Class Flashcards
1
Q
How does an agent ensure that liability is passed on to the principle?
A
The agent must disclose the principle’s existence and identity?
2
Q
How does an agent establish actual authority?
A
Principle manifests intent that the agent has authority
The agent believes they have authority
The belief of the agent is reasonable
3
Q
How is an agent’s apparent authority established?
A
The principle manifests intent (holds out) that the agent has authority
A third party believes that the agent has authority
The belief is reasonable
4
Q
How does one establish inherent agency if the principle is undisclosed?
A
the agent is a general agent
does acts that are usual or necessary to authorized transactions (even if forbidden)
then liability of the principle exists
5
Q
What is the duty of loyalty for an agent?
A
Agent must not:
acquire a material benefit form acting on the principle’s behalf
deal adversely with the principle
compete with the principle
use the principle’s property for personal or other use
share the principle’s confidential information
6
Q
How oes one establish inherent agency when the principle is disclosed?
A
the agent is a general agent
doing acts which usually accompany or are incidental to authorized transactions (even if forbidden)
other party reasonably belives that the agent is authorized
then liability of the principle is established
7
Q
What is a general agent?
A
An agent authorized to conduct a series of transactions involving a continuity of service.
Rest.2d Agency 3(1)
8
Q
Who can be an Agent?
A
- Anyone can represent the interests, that is physically able to do act, of Principals
- Minors, etc.
- Some relationships require additional requirements
- Written Authorizations
- Equal Diginities
9
Q
What is an Agency relationship?
A
- Principal responsible for the acts of agents
- Employers responsible for the acts of employees
- Masters responsible for the acts of servants
10
Q
What is the Green test?
A
- Mutual Consent (P and A)
- Power to alter P’s legal relations
- Right of Control of Agent
- Duty to act solely/primarily for the benefit of P
Green v. H.R. Block
11
Q
What is a the definiton of agency?
A
A fiduciary relationship resulting from a manifestation of the principal for the agent to willingly act on the principals behalf subject to the control of the principal, and to be bound the agents acts.
Green v H.R. Block
12
Q
What is the threshold for the Principal/Agent relationship.
A
Principals setting of the task is enough.
13
Q
What is the threshold for Employer/Employee (Master/Servant)
A
The right of the Employer to control the work conduct of the Employee.
14
Q
Ten Elements Distinguishing Employees from Ind. Contractors
A
- Control or Right of Control of the Work
- Distinct occupation or business (contractor)
- Type of work (specialist without supervision or under direction of employer)
- Payment/Benefits
- Skill Required for the Activity
- Whether employer provides work location, instrumentalities
- Length/Term of Employment
- Principal is a Business
- Parties Believe They Have an Ind. Contractor Relationship
- Work is part of principals regular business
15
Q
What is Vicarious Liability
A
An employer is liable for all torts committed by an employee within the scope of employment
16
Q
What is Control Theory?
A
The employee is actions were under direct control (authority) of the company.
17
Q
What is Enterprise Theory?
A
The employee is furthering the goals (purpose) of the enterprise (company)
18
Q
What are the elements of Scope of Employment
A
- Activity that the employee is employed to perform
- Occurs within the authorized time and space limits
- It is actuated, at least in part by a purpose to serve the employer
- If force is used that is not unexpectable to the employer
“Not unexpectable to the master, the use of the force is”
19
Q
Intentional Torts of Employees
A
- When and where the tort took place
- Whether the job is one that involves an authorization to use physical force
- Whether the employee was trying to serve the employers interest when the tort took place
20
Q
Vicarious Liability while Commuting
A
- Special Errand/Dual Purpose
- Compensation for time and travel
- Special Hazards (traveling a dangerous path to worksite)
22
Q
Vicarious Liability - Partnerships
A
- An agreement
- A common purpose
- A community of pecuniary interest
- An equal right to a voice, accompanied by an equal right to control instrumentality
27
Q
Employer Vicarious Liability for Independent Contractors - Exceptions
A
- Intrinsically dangerous work
- Legally or contractually non-delegable duty
- The act will create a nuisance
- Where the act will probably cause harm to others if precautions not taken
- Where the act is illegal
28
Q
What are the differences between Servant and Agent?
