, they are shared like profits 2. If Agreement Profits Shared 60/40 losses Shared? a. Without an agreement on losses, they are shared just like profits 60/40 3. If Agreement Losses Shared 60/40 - Profits shared? a. Without an agreement, Profits are shared equally 4. Partner A puts up all of the money. Partner B does all of the work. Partner C gives the partnership its fine name. Partner D does nothing. How are Profits are shared? a. Absent an agreement, Profits are shared equally and losses are shared like profits. Dissolution a. Key Definitions i. Dissolution - Any material change in GP caused by death/withdrawal of any single Partner causes an automatic dissolution ii. Termination - Real End of a Partnership iii. Winding UP - period between dissolution and termination in which the remaining partners must liquidate the partnerships assets to satisfy the partnerships creditors b. Compensation and Liability for Winding Up i. Compensation for Winding Up Partners do receive compensation for helping to wind up ii. Partnership s liability for winding up 1. Old Business: Partnership and its General Partners still retain liability on all transactions entered into to wind up Old Business with existing Creditors 2. New Business: Partnership and its General Partners still retain liability on all new transactions until NOTICE of Dissolution is given to all existing and even potential creditors c. Priority of Distribution i. Each level of priority must be fully satisfied before beginning the next level in this order 1. First, All Creditors must be paid a. First, All outside non-partner trade creditors b. Second, All inside partners who have loaned money to the partnership must be paid 2. Second, Capital Contributions by Partners must be paid a. Capital Contributions paid in just for a share of profit if any b. Partnership still owes for the full repayment for all capital contributions 3. Profits and Surplus if any, ONLY after a. Paying Creditors and Capital Contributions b. Partners are paid equally absent an agreement

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ii. RULE for Contribution: Each Partnership must be repaid his or her loans and Capital contributions, plus partner s share of the profits minus that Partner s share of losses Mini Review - Partnership a. Formation i. No General Partnership Formalities ii. GP association, two or more persons, carrying on as co-owners of business for PROFIT b. Liability to TP i. GP are liable for Partnership Obligation ii. Estoppel representers are liable as if they are general partners iii. Limited Partners, registered Limited Liability Partners, LLC members HAVE Limited Liability c. Relations Between Partners i. Fiduciaries accounting for profits ii. Only the Share of profits is liquid, transferable personal property iii. Without an Agreement equal control, no salary, equal profits and losses like profits d. Dissolution i. Definitions Dissolution = any material change including death or withdrawal ii. Priority 1. Outside C; 2. Inside C; 3. Capital Contributions; 4. Profits shared equally without an Agreement iii. Distribution Rule Each Partner receives loans/capital contributions + share of profitless share of losses