2L: BA-2 (SP)

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  1. Define an agency relationship
    • (1) §1.01: AGENCY is the fiduciary
    • relationship that results from the principal’s manifestation of assent to agent that the agent shall act on the principal’s behalf, subject to the principal’s control, and the agent manifests assent

    (2) An agency relationship is created by actual or apparent authority bestowed on the agent by the principal.

    • To prove the existence of an agency
    • relationship, the agent must prove that he had: ASSENT by the P to act for the BENEFIT of the P, under the CONTROL of the P

    (a) Assent & fiduciary relationship- informal/formal agreement between principal and agent

    (i) Fiduciary= trust

    (b) Benefit- A’s conduct must be for P’s benefit

    (c) Control- P must have right to control A by having power to supervise the manner of A’s performance

    • (i) Actual Agent- three steps are
    • satisfied

    • (ii) Apparent Agent- no agency
    • relationship but third party relies on the fact that an agency relationship
    • appeared to exist because of the PRINCIPAL (argue as last stance)
  2. P's liablity in K .... actual authority

    (a) Actual Authority (P > A)

    (i) §2.01 Def.: Agent reasonably believes, in accordance with P’s manifestations to the agent, that the P wishes the agent so to act

    (ii) §3.01 Creation

    • 1. Actual Express Authority—P
    • expressly gave A power to undertake the act on P’s behalf

    • 2. Actual Implied Authority—A has
    • authority to do what’s “necessary or incidental to achieving P’s objectives”

    a. An appropriate means to the ends

    EX:cutting down a tree necessarily requires trimming the branches

    • (iii)
    • §3.06 Terminated by:

    • 1. AGENT’S death, cessation of
    • existence, or suspension of powers

    • 2. PRINCIPAL’S death, cessation of
    • existence, or suspension of powers

    3. P’s loss of capacity

    • 4. Agreement or occurrence of
    • circumstance in which P no longer would assent to A’s taking action

    • 5. Revocation by P to A or Renunciation
    • by the A to the P

    6. Statute
  3. P's liablity in TORT .... actual authority

    • (i) §2.03 Def.: Third party
    • reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the P’s manifestation

    1. Manifestation attributable to P

    2. Communicated to 3rd party

    3. 3rd party reasonably believes A is P’s agent

    • (ii) Apparent authority is possible even though the principal neither intended an agency
    • relationship nor granted that agent actual authority (either express or implied)

    (iii) §3.03 Creation

    (iv) §3.11 Termination of actual authority DOES NOT by itself end apparent authority held by an A.

    • 1. Ends when it is no longer reasonable
    • for the 3rd party to believe that A continues to act with actual authority.
  4. Define Inherent Authority
    • (i) Apparent authority by position;
    • “Built-in” authority (IE: Corp. President)

    • 1. Distinction in terms is not a
    • distinction in effect
  5. Define Ratification.... what's its effect
    • §4.01
    • GR: A principle becomes liable for the unauthorized acts of an agent by ratifying (affirming) those acts after the fact

    • 1. Person ratifying must have capacity,
    • ratification is timely, and encompasses the entire act

    2. §4.02 Effect – creates the effect of actual authority.

    • a. NOT effective if (1) caused by
    • misrepresentation; (2) ratified to avoid a loss; (3) diminish the rights/interests of persons that are not parties to the transaction
  6. Agency by Estoppel
    (a) Agency by Estoppel

    • (i) Lack of actual and apparent authority
    • but as a matter of fairness and equity… prohibit P from denying another as their
    • agent…

    • 1. IE: Act in bad faith/ fraudulent/
    • misrepresentation/
  7. Determining AGENT’S liability in CONTRACT
    • (1) §6.01 Disclosed
    • principal: NO agent
    • liability

    • (a) 3rd party aware A is
    • acting on behalf of P and identity of P

    • (i) P and 3rd party are
    • parties to the K; Agent is NOT a party
  8. Determining PRINCIPAL’S liability in TORT
    (1) §7.03 Direct liability