A
- Agent
- Fiduciary
- Liability in Contract
- Principal not liable for unintentional torts of A
- Servant/Employee
- Fiduciary
- Principal liable for torts of Employe within the scope of employment
29
Q
What is the proper use of the “Control Test”?
A
For Agents, the control of the work is not the correct threshold. As long as the Agent is carrying out the manifest wishes of the P, then control is met.
30
What is power to alter?
An agent is one that can alter the legal relations of the P, even though:
* they are not a direct party to the contract, or
* the principal is not a direct party to the contract.
31
Who can be a principal?
Anyone with the legal capacity to possess rights and incur obligations.
* Minors cannot
* Incapacited cannot
32
What is the Equal Diginities rule?
The authorization of the agent must be in a form similar to requirements of the act to be taken.
* Statute of Frauds - In Writing
* Power of Attorney - In Writing
33
What is express authority?
Authority to take action that is given orally or in writing for a specific undertaking.
34
Is the Principal liable for an Agent's unauthorized act?
* Principle not liable for unauthorized contract as the agent made it, but is bound by the contract that the agent was authorized to make.
* Exception: If the difference is
* amount, or
* separable term of contract, and
* the third party is willing to enforce the authorized separable portion
Rest.2d Agency 164
35
What is implied authority?
When a principal intentionally or negligently allows the the agent to believe that they have authority.
36
What is inherent authority?
When the Agent exercises authority necessary or customary to carry out the authorized duties
37
When does an agency relationship terminate?
* Death of the principal (common law)
* Loss of capacity of the principal
* Revocation by either Agent or Principal
* Occurrence of events which should indicate to the agent that the relationship is terminated
* Specified by statute
38
When may actual authority be irrevocable?
* the power was given as security
* proxy to vote securities
* ownership interest that is irrevocable under statute
39
When may a third party recover from a principal under apparent authority?
Third Party establishes:
* The principal was responsible for appearance of authority of the agent
* Third Party reasonable relied on the agents apparent authority.
40
How does a Principal teminate apparent authority?
Notice to the Third Party.
41
What is the common law rule when a Principal is partially disclosed?
* Principal is party to the contract
* P is liable
* P can enforce the contract in its own name
* Agent is also a party to the contract
* Third Party must elect remedies, cannot pursue both parties
* Modern rule is Joint/Several liability (not Texas)
42
What is the civil code rule for an undisclosed Principal?
* Agent acts in own name
* Principal not a party to the contract
* Only A is liable and can enforce
43
What is the rationale for the civil code for undisclosed principal?
The third party should whom to sue and who might sue them.
* Once one party sues, the identity of the principal can be determined and joined to the suit.
44
What happens in a case of fraudulent representation of an undisclosed principal?
* Third party may void the contract or conveyance
* If either the P/A knew that the Third Party would not have dealt with them.
Rest.2d Agency 304
45
What happens in a case of implied misrepresentation?
If the identity of the Principal is material to the contract, and the agent does not disclose, the Third Party may have grounds to void contract.
* ID of principal is a basic assumption and Third Party mistaken
* mistake makes contract unconscionable
* mistake known to A/P
* Material and adverse affect on performance due to Third Party
46
What types of relationships can bind a Principal for **Unauthorized** Acts?
* Apparent authority
* Estoppel to deny agency relationship
* Inherent Agency power
47
What is common among the types of relationships that bind P for **Unauthorized Acts**?
* Appearance of agent's authority to Third Party
* P has some responsibility for the appearance of authority
* some manifestation by P
* Third Party reasonably believes P granted authority
* Must know of manifestation
* Belief is tracable to manifestation
48
What are some sources of manifestations of apparent authority?
* Direct communication to Third Party
* Course of Dealing
* Prior dealings not objected to by Principal
* Agent is in a position that would customarily have that type of authority
* Third Party to show custom
49
What is a "Deny Agency Relationship Estoppel"?
