Legal Definitions - proprietary act

A proprietary act refers to an action taken by a government entity (such as a city, county, or state) that is similar to an action a private business or individual would undertake. When a government acts in a proprietary capacity, it is generally treated like any private party in terms of legal rights and responsibilities, especially regarding contracts, property management, or the provision of services for a fee. This is distinct from a governmental act, which involves exercising sovereign powers for the public good, such as law enforcement, zoning, or public health regulations.

Here are some examples to illustrate a proprietary act:

• Example 1: A city operating a convention center.

  The City of Metropolis owns and manages a large convention center, which it rents out to various organizations for conferences, trade shows, and events. The city charges rental fees, provides catering services, and enters into contracts with vendors and event organizers.

  Explanation: By operating a convention center, renting out space, and providing services for a fee, the City of Metropolis is engaging in activities that could easily be performed by a private company. It is managing an asset to generate revenue and provide a service, much like a private business would. Therefore, its actions related to the convention center's operation, such as negotiating rental agreements or managing staff, are considered proprietary acts.

• Example 2: A state university managing its investment portfolio.

  State University maintains an endowment fund, which it invests in stocks, bonds, and real estate to generate income that supports its educational programs and research initiatives. The university employs financial advisors and makes investment decisions to maximize returns.

  Explanation: When the university manages its endowment through investments, it is performing a proprietary act. This involves financial management and asset growth, activities commonly undertaken by private investment firms or individuals. While the ultimate purpose is to support education (a governmental function), the act of investing and managing a portfolio for financial return is proprietary in nature, similar to how a private corporation would manage its assets.

• Example 3: A county government leasing out agricultural land.

  The County of Farmland owns a large parcel of land that is not currently being used for public services. To generate income, the county leases portions of this land to private farmers for agricultural cultivation, collecting annual rent payments.

  Explanation: By acting as a landlord and leasing out its property to private entities for commercial purposes, the county is engaging in a proprietary act. This activity, which involves managing real estate for profit, is typical of a private landowner or real estate company. The county's decisions regarding lease terms, rent collection, or property maintenance in this context are proprietary, rather than an exercise of its sovereign governmental powers.