Select Page

Agency and Partnerships
South Texas College of Law Houston
Leahy, Joseph K.

Agency and Partnership-Leahy Spring 2015

I. Introduction to Agency Relationship

A. FACTUAL QUESTION (whether agency exists or not)

1. No presumption/assumption of agency- burden is on person trying to prove agency relationship

2. Written disclaimers are not dispositive- but some evidence of intent

3. A K is not dispositive (just bc you have a K that says u have an agency relationship doesn’t mean that you do)

4. One or more of the parties just saying that there is or is not a relationship is not dispositive.

B. A favor may create an agency relationship WHEN the definition of agency is satisfied. Mcllarky Water heater case

C. Important b/c it links the shallow pockets to the deep pockets

D. 3 elements: “acting on behalf of” “consent” and “control”

1. Agreement (consent)

a. No such thing as an “unwitting agent”

b. Can be implied or expressed

c. Can exist even if parties do not recognize that they created an agency relation. (agency is a factual question); denial of agency doesn’t mean anything if the facts of agency are satisfied

d. Agents have a duty to conduct the affairs of the principal with a certain level of diligence, skill and competence. (have reasonable efforts been shown?)

2. Acting on behalf of (not just merely benefiting another)

a. A is acting on behalf of P

b. You can be an agent even if all you think about is the money bc still serving employer’s ends

c. Have to act “primarily” for principal’s benefit, but doesn’t have to be solely for his benefit

d. Merely benefiting another by one’s conduct does not qualify (i.e. mall restaurant tenant and mall landlord are not agent/principal and thus liability of restaurant cannot be imputed to mall, even if mall is benefitted by restaurant).

3. Control

a. Subservience

b. Control over result: Don’t have to have control of the detail or means of the work

i. Don’t have to tell A how to do their job, still agency relationship (lawyer-client ex.)

E. § 13: Agent as fiduciary- An agent is a fiduciary with respect to matters within the scope of his agency.

1. Fiduciary = accounting for profits; can’t act adverse to consent; can’t compete with P for his own account; must deal fairly

F. Co-agency

1. M.D. & Associates and Paul D. Hogg v. Sears, Roebuck & Co. (1988) pg. 12

a. Sears is the lessor

b. The letter goes to the wrong address to renew the lease

c. It was an old address

d. Fraley picked up the mail at a P.O. box

e. The question is whether Fraley was an agent of Hogg

f. Notice to an agent in certain circumstances is notice to the principal

g. The court holds that Fraley is Hogg’s agent for the purposes of picking up the mail

h. Co-Agents

i. Hogg and Fraley were both employed by Dr. Lane

ii. Fraley is a subordinate co-agent; she reported to Hogg

iii. Co-agent- 1 of 2 or more agents of a principal. Subordinate co-agent. The lower agent is not always principal to the higher agent. Depends on facts.

2. Implied or inferred agency: Agency relationship and authority can be implied by proof of facts, circumstances, words, acts and the conduct of the party to be charged with the agency.

a. Key to Authority implied from course of conduct: is the knowing acquiescence of the principal in the past acts.

b.When you have a company, president, and a secretary. What is their relationship?

i. All employees to the company, all agents…. President and secretary are “co-agents”; also “subservient co-agents” and both agents of one principal (the company)

ii. No- they are not inherently an agent of their supervisor (default situation)

3. But a special (limited) agency relationship can nonetheless arise between co-agents if the fact support it (M&D v. Sears assoc case)

G. Hypos

1. B entered into a 1 yr lease of a single-fam residence w/ O (owner of the house) and took occupancy. saleswoman, A, offered B a K to paint the house for $1.5k, B said ok but not on his liability, O owns it. O refuses to let, A, paint. A sues O for breach of K. Is O liable to A?

a. Not inherently because Prof thinks they are adversary usually

2. P employs A an interpreter to make an offer to T that P will buy certain described goods from T. A misunderstands P and makes an offer for different goods also sold by T, which T in good faith accepts. Is P bound to T?

a. Interpreter typically agents because they are talking of behalf of someone and that person is controlling what the interpreter is saying

3. H and W. — W runs an interior decorating business. H is a school administrator. Recently W bid on a redecorating job for R, an acquaintance of H and W. R decides to accepts and sees H and says to him “Tell W I’ve decided to accept her bid on the redecorating job for me.” H agrees to do so, but later forgets to pass on the info. Is the attempted acceptance effective?

4. Possible for spouses to be agents of each other

5. A is a neighbor of P. A tells P she’s going to the local hardware store to buy some materials. P says “While you are there would you get me 4 lbs of 8-penny nails? just charge it to my account.” A charges the goods to P’s account and decides to make personal use of them. Would P still be liable to the store?

6. Yes there can be because there’s an agreement to act on behalf of and control there

II. Agency Distinguished from Buyer/Seller Relationship (usually not agency)

A. Intro

1. One who receives goods from another for resale to a 3P is not thereby the other’s agent in the transaction: whether he is an agent for this purpose or is himself a buyer depends upon whether the parties agree that his duty is to act primarily for the benefit of the one delivering the goods to him or is to act primarily for his own benefit.

