Business Organizations Outline

 
Business Organizations Wade Fall 2015
 
 
Agency Relationships
 
What/Who is an Agent?
1.  Restatement § 1: fiduciary relationship that results from the: (1) manifestation of consent by one person (principal) to another (agent) (2) that the other (agent) shall act on his (principal’s) behalf and (3) be subject to his (principal’s) control.
a.   Manifestation of Consent does not require intent
i.No written K needed; compensation not req’d
ii.Lending car is prima facie evidence of agency
1.Doty: Agency r’ship, not bailment, exists and teacher liable for accident where teacher loaned car to coach and told coach only he could drive b/c coach was acting on teacher’s behalf and subject to her control
iii.Control of Day-to-Day Operations = Agency Relationship (e.g., debtor/creditor r’ship + control = agency)
1.Cargill: Creditor Cargill liable for transaction entered into by debtor Warren where creditor assumes control over debtor’s day-to-day, oversees finc, sends its own e’ees to oversee op’s, etc.
a.BUT a creditor who merely exercises a VETO POWER over the business acts of his debtor ≠ Agency Relationship
iv.Policy: P derives benefit of A's actions, and A is acting on behalf of P
v.     Least Cost Avoider: Ensure whoever most at fault is liable and who is injured gets made whole. As b/w P and 3rd Party, P in better position to avoid harm – chose A
 
2.  Did Agent Have Authority to Act on Principal’s Behalf?
a.Generally
i.Authority: power of A to affect legal relations of P, by acts done in accordance with the P’s manifestation of consent to A
ii.Can be written, spoken, or conduct, but must give agent reasonable belief that principal manifested consent
iii.Authority includes acts which are incidental to it, usually accompany it, or are reasonably necessary to accomplish it
iv.Duty to give profit to principal for acts agent does in connection w/trans conducted on behalf of principal
b.Express Authority (P –> A)
1.  Express stmt by principal that wd lead someone else to believe the authority exists
ii.  Implied Authority (P –> A)
1.  Conduct by P that wd lead someone else to believe the authority exists
a.   Based on the circumstances and course-of-dealings of the relationship.
i.    Prior similar practices = most important factor!
1.  Mill St. v. Hogan: Agency r’ship existed and church liab for work-related injury to Hogan’s brother where in prior work for church, Hogan given implied auth to hire brother, and Hogan needed assistance to complete this job
iii.Apparent Authority (P –> 3rd Party)
1.  P knowingly manifests to 3rd Party that that A has auth to act on behalf of P, and
a.   Hogan: Brother believed that Hogan had authority to hire him as had been the practice in the past and the church treasurer even paid Hogan for the 1/2 hr of work that brother completed prior to accident.
 
2.  3rd party reasonably relies on such manifestation (P estopped from denying existence of authority) –> must be sufficient to lead a reasonably prudent person to suppose that A had the authority he purports to exercise.
a.   A has apparent auth to do things usual and proper in A’s biz, absent…
i.    ACTUAL KNOWLEDGE by third parties to the contrary.
1.  Ampex: Salesperson had apparent authority to accept buyer’s offer, and 3rd party buyer was justified in relying, where salesperson sent buyer an unexecuted contract and follow up acceptance confirmation after supervisor issued intra-office memo acknowledging buyer’s request that salesperson handle all comm’n re: sale
 
iv.Inherent Authority (A)
1.  People who hold A’s position have the authority to perform the activities necessary to fulfill their employment duties.
a.   Could P reasonably foresee this action?
i.    Look to custom and usage in the industry
 
v.Ratification: Affirmance by a person of a prior act which did not bind him, but which was done or professedly done on his account, whereby the act is given effect as if originally authorized by him.
1.Dates back to the time of the transaction!
a.Dempsey: D asked A to deliver coal to plft and A broke window. When D later sent bill and accepted pmt, this constituted ratification of the e’ment r’ship and est relation of master/servant from beginning. Altho D did not ratify the trespass directly, D wd have been liable as master if A had been servant when delivering
2.Requires: (1) acceptance of the results and (2) intent to ratify (3) with full knowledge of all the material circumstances.
a.Evans v. Ruth: Ratification occurred and employer had to pay where worker hauled stones w/o a K, not knowing who he was working for, but n/w/s employer subcontracting out work, employer accepted stones, provided acknowledgement forms, and employer offered to pay some portion
3.Implied Ratification: occurs when P acts w/full knowledge of material facts such that P:
a.Receives, accepts and retains benefits from the K;
b.Remains silent, acquiesces, or fails to repudiate or disaffirm K; OR
c.Otherwise exhibits conduct recognizing A’s acts as binding
i.P estopped from denying unauthorized act of A b/c otherwise wd result in unjust enrichment
1.Dempsey: Deft. asked A to deliver coal to π and A broke window. A was not ∆’s servant, but delivery was ratified when ∆ sent π a bill. This made ∆ liable
ii.Must make a clear showing of intent to ratify, especially in cases of implied ratification
1.Manning v. Twin Falls: Changing policies and failing to reprimand not enough to est ratification where after nurses disconnected patient from oxygen while switching rooms and patient died.
4.Without Knowledge, Receiving Benefits is NOT Enough!
i.  Bot