Select Page

Business Associations/Corporations
Rutgers University, Newark School of Law
Dennis, Donna I.


I.                   Unincorporated Business

A.        Sole Proprietorship

1.        What is an Agent?

– Restatement Agency 2d § 1 Agency; Principal; Agent
(1) Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.
(2) The one for whom action is to be taken is the principal.
(3) The one who is to act is the agent.

– Gorton v. Doty (Idaho 1937, p.1)
–       The court held that the football coach was acting as the teacher’s agent when he drove the football players to the game in the teacher’s car. Thus, the teacher was liable to the players when the football coach crashed the car.
–       The court, relying on Agency § 1, stated that in volunteering her car for transport upon the express condition that only the football coach should drive it, she consented to the football coach acting as her agent. The court added that this was not merely a loan because she said nothing to the coach about “loaning” the car, and the coach said nothing about “borrowing” the car. The fact that no contract existed or that Doty received no compensation does not preclude the existence of an agency relationship.
–       The dissent argued that this was simply a loan of the car. An agency relationship requires something more than mere passive possession, it involves command or instruction.
–       I agree with the dissent in this case. Note that although the majority relied on the language of the Restatement, it does not convincingly argue that the coach acted on Doty’s behalf or under her control, two of the three elements of an agency relationship.

–       A. Gay Jenson Farms Co. v. Cargill, Inc (Minnesota 1981, p. 7)
–       The court held that the creditor became the principal on the contracts made by the debtor because of its control and influence over the debtor.
–       The court first stated that the three elements of agency were present. Cargill had manifested its consent that Warren be its agent by directing Warren to implement its recommendations. Warren acted on behalf of Cargill in procuring grain for Cargill as part of its normal operations which were financed by Cargill. Cargill exercised control over Warren by interfering with the internal affairs of Warren.
–       The court further stated that a creditor who ass

conduct in the performance of the undertaking. He may or may not be an agent.

– Restatement Agency 2d § 3 General Agent; Special Agent
(1) A general agent is an agent authorized to conduct a series of transactions involving a continuity of service.
(2) A special agent is an agent authorized to conduct a single transaction or a series of transactions not involving continuity of service.

2.        Agent’s Authority and Duty

–       The question now is not whether the agency relationship exists, but what authority the agent has.

– Restatement Agency 2d § 6 Power
A power is an ability on the part of a person to produce a change in a given legal relation by doing or not doing a given act.

– Restatement Agency 2d § 7 [Actual] Authority
Authority is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to [the agent].

– Restatement Agency 2d § 8 Apparent Authority