Agency & Partnership
I. Introduction to Firms
§ 1st – is there an agency relationship existing?
§ Agency – a K related transaction
1. Another type of relationship – Master/servant
– Has to do w/tort or criminal responsibility
Master – Principal
tort — — Contract
Servant – Agent
§ Though they are related, they are not necessarily overlapping categories. Somebody who is an agent may or may not be a servant. Someone who is a servant may not have the authority to do the K-like stuff that an agent may be able to do.
§ More modern way to refer to master/servant is employer/employee.
2. Independent contractor – can be a non-agent service provider that doesn’t meet the legal test to be a servant. Can be agent that doesn’t meet legal test to be a servant.
3. Key difference – if someone is an agent but not servant or employee, he is not liable for the incidental torts committed in the performance of the duties.
E.g. Prof is a servant, if he does something bad, he is liable if he does something bad & the school is liable. But he cannot make the school enter into Ks.
B. Types of Firms
1. Business Firms
§ Most business firms have at least 2 people involved in the firm.
§ You could have someone that is a one-person band.
§ Courses overlap b/c of the owners of the firms. Who are they & what are their rights & obligations/responsibilities.
– Note – employees, agents, servants may be part of a firm.
2. Ownership structures of firms:
1) Sole proprietor – unincorporated firm owned by one person
2) Partnership/general partnership – unincorporated firm, exists at CL, in nature, no limited liability
3) Limited partnership (LP) – statutory entity, at least one partner does not have limited liability & there’s other partners who have limited liabilities.
a. General partner – no limited liability
b. Limited partner – limited liability
4) Limited Liability Partnership (LLP) – partnership that operates w/same level of informality & basic rules as a partnership except partners are not liable for most obligations of the partnership
5) Limited Liability Limited Partnership (LLLP) – General partners have limited liability like the general partners in an LLP.
6) Limited Liability Company (LLC) – can elect whether it wishes to be taxed as a corp or taxed as if no corp
– Around the time that the LLC came into play, we were going through aftermath of Savings & Loan crisis.
– Owners are SH, not liable for obligations of corp.
– Federal govt taxes corps different than partnerships.
C. Firm and its Agents and Servants
1. Problem 1.1 – Are they an agent for secondary reasons?
While swimming behind a boat in Peaceful Valley Lake in Missouri, B died of CO poisoning. The boat’s motor was manufactured by Mercury Marine, Inc. Under Missouri law, MM may be sued either in the county in which the accident happened, or in any other county in which it “keeps an office or agent for the transaction of [its] usual & customary business.” MM has no office in St. Louis, but its boat motors are sold in that city by Dealer. MM appointed Dealer as its “authorized dealer for the retail sale, display, & servicing” of its products. Under the agreement b/w them:
(a) MM sells its products to Dealer for resale. Dealer is free to sell products made by other manufactures.
(b) Dealer gives MM’s warranty to all buyers of MM products.
(c) Dealer performs warranty svc on MM products. MM honors warranty claims “made by purchaser through Dealer” and reimburses D for warranty service it performs “on behalf of MM.”
Is Dealer MM’s agent for purposes of determining venue?
Boat/Motor Dealer à Buyer/Owners Sell service
Agency issue arises b/c they are trying to determine venue. Venue here lies:
1) Where accident occurred or
2) Any other county in which it “keeps an office or agent for the transaction of [its] usual & customary business.”
We want venue in St. Louis but mnfg is not in St. Louis.
You can bring it in the county of place of business of agent of Δ.
If dealer is acting as agent for mnfg who is the principal for the purpose of selling the boat/motor warranty or providing warranty-related svcs, then venue is proper in St. Louis.
2. Green v. H&R Block Inc. (part I)
(Master) Principal 1
5 6 3 2
(Servant)Agent Third party
1st – Who is P, A, & 3P
2nd – What part of the triangle are we worried about?
Owner 1 Owner 2
B/c of taxes & liability we have nest instructions
Is H&R an agent for the πs (taxpayers)?
H&R – prepares return
– (assists) filing
– Rapid “refund” – can be done by electronic filing.
Bank – makes a loan to taxpayers who assign refund to bank.
Assign Duty to disclose
Refund Loan (RAL)
Bank H&R Block
Sears check cash (fee)
A lot of officers were inside Sears & they encouraged customers to take check to Sears & cash it there, then Sears gave some $ to H&R Block.
They didn’t tell this to taxpayers.
Issue: πs claim that H&R had a duty to disclose
§ They are trying to say that agents owe fiduciary duties to their principals.
§ Taxpayers want damages & their best theory is breach of a fiduciary duty & they see agency as only a way of saying this is a fiduciary relationship.
Do you think that in trying to determine wheth
1) There are many types of fiduciary relationships. E.g. agency, confidential (trust & confidence).
2) Basile – there can be a relationship of advisor/advisee where inferior party puts advice on the superior party.
“We are not holding that relationship of a tax consultant to his client is confidential per se. Factfinder will determine on the evidence.”
3) Are they acting on behalf of the taxpayer when they prepare the return & file it?
Customer by signing may enter into a K, negotiate the K, advice re: the K – in all 3 cases you are acting on behalf.
c. Translator as intermediary – R3d §1.01, cmt g
Many actors perform an intermediary role b/w parties who engage in a transaction. Not all are agents in any sense, and not all who are agents act on behalf of those who use the intermediary service provided. E.g. employee of courier svc who shuttles documents among parties who are closing a transaction among them is not parties’ agent simply b/c an intermediary function is provided. Translator does not occupy a role that conventionally involves identifying parties w/whom the principal might deal or role that confers discretionary authority to determine whether to commit the principal to the terms of a proposed transaction or to initiate or vary terms for the principal. Nonethelss, translator’s relation to the principal is one of agency. The translator acts on the principal’s behalf and the principal has the power to provide interim instructions as to how the translation should be done.
– E.g. oral K – translator bound me when she entered K for me. I haven’t authorized her to sign but translate info. Rest. thinks that that is probably acting as an agent b/c you are interacting w/3Ps in transmitting info.
– Suppose I’m dealing w/something in China & I get a proposed K & its in Chinese so I go to Translator’s R’US & say to translate K, they translate it for me, I say its okay sing it & send it. Is that agency? You might think not.
– What if there’s no interacting w/a 3P at all? E.g. I get K, I got in lawyerly terms so I take it to lawyer to tell me what it means, I sign it, he doesn’t have any interaction w/other side. Is he acting as agent? Not necessarily.
If you are providing advice but not interacting w/3P, then you are not acting as an agent, you are merely providing the svc. In B II, even if merely providing svc, there may be a relationship that creates fiduciary duties.
d. Sale on consignment – title is retained by the seller & the store is selling it but takes a % & gives rest of money to seller. Sounds like agency.
e. Back to Problem 1.1
They are the agent of the manufacturer for the warranty b/c they altered