* No manifestation of authority, but
* P is liable to Third Party if
* Third Party was justfiably induced
* to detrimental rely on
* belief in P's manifestation of authority
* Because
* P intentionally or carelessly caused such belief, or
* knowing that the Third Party had such belief took no reasonable steps to notify the Third Party of the facts
Rest. 2d Agency 8(B)
50
What remedies are allowed for Third Parties in Estoppel?
Agency
* Contract value (benefit of the bargain)
* Detrimental Reliance (extent of harm)
51
What is required of the Principal to incur an Estoppel judgement
Consent (common law)
* Possession of Principals property not enough
* UCC 2-403 requires that the principal entrusts goods to a merchant
* necessity of selling requires assumption of consent
52
When does a general agent have inherent agency power?
* Acts accompany or are incidental to the transactions A is authorized to make
* P has limited A's authority
* Thirs Party reasonably believes that the A has authority
* No notice by P to Third Party of A's limited authority
53
What are the factors for Continuity of Service?
* Integral part of business
* Number of acts
* Term of conducting acts
* Employees
## Footnote
*DuPuis*
54
What are the factors for evaluating of acts of general agents?
* What acts are customary for A to conduct?
* Job description
* Job authority delegations
* Are the acts within the scope of business?
55
To whom does apparent authority not apply?
* Sovereigns
* US
* Entities created by Sovereigns to conduct government business
* Agents for the US government
56
What are the Partnership Statutes?
* UPA - Texas Adopted in 1960
* RUPA - 1997
* TRPA - 1996
57
Has the RUPA been fully adopted?
* East of Miss. River
* 16 yes - 9 no
* West of Miss. River
* 24 yes - 2 no
* Texas no
58
What is Partnership Entity theory?
The partnership is like an entity unto itself and can be treated separately from the partners. Has its own rights and obligations. RUPA
59
What is Partnership Aggregate Theory?
A partnership is merely an aggregation of partners and has no distinct identity. UPA
60
What is the Conceptulistic Approach for considering the nature of partnerships?
Consider metaphysically what a partnership is, and then reason from there.
61
What is the Practical Approach to determining what a Partnership is?
Whether the parties are best served by one definition, entity or aggregation, or the other.
62
What are the main elements of the Practical approach?
* Rights and obligations related to the context of the issue
* Employer/Employee
* Workers Comp
* Rights and obligations of partners
* under partnership law
63
How does UPA view Partners obligations?
Aggregate
* Partners as parties to contracts
* Jointly liable on contracts
* Right to participate in management
* Right to conduct business of partnership
* Partnership is a way of describing the jont activities of the partners
64
How does RUPA view Partner obligations?
Entity and Aggregate
* Entity
* Partnership is a distinct entity (RUPA 201(a))
* Aggregate
* Joint and Several liability for Partners
* Each Partner an agent for Partnership (RUPA 301)
* Equal rights to management and to conduct business (RUPA 401(f))
65
What does joint and several mean for Partners?
* Each Partner can be held independently liable for obligations of the partnership.
66
What does jointly liable mean for Partners?
The Partners are held jointly liable, with each only being responsible for a fraction of the liability.
67
Can a Partnership be Sued?
Under aggregate theory
* No legal capacity to sue or be sued
* Must name and serve all partners
68
What is the definition of a Partnership under UPA?
Persons carrying on as co-owners of a business for profit. UPA 6
69
What does the Partnership "name" mean?
Persona
* P's using name to conduct partners business
* Name is the business persona of the partners
70
What does the common law allow for suing partnerships?
* Sue under common name
* Serve the partnership and at least one partner
* Judgement enforceable on
* Partnership assets - jointly
* Served partners assets
71
What are the liability standards under UPA?
Partners Liable for Partnership:
* Jointly and Severally for wrongful conduct, breaches of trust
* Jointly for debts, obligations and breachs thereof (contracts)
72
How would one get satisfaction at common law?
* Must exhaust partnership assets first
* Then individual partner assets if judgement allows
* Served
* Judgement against partner
73
How does one get satisifaction under RUPA/TBOC?
