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Corporation's OUTLINE

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1. PRINCIPAL/ER LIABLE FOR AGENTS/EESI. WHEN IS PRINCIPAL LIABLE FOR AGENT Principal is liable when agent has: 1) Actual authority the authority granted to the agent by the principal as possessing the person alleging agency and resulting authority has the burden of proving that it exists o see Dweck v. Nasser: Telling longtime lawyer to settle dispute gives lawyer actual authority to settle the litigation (so it is binding on client): 2) Implied authority authority not explicitly given but which is implied by the actual authority the agent does have: 1) powers as are practically necessary to carry out the duties actually delegated); 2) to act in manner in which an agent believes the principal wishes the agent to act based on the agents reasonable interpretation of the principals manifestation in light of the principals objects and other facts known to the agent. Demonstrated by: whether past/present conduct of principal gives agent reasonable belief that agent can/should act in a certain way or have certain authority. nature of agents task (must agent have certain implied authority to perform his job?) existence of prior similar practices is one of the most important factor o see Mill Street Church of Christ v. Hogan - when Church told Bill he could hire an assistant and didnt name anyone specific, they gave him IMPLIED authority to hire Sam (Fact that Church wanted Bill to hire someone else but never told him doesnt matter). church had allowed him to do so in the past 3) apparent authority: the power held by an agent or other actor to affect a principals legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of

the principal and that belief is traceable to the principals manifestations (REST, 3rd, Agency, section 2.03) Dweck v. Nasser [Probably dicta] - Lawyer had apparent authority to settle the litigation b/c client told multiple parties (including defendants relatives and husband) that he would follow what lawyer and Heyman told him to do. [BUT HE DID NOT TELL OTHER ENTITY THIS DIRECTLY PROBLEMATIC] o if communication had been made to Dwecks agent (e.g., her lawyer) then it would have been as if it was told to Dweck. see Three-Seventy Leasing Corporation v. Ampex Corporation principal gave salesman apparent authority in explicitly allowing him to be sole contact person with buyer, when it is not explicitly stated that he does NOT have the power to accept. o absent knowledge on the part of third parties to the contrary, an agent has the apparent authority to do those things which are usual and proper to the conduct of the business which he is employed to conduct The principal is liable for all the acts of the agent which are within the authority usually confided to that type of agent (even if forbidden by principal). Watteau v. Fenwick (outlier) - when an agent operates business on behalf of principal under agents name, the principal is still liable for the agents unpaid debts incurred while operating business, whether or not the third party doesnt know about the principal o same idea is seen in Rest, 2nd of agency, 194 & 195 BUT, SEE: REST, 3rd, 2.06. Liability of Undisclosed Principal: an undisclosed principal is subject to a third party who is justifiably induced to make a detrimental change in position by an agent acting on the principals behalf and without actual authority IF the principal, having notice of the agents conduct and that it might induce others to change their position, did not take reasonable steps to notify them of the facts. FOR TEST: Watteua vs. REST, 3rd 2.06

Three elements required to show the existence of an agency relationship: 1. manifestation by the principal that the agent will act for him 2. acceptance by the agent of the undertaking; and 3. an understanding between the parties that the principal will be in control of the undertaking Botticello v. Stefanovicz - ** Marital status does not create agency relationship. o Joint ownership of land does not create agency relationship. o The facts that Walter handled a lot of the business aspects of the farm Mary co-owned did NOT make him her agent. Ratification the affirmance by a person of a prior act which did not bind him but which was done on his account. Requires acceptance of the results of the act with an intent to ratify, and with full knowledge of all the material circumstances (Botticello v. Stefanovicz)

2. WHEN PRINCIPAL IS LIABLE FOR FRANCHISEE No liability can be imputed to a Franchisor that has no control over the details of franchisees day-to-day operation for negligent acts of franchisee. Hoover v. Sun Oil Company (Del 1965) - Sunoco could not be held liable for fire @ franchisees gas station b/c franchisee was an independent contractor: o made no written reports to Sun o no sharing of profits/losses o Sunoco didnt determine hours of operation/wages of EEs o lease was subject to termination by either party upon 30 days written notice

Contract that is meant to achieve system-wide standardization, uniformity of commercial service, optimum public good will for the

benefit of both contracting parties does NOT create an agency relationship, without day-to-day control Murphy v. Holiday Inns, Inc. (Va. 1975) - BUT, If a franchise agreement, as a whole, establishes an agency relationship (regulates activities of the franchise to vest control with franchisor), then a disclaimer in the contract that it is not creating an agency relationship DOES NOT MATTER.

