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What is Liability in Contract?
What is required to create Liability in Contract?
P becomes liable to 3rd party through the actions of A if A and P both consent and A is subject to P's control.
Requirements: (1) P must have contractual capacity; (2) Writing and consideration not required.
List and describe the different types of actual authority agency.
Actual Authority - authority which the agent reasonably believes she possesses based on the principal's dealings with her, actual authority may be either express of implied via conduct.
Express Actual Authority - authority actually contained in the 4 corners of the agency agreement, even if the authority is mistaken or obtained by misrepresentation, it is still express actual authority.
Implied Actual Authority - authority which is reasonably implied by the actions of the principal.
List the ways an agency relationship is terminated.
1. After a specified time/event or lapse of a reasonable time.
2. Change in circumstance (e.g. subject matter destroyed)
3. If agent acquires adverse interest (e.g. joins a competitor)
4. When agent says so (note: agency must be consensual)
5. When principal says so (unless coupled with an interest, which makes power of agency irrevocable)
6. Operation of law - death, loss of capacity, bankruptcy, etc
List the different substitutes for actual authority agency.
SUBSTITUTES FOR ACTUAL AUTHORITY
- Apparent Authority - arises from
- reasonable belief of 3rd parties created by P (not A alone) that induces 3rd party to rely on such authority
Ratification - retroactive; even if A had no authority, P can ratify by expressly affirming contract, accepting benefit from contract, or suing 3rd party on it as long as (1) P knows all material facts, (2) P accepts entire transaction, (3) P must have capacity at time of ratification and at time of original contract.
Adoption - not retroactive; a corporation can always adopt something as its own after formation; promoter not automatically relieved of liability
Relationship between Principal and Agent
A is fiduciary and owes duty of loyalty, care, and obedience.
P must pay, reimburse, and indemnify A
Relationship between Principal and 3rd Party
P liable to 3rd party
3rd Party liable to P unless A has special skills and P is undisclosed
3rd Party agent is generally not liable (since A is just a go-between)
What is the test for determining liability in tort (master/servant relationship)?
Was the tort committed by a servant acting within the scope of employment? If so, the master and servant are jointly and severally liable.
What factors are used to determine whether someone is a servant or independent contractor?
- Who had right to control how person did job?
- Who provided supplies and tools?
- Was job part of employer's regular business?
- Was it long term?
- How much skill was required?
- Was payment made in regular intervals, like a salary, or by the job?
Define Scope of Employment.
Usual tasks are within the scope; minor deviations are within the scope; intentional torts are within the scope ONLY IF force is used to further M's business, M ratifies force, or M authorized S to commit a tort.
In Texas, what is the effect of releasing the servant from liability?
In Texas, releasing the servant does not necessarily release the master from vicarious liability.
What is the Borrowed Servant Doctrine?
Borrower master is liable if he or she had the right to control the servant when the accident happened.
What is Direct Liability?
M is liable for its own negligence if M fails to properly train or supervise employees or check an employee's criminal record.