* Partnership can be sued under its own name
* Can sue Partnership and Partners in same or seperate actions
* To get a judgment against a Partner, must name and serve Partner
* Partners jointly and severally liable
74
What must a Judgement Creditor do under RUPA?
* Must execute against the Partnership first
* If the judgement is unsatisfied from Partnership assets, then
* can exercise a writ of execution against Partners assets, if
* Partner was part of the same judgment
75
How does TBOC and RUPA differ between judgement execution?
* Creditors
* Judgement Creditors - RUPA
* Creditors - TBOC
* Order
* Partnership assets first - RUPA
* Wait 90 days - TBOC
* Condition
* Levying execution on a Partners assets - RUPA
* Proceeding against Partners/Assets
*
76
What are the exceptions to judicial creditor rules?
Go after the Partners asets directly if:
* Partnership in bankruptcy
* Partners consent
* Partnership assets clearly insufficient, or
* Getting at the Partnership assets excessively exhaustive, or
* Equity demands
77
What is required by the Partners to form a Partnership?
* form (intent) a business - RUPA 202
* to carry on (intent) as co-owners - UPA 6
* Accord (intent) - TBOC 152.051(B)
78
How does a Partner manifest intent to be in a Partnership (Common Law)?
* Money, Property, Labor
* Agreement to share profits
* Agreement to share losses
* Mutual right to control or manage business
79
What acts in and of themselves do not establish a Partnership under UPA?
* Common ownership of property
* Accord
* Sharing of "Gross Returns" not profits
* Sometimes sharing Profits
80
What factors indicate a Partnership has formed under TBOC?
* Profit-sharing (actual or rights to)
* Expression of intent
* Participation in control/managment
* Sharing losses and liabilities
* Contributing money or proprty to the Partnership
81
How do courts use the indicia of Partnership?
* Mostly as factors
* Coupled with Totality of Circumstances
* Texas (Common Law) - Elements
* All necessary, but some can be implied
82
How are Profts interpretated for Partnership formation?
* Intent to share (actual not required)
* UPA - Prima Facie evidence of being a Partner
* unless received as a non-partner
* TBOC - only a factor
* again unless received as a non-partner
* Totality of Circumstances
* Burden on proponent
83
What are examples of non-Partner profit sharers?
Payment of:
* debt
* wages
* rent
* former partner obligation
* interest
* consideration for sale of property (tangible/intangible)
84
Is "control" an important factor for Partnership formation?
Essential - UPA
* Joint decision making for business activities
* Access to business details
* books
* records
85
What is considered a "contribution" to Partnership formation?
* Property, Capital
* Labor - w/o salary expectations
* Services - w/o compensation expectations
* Not a Lender
86
What is a Joint Venture?
A Limited Partnership for a single purpose, but a Partnership
* Limited in:
* Apparent Authority
* Implied Authority
* Scope of Undertaking
87
What is a General Partnership?
All Partners have equal liability for Partnership obligations.
88
What is a Limited Liability Partnership?
A General Partnership where some Partners have
* limited liability for some obligations of the Partnership
must be filed with the State
89
What is required to file a Limited Liability Partnership registration?
* Application
* Name of LLP
* Tax ID
* Street address of office in Texas
* Number of Partners
* Business statement
* Signed by majority-in-interest of Partners
* $200 per partner
90
What limitations can LLP Partners receive?
Liabilities, Full Shield (RUPA, TBOC)
* Tort
* Contract
91
Can an LLP be terminated?
Yes
* LLP Annual Report due 6/01 of each year
* plus $200 per partner filing fee
* Failure to file by Mat 31 of following year terminates LLP
* Reverts to General Partnership
* Does not require dissolution of Partnership
92
Can a termianted LLP be reinstated?
Yes
## Footnote
File an application within 3 years of termination anniversary
93
What is required for a termination reinstatement application?
* Name and Date of Termination
* Reason for Termination
* File Annual Report
* Pay filing fee and all unpaid filing fees from termination period
* File a tax clearance letter showing franchise tax payments
94
What is the effect LLP reinstatement?