Franchisor MAY be liable for franchisee when franchisee is apparent employee (b/c whether McDonalds is franchise or corporate owned, customers are given the impression that all are controlled by corporation) Miller v. McDonalds Corp. (Ore. 1997) McDonalds may be liable for its franchisee b/c its franchise agreement expressly required operator to operate in compliance w/Ds prescribed standards, policies, practices and procedures, including: o serving only food/beverages Ds designated o following Ds specs and blueprints for equipment, layout, signs insistence on uniformity of appearance and standards may be designed to cause the public to think of every McDonalds, franchised or unfranchised, as part of the same system, that makes it difficult or impossible for plaintiff to tell whether her previous experiences were at restaurants that D owned or franchised

Diff between McDonalds and Holiday Inn: even tho holiday inn is required to conform to certain standards, the way the franchisee meets those standards (who it hires, methods it uses) are not stipulated therefore, Holiday Inn is not franchisor.

3. WHEN EMPLOYER IS LIABLE FOR EMPLOYEE REST, 2nd, Agency, 219(1): a master is subject to liability for the torts of his servants committed while acting in the scope of their employment.

An employer may be liable for injuries caused by an employees assault WHERE: that assault is a response to victims interference with the employees ability to perform his duties. Manning v. Grimsley (1st Cir. 1981) - Orioles can held responsible for actions of its pitcher in throwing ball into stands during game o Ps conduct was a response to continuing conduct which was presently interfering with his ability to pitch in the game if called upon to play NOTES: REST, 2nd, Agency, 231 serious crimes are outside scope of employment REST, 228(2) a servants use of force against another is w/in scope of employment if the use of force is not unexpected by the master (e.g. nightclub bouncer injuring a drunk while throwing him out) 4. WHEN PRINCIPAL IS LIABLE FOR ACTS OF INDEPENDENT CONTRACTOR: Employer IS liable for the negligent acts of an independent contractor WHERE: 1. the principal retains control of the manner/means of doing the work contracted for 2. landowner hires an incompetent contractor OR 3. the activity contracted for constitutes a nuisance per se (an INHERENTLY DANGEROUS ACTIVITY) Majestic Realty Associates, Inc. v. Toti Contracting Co. (NJ 1959)NY law saws that razing buildings in busy built up sections of city is inherently dangerous w/in section 416 of REST.

REST, Torts, 416 when a landowner hires a contractor to do work that will be dangerous if special precautions are not taken, then the landowner will be liable if the contractor fails to take those precautions

2. When are Agents liable to Principals or 3rd parties?1. WHEN ARE AGENTS LIABLE? REST, 2nd, Agency 4(2): if the other party to a transaction has notice that the agent is or may be acting for a principal but has no notice of the principals identity, the principal for whom the agent is acting is a partially disclosed principal. An agent acting on behalf of a partially disclosed or unidentified principal IS personally liable. BUT, If agent fully discloses his principle and contracting only in the principals name then the agent is free of all personal liability. Atlantic Salmon A/S v. Curran (Mass. App. Ct. 1992) - Ds use of trade names/fictitious names by which he claimed Marketing Designs, Inc., conducted its business is not a sufficient identification of the alleged principal so as to protect the D from personal liability o it doesnt matter that P could have found out who the principal was; its responsibility of agent to disclose

2. FIDUCIARY DUTY/OBLIGATIONS OF AGENTS: A. DUTY OF LOYALTY Agent must use the principals interest above his own. Agent may not use his as agent of principle to unjustly enrich himself, in violation of his duties. [REMEDY] If he does, principal is entitled to the money that was unjustly earned. Three situations that violate this principle: 1. agent receives money from third party for agent connecting third party to principal (kickback) 2. self-dealing (principal tells agent to guy buy house for him. agent buys house then sells it to principal at a profit) 3. using your position to profit (Reading case, below) o in thi

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