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Liability of Principal for Torts of Agent (Respondeat Superior or Vicarious Liability)

A principal will be liable to the torts of its agent if 1) There is a principal-agent relationship and 2) The tort was committed by the agent within the scope of that relationship.


1. P-A Relationship

A. Assent: Informal agreement between P and A.

B. Benefit: Agent's conduct must be for P's benefit.

C. Control: P must have the right to control the agent by having the power to supervise manner of agent's performance.

1. Generally not liable for sub-agents or borrowed agents due to lack of control.

2. Generally not liable for Independent Contractors unless:

a. Ultra-hazardous activity

b. Estoppel: holds out IC with appearance of agency.

2. Scope of P-A 

A. Was conduct of the kind (within job description) agent was hired to perform?

B. Did the tort occur on the job? 

1. Frolic: New and independent journey

2. Detour: Mere departure from assigned task.

C. Did agent even in part intend to benefit principal?

D. Exception: Intentional Torts, Unless:

1. Authorized by P

2. Natural from nature of employment

3. Motivated by desire to serve principal


Liability of P for K entered by Agents

P is liable for K entered into by its A if P authorized the A to enter into K.


1. Actual Express Authority: P used words to express authority to A.  Can be oral and private so long as K itself does not have to be in writing due to S of F (Land).

a. Can be revoked by unilateral act of either P or Agent, OR death of P unless P gives A durable POA: written expression of authority to enter into a K and conspicuous survival language.

2. Actual Implied Authority: authority agent reasonably believes the P has given because of:

a. Necessity

b. Custom

c. Prior dealings

3. Apparent Authority: 1. P cloaked agent with appearance of authority and 2. 3rd party reasonably relies on appearance of authority.

a. Secret limiting authority: A has actual authority but P has secretly limited that authority and A acts beyond scope of limitation.

b. Lingering authority: actual authority has been terminated. Afterwards, agent continues to act on P's behalf.

4. Ratification: Authority can be granted after K has been entered if:

a. P has knowledge of all material facts regarding K.

b. P accepts its benefits

c. however, cannot alter terms of K.


P is liable on its authorized Ks, and therefore an authorized A are not liable for authorized K's unless P is ambiguous.

a. If P is partially disclosed (only ID of P is concealed) or undisclosed, authorized agent may nonetheless be liable at election of 3rd party.

Duties Agent Owes to Principal.

A. Duty of Reasonable Care

B. Duty to Obey Instructions that are reasonable

C. Duty of Loyalty.

a. Self-dealing: receive a benefit at detriment of P.

b. Usurping (taking away) P's opportunity

c. Secret profits.

d. Breach of loyalty will result in recovery of losses caused by breach and also may discharge profits made by agent as well.

Partnership Formation

A General Partnership is an association of two or more persons who are carrying on as co-owners of a business for profit.  A contribution of money or services in return for share of profits creates presumption that a GP exists.

Liabilities of General Partners to 3rd Parties

Agency Principle: Partners are agents of the partnership for carrying on usual partnership business. The partnership itself is bound by torts committed by partners in the scope of partnership business and bound by K's entered by partners with actual or apparent authority.

a. Apparent authority will exist if P acts within ordinary course of Pship's business and 3rd party is unaware that P lacks authority.


Personal Liability: General partners are personally liable for debts of partnership

1. Incoming partner's liability for pre-existing debts: Generally not for prior debts, but any money paid into Pship by incoming partner may be used to satisfy prior debts.

2. Dissociating partner's liability for subsequent debts: Retains liability on future debts until actual notice of dissociation is given to creditors or until 90 days after filing notice of dissociation with state.

General Pship liability by estoppel: one who represents to a third party that a general Pship exists will be liable as if general Pship does exist.

Other types of business organizations other than Partnerships

1. Limited Partnership (LP): Pship with at least one general partner and at least one limited partner. Formed by filing a limited pship certificate that includes names of general partners. General partners are liable for all limited Pship's obligations, but also get to control the business. Limited partners are not liable for LP obligations but cannot manage.


2. Registered Limited Liability Pship (RLLP): Register by filing statement of qualifications (Pship agreement) and annual reports. No partner is liable for Pships debts or obligations or for acts of other partners


3. Limited Liability Company (LLC): File articles of organization (operation agreement) and two Pship qualities: 1. Limit on transferability, 2. limitation on life.  Owners (members) have same limited liability as shareholders in a corporation (their investment) and benefits of pship tax status (corporate tax is bad because it involves double taxation principles, while pship doesn't).

 Liabilities between Partners

A. General Partners are Fiduciaries of each other and the Pship.

1. Duty of loyalty

a. Self-dealing

b. usurp

c. Secret profit

2. Action for Accounting (Recovery)

a. Losses caused by breach + any profit made by breaching partner

Partners' rights to partnership property

Specific Partnership assets (land, leases, equipment): Owned by partnership and therefore may not be transferred  by any individual partner without Pship authority


Share of profits and surplus: Is personal property and therefore may be transferred to some 3rd party.

a. Absent agreement, partners do not get salaries except for helping wind up business.

b. Absent agreement, profits are shared equally.

c. Absent agreement, losses are shared like profits are.

d. Creditors can obtain transferable interest in the Pship (i.e. obtaining a charging order from court).

Share in management: owned only by Pship itself. Cannot be transferred.

a. Absent agreement, each partner is entitled to equal control (equal vote)


*If there is a conflict between specific Pship assets and personal property, look to whose money was used to buy the property.

Dissolution (A/P)

Without an agreement that specifies events of dissolution, dissolution occurs upon notice of express will of one general partner to dissociate.

1. Termination: Real end

2. Winding up: Period between dissolution and termination in which remaining partners liquidate Pships assets to satisfy creditors.

a. Ps will be compensated for winding up

b. Pship retains liability on all transactions to wind up old business with existing creditors, and on new business transactions until actual notice of dissolution is given or until 90 days after filing statement of dissolution with state.

3. Priority of distribution

a. MUST pay all outside non-partner trade creditors and all partners who loaned money to Pship

b. MUST pay all Capital contributions by partners

c. If profits or losses , shared equally 

* Suppose there is a $200,000 loss owed to B because B made a contribution in that amount and there is nothing left to distribute. A and B will share loss equally by paying equally and then B will get reimbursed (F'ing weird)

* A Creditor can only ask court for a decree to wind up the Pship if 1. The term specified in the pship has expired or 2. it is a Pship at will.


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