Kristen Johnson
Business Associations
Fall 2012
BUSINESS ASSOCIATIONS
Agency Defined
Gorton v. Doty -What does it mean for a party to be deemed an agent of another party?-Does there need to be a contractual agreement between principal and agent?
Coach needs to transport team. Teacher offers to lend her car. Says that the Coach must be the driver of the car. Agreement: Teacher agrees to lend her car to coach as long as he drives, for the purpose of transporting players. Doesn’t ask for any money. Suit brought by one of the teammates against teacher. Issue: was the coach an agent of the appellant (Ms. Doty)
Dissent: Agrees with the application of the law. But the issue was the application of the facts to the rule. Does not require a contract. Just need each of the three elements to be satisfied. No formal or written agreements are necessary. Also that the coach wasn’t driving for the benefit of Ms. G rather for the benefit of the school.
-In certain context certain actions of the agent can be put upon the principal.
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 ad subject to his control, and consent by the other so to act R2A 1
Johnsons: Agency exists where (1) one person (the principal or P) consents that another (the agent or A) shall act on P’s behalf and subject to P’s control and (2) A consents so to act
-Ubiquitous
-Sole Proprietor with one employee
Gay Jenson Farms v. Cargill
Creditor exercising control over its debtor
P were farmers who sold their grain crops to Warren (local firm that operated a grain elevator) Cargill(worldwide dealer in grain)àIssue is whether Warren was an agent of Cargill
Warren became insolvent-farmers sued Cargill for the cost
-Judgment was in favor of P-Warren was an agent of Cargill.
-Cargill financed Warren; entered into a security agreement (Cargill would loan money for working capital to warren; Cargill had the rights to inspect Warrens books. Warren entered into contracts for the growing of wheat seed with Cargills named as the K party.
Cargill continues to extend lines of credit.
Warren goes bankrupt
-Warren was indebted to Cargill in 3.6m and to the P in 2m
-P allege that Cargill was jointly liable for warren indebtness because it acted as principal for grain elevator.
-Ct. concluded that Cargill by its control and influence over warren became a principal w liability for trans.
*When and agency relationship has been show, the principal must be shown to have consented to the agency since one cannot be the agent of another except by consent
-warren acted on Cargill’s behalf by procuring grain and Cargill interfered with the internal affairs of warren
Cargill is the Principal and Warren is its agent.
The farmers are seeking to establish that there is a legal obligation: that legal obligation is an agency
Cargill argued that its relationship with Warren was purely contractual, and that it was a web of K Court points to 9 factors pg. 10-11.
There needed to be a basis that the creditor had some control over the debtor.
Farmers could have collatorized-
3. Cargill could have not continued to extend credit, they could have asked for cash
Class 1 Review-Takeaways
Sole Prop.-one single person who is the sole source of governance to the company.
Agency definition- Agency exists where: (1) one person (the principal or P) consents that another (the agent or A) shall act on P’s behalf and subject to P’s control and (2) A consents so to act
There are two classes of agents
Servant- (Agent)-employer employee
Non-servant(non- agents) Independent contracts
Terms
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 ad subject to his control, and consent by the other so to act
Principal-the one for whom action is to be taken
Agent- the one who is to act
Master- is a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service
-Doesn’t have to control all aspects of the servant/agent but has the right to control.
Servant is an agent employed by a master to perform service in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right to control by the master
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Independent contractor- is a person who contracts with another to do something for him but who is not controlled by the other nor subject to the others right to control with respect to his physical conduct in the performance of the undertaking. He may or may not be an agent.
-IC who isn’t an agent- plumber; accountant; lawyer;
General agent- is an agent authorized to conduct a series of transactions involving a continuity of service
Special agent- is an agent authorized to conduct a single transaction or a series of transactions not involving continuity of service.
Authority- Is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principals manifestations of consent to him.
Apparent Authority- the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the others manifestations to such third persons
8A Inherent agency power- term used to indicate the power of an agent, which is derived not from authority, apparent authority or estoppel, but solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent.
Class 2-
Consequences of Creating an Agency Relationship: Liability of Principal to Third Parties in Contract- A. Agent’s Authority – Mill Street Church of Christ v. Hogan; Watteau v. Fenwick (KRB 14-16; 20-24; Restatement §§ 1- 3; 7-8; 8A-B; 26-27; 144-195A, 399-404)
Mill St. Church v. Hogan
1986 Mill St church hired Hogan to paint church, in the past church had hired Hogan to do similar jobs, he typically hired his brother as a helper, this time the church hired a church member Petty to help. Hogan painted the church alone until he reached a high point, had discussion with Dr. Waggoner about Hogan needing help. They mentioned Petty but didn’t say he had to hire him. Dr. W mentioned Petty was difficult to reach. Hogan asked his brother Sam to help, and sam accepted. Sam fell hurt his left arm. Church elders didn’t know bill Hogan approached sam Hogan. The Church pai
what he did.
R2A 194 Undisclosed Principal- liable for acts of an agent “done on his account, if usual or necessary in such transactions, although forbidden by the principal”
195- an undisclosed principal who entrusts an agent with the management of his business is subject to liability to third persons with whom the agent enters into transactions usual in such business and on the principals account, although contrary to the directions of the principal.
R2A § 26 Creation of Authority; General Rule- Except for the execution of instruments under seal or for the performance of transactions required by statute to be authorized in a particular way, authority to do an act can be created by written words or spoken words or other conduct of the principal which, reasonably interpreted, causes the agent to believe that the principal desires him so to act on the principals account.
R2A § 27 Creation of Apparent Authority: General Rule-Except for the execution of instruments under seal or for the performance of transactions required by statute to be authorized in a particular way, apparent authority to do an act is created as to a 3rd person by written words or spoken words or other conduct of the principal which, reasonably interpreted, causes the 3rd person to believe that the principal consent to have the act done on his behalf by the person purporting to act for him.
R2A § 144 General Rule- A disclosed or partially disclosed principal is subject to liability upon K made by an agent acting within his authority if made in proper form and with the understanding that the principal is a party.
R2A § 145 Authroized Representations- In actions brought upon a K or to recind a K or conveyance to which he is a party, a disclosed or partially disclosed principal is responsible for authorized representations of an agent made in connetion with it as if made by himself, subject to the rules as t the effect of knowledge of, and notifications given to, the agent.
R2A § 159 Apparent Authority- A disclosed or partially disclosed principal is subject to liability upon K made by an agent acting within his apparent authority if made in proper form and with the understanding that the apparent principal is a party. The rules as to the liability of a principal for authorized acts, are applicable to unauthorized acts which are apparently authorized.
R2A §160 Violation of Secret Instructions- A disclosed or partially disclosed principal authorizing an agent to make a K, but imposing upon him limitations as to incidental terms intended not to be reveled, is subject to liability upon a K made in violation of such limitations with a third person who has no notice of them.
