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Chapter 11 - Legl 2700 Chapter 11 Agency Law and Business...

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Legl 2700 Chapter 11 03/31/09 Agency Law and Business Organizations Possible Forms of Business Organizations (pg 332) The Basic Forms: The Hybrid Forms: Closely Held - Organizations owned by only a few people Publicly Held - businesses that may be owned by hundreds, if not thousands, of persons The application of agency law involves the interaction among three parties… First, a principal interacts with someone (or organization) for the purpose of obtaining that second party’s assistance. Second party= Agent . Next, the agent (on behalf of the principal) interacts with a third party . Last, the usual legal purpose of the agent is to create a binding relationship between the principal and the third party, Keep in mind that the employer/business organization is the principal and the employee is the agent An agent who causes harm to a third party may create legal liability owed by the principal to the third party. The legal tests for imposing this vicarious liability depends on whether the agent was acting within the scope of employment when the tort occurred. Any time an employee is liable for tortuous acts in the scope of employment , the employer is also liable. This is because of the tort doctrine of respondeat superior (“let the master reply”). In a sense, the employer has set the employee in motion and is responsible for the employee’s act. Frolic and detour - is the defense the employer has to the strict liability of respondeat superior stating that the employee was outside the scope of employment An employer who must pay for an employee’s tort under respondeat superior may legally sue the employee for reimbursement. In practice, this seldom happens b/c the employer carries insurance. Occasionally, an insurer who has paid a respondeat superior claim will sue the employee who cause the claim. Only when one of the following types of authorities are present will the principal and the third party become contractually bound… 1) Actual Authority - specific instructions, whether spoken or written, given by an employer to an employee 2) Implied Authority - Can be inferred from the acts of an agent who holds a position of authority or who had actual authority in previous situations 1
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Legl 2700 Chapter 11 03/31/09 Agency Law and Business Organizations 3) Apparent Authority - When a principal does not notify a retailer that they laid off an agent, the agent can still get stuff from the retailer for the retailer still believes its apparent that the agent still has authority to buy for the principal
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