Business Law: Agency & Business Structures

Authority

• Express and implied actual authority → principal bound.
• Apparent: from the principal's conduct to the third party; continues after firing until notice.
• Ratification: principal knows all material facts; accepts the whole contract.
• Equal dignity rule: authority to sign a written-required contract must be written.

Liability

• Undisclosed or partially disclosed principal → agent also liable.
• Torts: employer liable within scope (respondeat superior); not for independent contractors.

Termination

By act → notice needed (actual to prior dealers). By operation of law (death, bankruptcy) → automatic. Agency coupled with an interest survives.

Entities

• General partnership: joint and several unlimited liability; profits equal unless agreed; assignee gets distributions only.
• Limited partnership (LP): at least one general partner; limited partners risk liability by controlling.
• Limited liability company (LLC) and corporation: limited liability; veil can be pierced.
• Directors: business judgment rule. Promoters: liable until novation.

Exam traps

• An agent who acts beyond their authority is personally liable to the third party for breach of the implied warranty of authority.
• Apparent authority can't arise for an undisclosed principal — the third party didn't know a principal existed.
• A principal generally isn't criminally liable for an agent's crimes unless it authorized or took part in them.
• Shareholders vote on fundamental changes (mergers, selling substantially all assets, amending the articles), not on day-to-day management.