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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.
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List and describe the different types of actual authority agency.
ACTUAL AUTHORITY
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.
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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
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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
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Relationship between Principal and Agent
A is fiduciary and owes duty of loyalty, care, and obedience.
P must pay, reimburse, and indemnify A
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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)
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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.
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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?
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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.
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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.
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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.
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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.
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