* If reinstated, then LLP status will be as those it never lapsed
95
What happens after three years and filing is made?
* LLP is terminated
* Filing restablishes LLP
* Period of lapse is deemed to be a General Partnership - yikes
96
What does "Full Shield" mean?
A Partner is not liable for acts of the Partnership:
* To other Partners
* From act of those who work for the Partnership
* To Third Parties
only liable for:
* Own misconduct (malpractice)
97
Is a Partner and Agent of the Partnership?
Yes
## Footnote
Partners are Agents for the purpose of the Partnerships business
98
How does UPA define the Partner as Agent?
* Act of every Partner
* For appartently carrying on in the **usual** way the business of the Partnership
* Binds the Partnership
* Unless the Partner had no authority and the Thrid Party knew of it
99
What does "carrying on in the usual way" mean?
Ordinary course of
* Partnership business, or
* Business of the kind carried on by Partnership
100
What are Purported Partners (Partners by Estoppel)?
Where a party is
* Representing that they are a Partner, or
* The Partnership consents to the representation
UPA
101
How does the UPA view Purported Partnership?
If a Third Party is extending credit then:
* Delivery constitutes Partnership obligation
* Open Accounts
* Contract to provide, but no delivery
* No change of Third Party's position, no estoppel.
102
How does RUPA view Purported Partnership?
If the parties enter into a transaction, then estoppel can be granted - RUPA 308
103
Would a false representation trigger a Purported Partnership?
No
## Footnote
A false representation or conduct does not create a partnership - TBOC 152.054, UPA 7
104
So if a Third Party extends credit but no Partnership exists, then what?
Other laws apply
* Negligence
* Fraud
* Agency
* Unjust Enrichment
105
Is a Partnership liable for Wrongful Acts of employees?
Yes
* Respondant Superior
* Employees within scope of employment
106
Is a Partnership liable for the Wrongful Acts of Partners?
Maybe
* Partner acting as an Agent
* Not generally
* Partners acting as a Partner
* ordinary course of business, or
* authority of partnership
* YES
107
Who can the Partnership be liable "to" for a Wrongful Act?
For loss or injury to
* A person, or
* Partner
caused by or incurred as a result of a wrongful act or omission or other actionable conduct
TBOC 152.303
108
What are the fundamental differences between Doctors and Hospitals?
* Doctors - are licensed to practice medicine
* Hosptials - are only able to provide health care services and cannot practice medicine
109
What is within the "ordinary course of business" for a Hospital?
Providing support services for Doctors to practice medicine. Not to practice medicine itself.
110
Can Doctor's form partnerships?
Yes, to provide professional services
TBOC 152.055
111
Can a Partnership be liable for the loss of money or property?
Yes
* For money or property not belonging to a Partner
* Received in the course of the business
* misapplied when in the custody of the Partnership
112
How do Partnerships make decisions?
* Majority rule
* Texas - majority in interest
* UPA/RUPA - majority of Partners
113
What is Majority in Interest?
A majority based on percent interest in:
* Partnership 152.209
* Share of Profits 151.001
* Profits Equally 152.202
114
How does UPA view Partnership decisions?
All Partners have a right in management and conducting of Partnership business.
## Footnote
UPA 18
115
Can a Partner tell Third Parties that another Partner lacks authority?
NO!
Unless the Partnership has expressly voted and limited the authority of the Partner to act.
116
How does a Partnership settle differences?
* Ordinary course of business
* Majority
* Outside ordinary course of business
* Unanimous
117
118
What is the duty of a Partner to follow the decision of the Partnership?
Duty of Obedience
Breached when Partner knowingly acts against the will of the Partnership
119
What are the property rights of a Partner?
* Rights to specific Partnership property
* Interest in the Partnership
* Right to participate in management
120
How is the property in a Partnership held?
Tenancy in Partnership UPA 25
121
What does tenancy in partnership mean?
Each partner has a right to possess Partnership property for the purposes of Partnership business.
122
What are the limitations to tenancy in Partnership?
