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CORPORATIONS Agency 1. Principal-Agent Agency: a. Elements i.

Manifestation of consent by one person that the other shall act on his behalf; ii. Agent subject to principals control, and iii. Consent by the agent so to act b. Presumption: rebuttable presumption that agency accompanies ownership c. Control: does the putative principal exercise enough control? i. Some control not determinative, like teacher-student relationship ii. Relationship often leading to agency 1. Creditor-debtor when creditor takes over too much 2. Supplier relationships iii. As a policy note, sometimes it is useful to exercise control even when it increases liability, like for intellectual property 2. Liability of principal to third parties in contract a. Agents authority i. Actual authority 1. Actual express ii. Implied actual authority: agent has the power to do what is reasonably necessary to get the job done, as viewed through the lens of the agent a. Things necessary to complete task b. What is reasonable? Past similar acts; similar tasks; other peoples behavior c. Note that third party knowledge only relevant if third party knew the agent did not have authority iii. Apparent authority: when putative principal knowingly permits putative agent to do things that allows the putative principal to be seen as holding the putative agent out as his agent 1. Viewed through the lens of third party iv. Inherent authority: Principal is liable for all acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and agent (no secret limitations on authority) v. Estoppel: 1. Behavior (act or omission) that creates some reason to think there is authority (focus on reliance) vi. Ratification: the affirmance by a person of a prior act which did not bind him but was done on his account (an equitable remedy) 1. Acceptance of the results of the act with an intent to ratify; and 2. Full knowledge of the material circumstances

3. Partially disclosed principal a. Putative agent is liable for contract if the other contracting party: i. has notice that the agent is or may be acting for a principal; and ii. has no notice of the principals identity 4. Liability of principal to third parties in tort:

a. Master servant relationship exists where the servant has agreed i. To work on behalf of the master; and ii. To be subject to the masters control or right to control the physical conduct of the servant b. Focus is on the level of control i. factors for control 1. Method of paying rent 2. Who bears risk of loss 3. Utility bills 4. Written reports 5. Control over hours of operation 6. Selection of subordinate employees 7. Relationship terminable at will or locked in ii. Language of contract relevant but not controlling 5. Tort Liability and Apparent authority a. Franchises: If franchise agreement allocates to the franchisor control over daily operations, then agency relationship exists i. Apparent authority: for franchises, degree of uniformity is important, and must remember the reliance of the plaintiff (did the plaintiff reasonably rely on the uniformity of operation? )

6. Scope of employment

a. Rules: i. Within scope of employment if: 1. conduct to serve the interest of the principal, 2. Does the conduct occur substantially within the authorized time and space limits? ii. Factors to consider 1. Time, place, and purpose of the act 2. Similarity to acts which servant is authorized to perform 3. Whether the act is commonly performed by the servants 4. Extent of departure from normal methods 5. Whether master would reasonably expect such act be performed iii. If some harm is foreseeable then employer is liable even if the particular harm is not foreseeable b. Intentional torts: i. Employer liable employee conduct was in response to plaintiffs conduct which was presently interfering with the employees ability to perform his duties 7. Independent contractors: a. General rule: contractee who hires contractor to conduct independent business with his own employees and not under the control of the contractee b. Exceptions: i. Contractee maintains contl of manner and means of doing the work ii. Hiring an incompetent contractor (like contractor with no insurance or bond of indemnification) iii. Inherently dangerous activities: activities contractee should recognize as necessarily requiring creation of a condition involving peculiar risk to others unless precautions are taken (razing buildings) 8. Fiduciary duty of agents:

a. Duty of care: i. Restatement Sec 379(1): Unless otherwise agreed, a paid agent is subject to a duty to the principal to act with standard care and with the skill which is standard in the locality for the kind of work which he is employed to perform and, in addition, to exercise any special skills that he has. ii. Sec 279 (2): Unless otherwise agreed, a gratuitous agent is under a duty to the principal to act with the care and skill which is required of persons not agents performing similar gratuitous undertakings for others. iii. Other related duties: 1. Good conduct 2. Give information 3. Keep and render accounts 4. Act only as authorized 5. Not to attempt the impossible or impracticable 6. Obey 7. Not to act as agent after termination of agency relationship b. Duty of loyalty: i. Violated when 1. Payment from T (kickbacks, bribes, tips_ 2. Secret profits: a. If servant takes advantage of his service and violates duty of loyalty to make a profit for himself, he is accountable for it to his master b. Transacting with principal without the principals knowledge 3. Usurping business opportunities from principal 4. grabbing and leaving (like employees taking lists of clients with them): a. Restatement Sec. 396 Limitations on As use of confidential information after termination of agency. Among limitations: prohibition on using, in competition with the principal or to his injury, confidential information given to A only for the principals use or acquired by the agent in violation of duty. But agent is allowed to use general information concerning the method of business of the principal and the names of the customers retained in his memory, if not acquired in violation of duty.