B. Issue: On behalf of element is usually not satisfied in buyer/seller relationship- reseller issue

1. Ask to distinguish distributor relationship from agency:

a. Who has title?

i. Is the seller of the good selling them as if they were his own, or selling for another (property of the P)?

b. Who takes the credit risk?

i. Who remains the owner of the goods?

ii. Does the seller get a commission?

iii. Who gets the proceeds?

c. Who has the right to control the sale?

d. Who can fix the price and the terms of the sale?

e. Does reseller pay a fixed price?

f. Who can recall the goods?

2. A car deal is usually not an agent because they do it for themselves not the car manufacturer

3. Cases

a. Case: Hunter Mining Lab v. Management Assistance Inc.

i. Facts: P signed contracts with Data Doctros and Hubco and is suing D which manufactured the products that the P sold. MAI manufacturer of the software that sold to Hubco. Neither Dadta Doctors nor Hubco complete the installation. Hubco/DD are licensed distributors for MAI. Hunter sues MAI

ii. Holding: No agency relationship. D did not have power to control business expenditures, fix customer rates, demand a share of profits. No control, not acting for the benefit of. All companies acted independently and in their own names. There is only a seller/buyer relationship here.

III. Agency distinguished from Debtor/Creditor

A. Case: Gay Jenson Farms v. Cargill

1. Facts: The plaintiffs were farmers that sold grain crops and extended credit to Warren, a local grain elevator grain operator. Cargill was an international grain dealer. According to Cargill, Warren bought grain from farmers and sold it to Cargill. According to the plaintiffs, Warren bought grain as an agent for Cargill. Cargill had provided financing for Warren for many years. During those years, evidence shows that Cargill was very involved in Warren’s business. Warren became insolvent and didn’t pay the farmers for the grain, and they sued Cargill for Warren’s default on their contracts.

2. Holding: Yes, Cargill was a principal of Warren within the definitions of agency. The court held that Cargill (the international dealer) was liable because it exercised control and influence over Warren (the local operator). The basis for their conclusion is that there were several factors that indicated Cargill’s control over Warren. Cargill was an active participant in Warren’s operation, rather than simply a financer. All portions of Warren’s operation were financed by Cargill and Warren sold almost all of its market grain to Cargill. That is, Cargill tried to play too many roles, and it backfired on them – they were held to be an agent.

3. Rule: A creditor who assumes control of his debtor’s business may become liable as a principal for the acts of the debtor in connection with the business.

he end of the day there is on behalf of for both, so it might be easier to look at the element of “control”; FOCUS ON CONTROL!

B. Dual Agency Rule: A cannot serve two masters absent permission from the first principal or if they are not adverse parties

1. A cannot serve two adverse Principals absent:

a. Full disclosure to and

b. Consent by both Ps

2. But EE being an A of 3dP does not violate if:

a. EE job suggest implied consent and disclosure (Leahy thinks this is bull)

b. EE work for 3P was so ministerial that it was not adverse to the first principal

3. If violate it,

a. The principal that does not know of the dual agency can void the transaction or

b. If the other principal does know, you can affirm the transaction and seek damages

C. Cases

1. Case: Thayer v. Pacific Electric Railway

a. Facts: Thayer was going to ship something and that shipping company messed up his goods so he didn’t want to pay. And the employee wrote a note on his bill and that is what the whole beef was about.

b. Holding: Yes. It can be inferred by the conduct of the parties. The notice requirement does not specify the form. Therefore, the annotated bill would qualify as notice. Hillman signed the bill on Thayer’s insistence and was therefore acting like his agent in that regard. Leahy doesn’t really see how there is an agency relationship here. It wasn’t the supreme courts call to overrule, it was a jury opinion.

c. Dual agency- when you are representing two different parties which have different goals; it’s usually permissible if both parties are aware of it and consent

d. Implicit consent- they put him there; they should expect him to fill out these forms for the railroad

e. Exception to dual agency- when it is a ministerial capacity

2. Case: Kilbourn v. Henderson (looked to “on behalf of”)

a. Facts: P, employee of OTC was covered by OTC health insurance plan. Health insurance was provided by CAN through Henderson insurance agency (D). P contends that Fitzgerald acted as agent to bind Henderson and CAN by her statements.

b. Holding: Fitzgerald is not the agent of Henderson or CAN. Plain meaning in the contract that inpatient treatment was not covered.

c. Reasoning: An employer’s administration of a group insurance plan does not create an agency relationship between the employer and they were acting on behalf of their employees

d. Majority view

3. Case: Norby v. Bankers Life Co. (looked to control)

a. Facts: Hoffman, P’s employer was a member of an association which was the policyholder for a group accident and sickness policy issued by Bankers Life Co (D). The policy included partial reimbursement for medical expenses incurred by covered employees for illness or accidents, including dependents. P’s initial app was not transmitted to D from Hoffman. So P submitted a second app. This second one was not effective till jan 20, 1971. P’s kid was injured on Jan 19, 1971. Banker denied the claim. Initial ct held that the first app was binding on D bc Hoffman was acting as the agent of D in accepting the initial app.

b. Holding: Yes. To the extent that employer, with the consent of the insurer, performs the functions of the insurer, it may properly be considered the insurer’s agent. Unreasonable and inequitable to frustrate the employees expectations bc of an employers negligence in administering the insurance agreement.

c. Look to control here rather than on behalf of.

d. Minority view