* not assignable
* not subject to attachment, execution, except for a claim against the Partnership
* not subject to marital rights
* on death, vesting remains with Partnership
123
What can a Partner transfer or assign?
Rights to the distributions of the Partnership or surplus property
## Footnote
UPA 26
124
Does a transferee become a Partner?
No, Partners can only be added by the agreement of all Partners.
125
What is a Partnership interest?
Partners
* Profits
* Losses
* Right to receive distributions
* No right to partcipate in management
126
What rights does a Transferee have?
Distribution rights of the Partner transferor, UPA 27, RUPA 503
* Texas allows for information and inspection rights for transferees
127
What does the transferee get upon dissolution of the Partnership?
* Assingor's share
* Right to an accounting since the last accounting
128
Can a transferee dissolve a Partnership, UPA, RUPA?
A transferee has a qualified right to petition the court to dissolve the partnership if:
* The Partnership is at will, or
* Upon expiration of Partnership term, or
* Completion of Partnership undertaking
129
Can a transferee dissolve a Partnership, TBOC?
Right of Redemption
* If at the time of transfer the Partnership was for
* an unexpired, uncompleted, unhappened duration
* undertaking or event
* then **only** on the expiration/completion
* Can receive "fair value" of interest
130
What happens upon the death of a Partner, TBOC?
* Living spouse a transferee
* Probate executor can obtain information
131
Can a transferee demand a distribution?
No, unless
* contract forming the Partnership specified periodic distributions.
* no fiduciary duty owed transferee
132
What is a "charging order"?
A judicial lien on a Partners Interest
* Not the partnership assets
* A judicial transferee
* Debtor still a Partner
* When judgement is paid, lien stops
133
What does a judgment creditor get with a Charging Order?
* Distributions of the Partner's share of Partnership profits.
* Foreclosure of Partners Interest
* Can be sold to pay obligation
* If court believes that distributions inadequate over a reasonable period
134
What can a Partner do on a Charging Order foreclosure?
* Once notice of foreclosure is given
* redeem by paying off judgment
* gets Partner Interest back
135
What are Professional Services?
Any type of service which requires .....obtaining a license from the state.
* Lawyer
* Doctor
* CPA
* Dentist
* Vet
* Pharmacologist
136
What are the limitations on the purpose of professional organizations?
A Professional Entity may engage in only:
* One type of service
* Unless expressly authorized to have more under state law regulating service
* Services ancillary to the primary service
TBOC 2.004
137
What are the types of Professional Entities?
* Professional Association
* Professional Corporation
* Professional Limited Liability Company
TBOC 301.003
138
Does the service provided matter to the type of Professional entity?
* PA's - Doctors only
* PC's - Other professional services
* PLLC's - Any service
139
What is the Franchise Tax basis?
* Texas
* Gross Margin
* Applies to all LL Partnership
* Applies to General Partnerships if
* An LLP is a General Partner
* or any LL is a General Partner
140
What is a Limited Liability Company (LLC)
* Owners (members) have full limited liability and can be a single member
* If Member managed then rights to control and participate in managment/decisions
* If Management Managed then the managers have the authority to manage and control
* Members get no managment or apparent authority rights
141
What is a Limited Liability Partnership (LLP)?
At least one general and limited partner
* General partner gets control and management
* Limited partner get no control in exchange for limited liability
142
How is an LLP formed?
An election made when filing with the state.
143
What are the attributes of a General Partnership?
* At least two partners
* All partners have equal management rights
* All partners are liable
* At will, can be dissolved at any time
144
What is a Sole Propriertorship?
* A single owner doing business
* Owner liable for all obligations
* Complete control of business
* Ends when
* Owner dies
* Sale of business
* Partial sale or ownership
145
What is implied warranty of authority?
146
What are the Agents general duties?
* Duty of Performance
* Duty of Loyalty
147
What is an Agents duty of performance?
* Duty of Care, Competence, and Diligence
* Duty of Obedience
* Duty of Good Conduct
* Duty to Provide Information
* General duties to Principal's property
148
What is an Agent's duty of loyalty?