    • (a) Principal intended the conduct to
    • occur

    • (i) Agent acts w/ actual authority or P
    • ratifies conduct that is tortuous

    (ii) P is negligent in hiring/supervision

    (iii) P delegates harm

    (2) §7.03 Vicarious liability

    • (i) Principal (employer) is vicariously
    • liable for the acts of their agents (employee) if employee is acting within the scope of employment

    • 1. Acting w/I scope of employment means employee
    • performs a task for the benefit of the employer and under the control of the employer
    • 2. Frolic

    • a. No vicarious liability; Substantial deviation from hired
    • tasks

    3. Detour

    a. Vicarious liability; Minor deviation from hired tasks

    (c) Independent Contractor rule- NOT LIABLE

    • (i) Someone hired to do a job but not
    • told specifically how to do it- NO CONTROL…

    • 1. IE: have their own equipment; work
    • for several parties; P don’t control daily operations

    (ii) Agent or non-agent IC

    • 1. Agent IC à P is liable in CONTRACT (still NOT
    • TORT)

    • a. Become an agent IC if given actual
    • authority to act in a certain way (ex. authority to buy supplies from Home Depot)

    • 2. Non-agent IC à no actual or apparent authority to
    • act

    a. NO liability in contract or tort
  9. I) Determining an AGENT’S liability in TORT
    • (1) §7.01 Agent is ALWAYS liable for their own
    • actions unless there is a statute

    • (a) In tort law you are always liable for
    • your own actions

    • (2) All elements must be satisfied between Agent and 3rd party: Duty
    • to 3rd party, Breach of duty, Causation
  10. Attorney-Client Relationship Rule
    aty. authority may be considered plenary unless it is limited by the client and that limitation is communicated to opposing parties

    I) Hayes v. National Service Industries, Inc.
  11. Define Franchisor/ Franchisee

    What's the GR?
    • I) A form of business relationship in which
    • a business that has a successful product/service (franchisor) enters into a continuing contractual relationship with another business (franchisee).
    • Franchisee then operates under the franchisor’s trade name and with the franchisor’s guidance, in exchange for payment of a fee

    • (1) Franchisor: originator of the
    • business model

    • (2) Franchisee: Pays for the right to use
    • the business model

    I) Consent and Control-based analysis (even if cl. Deems “independent contractor”)

    Remember: Agency relationship exist when: ASSENT by the franchisee to act for the BENEFIT of the franchisor, under the CONTROL of the franchisor

    (a) Actual Agency:
    franchisor exercise control over the daily operations of the franchise, an agency relationship exists.

    (b) Apparent Agency:
    Franchisor imposed requirements as part of maintaining image of uniformity of operations and appearance and 3rd person reasonably relied
  12. How do you finance a business and its growth?
    A) Funding by owner

    • I) Money into the business by an owner =
    • investment (equity), NOT as a loan (debt) to be repaid

    B) Debt (loan) vs. equity (ownership interest

    I) All financing for business is either

    • (1) Debt funding: Loan that businesses is
    • legally obligated to repay w/ interest

    • (2) Equity funding: Ownership/Investment
    • that the business in not legally obligated to repay
  13. Ways to decrease lender risk:
    I) Collateral

    • · Pledge personal OR corporate assets
    • to secure the loan and lower risk

    II) Short-term financing

    • · Promise to pay money back in a short
    • time for more predictability

    · Factoring (not the same as loan)

    • III) Yield some measure of control to
    • lender

    • · Loan covenants, share profits with
    • lender, provide a seat on board of directors
  14. How do you determine if it's a loan (debt) or equity (ownership)?
    Partner= Receive a share of PROFITS of a business AND has

    (1) Decision making ability OR

    (2) Duty to share liabilities on dissolution

    (3) UNLESS profits are received in payment as

    (a) Debt by installment

    (b) Wages of an employee or rent to a partner

    (c) Annuity

    (d) Interest on a loan

    (e) Consideration for the sale of goodwill of a business or other property
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2L: BA-2 (SP)
2012-01-30 23:53:53

2L: BA-2 (SP)
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