The Agent has a fiduciary duty to the Pricipal to act for the Principal's benefit in all matters connected with the relationship
149
What is the expectation for an Agent's duty of competence.
The Agent must make reasonable efforts to achieve the goals of the Principal, no guarantee of success.
150
What is the expectation for an Agents duty of care with respect to negligence?
* Act with the standard care and skill of one of locality or type of work
* Act with a higher standard skill for special activities
151
What is the standard of care for an Agent to use discretion or judgment?
* Must act as a reasonably prudent competent
* Professional
* Person
* Must not be negligent in doing homework for making judgment
152
What is Duty of Obedience?
* Act only within the scope of actual authority
* Liable to Principal for DAS exceeding scope
* Principals defense costs
* Additional DAS if Principal bound by unathorized act
* Not to act after termination of Agency
* Obey
* P's reasonable and lawfull instructions
153
What is duty of Good Conduct?
* Act reasonably
* Refrain from conduct likely to damage Principal's enterprise
* Do not act with such impropriety to bring disrepute to Principal's business
154
What is the duty or Provide Information?
* Reasonable efforts to provide facts to Principal when
* the Principal would want to know the facts
* are material to Agents duties to Principal
* can be provided without violating superior duty to another person
155
How must an Agent handle the Principals property?
* not to treat them as the Agent's own property
* not to comingle with Agent's property and lose identity
156
How must an Agent keep and render accounts?
* Keep accurate records so that Agent can do an accounting
* Agent must account to Principal without being demanded
* Accounting must be a usual practice
157
Can an Agent get a personal benefit while representing the Principal?
NO!
* A duty exists not to get a material benefit from a third party from acting as agent
* A duty to account for profits Agent receives while acting as Agent
* The remedy is disgorgement
* Doesn't matter if Principal is harmed
* Cant keep the ill gotten gain
158
What is a constructive trust?
When an Agent receives something in breach of the duty of loyalty, the Principal can
* sue for the thing itself
* or its value
* or the proceeds from its sale
* a remedy in equity
159
What is self-dealing?
When an Agent is on both sides of the deal, that is adverse to the Principal while working on the Principal's behalf.
160
Why does Agency Law favor disgorgement as a remedy?
Disgorgement punishes Agents who unequitably profit from activities with the Principal. It serves as a deterrent. Allowing the Agent to keep the benefit would encourage others to do the same.
161
What is a simple test to determine breach of loyalty of the Agent?
Would the Principal have consented to the act of the Agent?
162
Can a Principal consent to breach or loyalty by the Agent?
Yes
* But Agent must show that they met the requirements for valid consent.
163
What are the requirements for a Principal to consent to a breach of the duty of loyalty?
* Agent fully disclosed
* Conflict exists
* All material facts
* Agent dealt fairly
* Fair price
* Fair advice (impartial)
164
Does an Agent have a Duty Not To Compete?
Yes
* as to subject matter of Agency
* a general duty not to compete
* not binding after termination unless
* non-compete agreement exists
* preparations to compete are okay, but no actual competing
165
What are the difference between competition and preparation?
Issue of Fact - no summary judgments
* Intent of Agent
* Circumstances of activities
* Forming new business (okay)
* Setting up offices (okay)
* Proposals, Patent applications, business plans (okay)
166
What is Agent usurpation?
An Agent taking an opportunity that belonged to the Principal.
* Existing legal interest/expectancy
* Line of Principal's business
* Found or developed from Agency
167
Can an Employer avoid liability by having work rules to not be negligent?
No
168
Can an Employer avoid liability if an Employee uses an authorized instrumentality negligently?
Yes
If the Employee uses the instrumentality substantially differently than how it is authorized to be used. Employer loses right of control
169
What is a frolic?
When an Employee deviates **far** beyond the authtorized time and space limits of his task.
170
When does an Employee re-enter from a frolic?
Remains out of scope until very near the authorized time and space of authorized scope.
171
What is a detour?
When an employee departs from scope, but the departure falls **substantially within** the uathorized time and space limits.
172
