BUSINESS ASSOCIATIONS, WAGNER, FALL 2012
Agency
1) Is there an Agency Relationship? 2) Does the Agent have Apparent Authority?
Who is an agent?
· LAW:
o R2d §1: Agency: (Gorton v. Doty)
§ 1) Manifestation of consent (assent) by principal
§ 2) That the agent shall act on principals behalf and subject to the Principal’s control
§ 3) Consent (assent) by agent to act for principal
o R2d 140:
§ Buyer Supplier: One who contracts to acquire property from a 3P and convey it to another is the agent of the other only if agreed that he is to act primarily for the benefit of the other and not for himself
· Comment: 1) Received fixed price for property, 2) acts in own name and receives title to property later transferred, 3) has an independent business.
§ Debtor-Creditor: Creditor who assumes control of his debtor’s business…. May become a principal… with liability for acts and transactions of debtor in connection with the business (Veto power OK)
· Cargill: cannot control day-to-day business that will = principal
· CASES:
o Gorton v. Doty
§ Background: Teacher let coach drive car
§ Application (R2d 1): 1) She offered car for his use, 2) She stipulated that he drive car, 3) Coach drove car. She got screwed.
o Jenson Farms v. Cargill
§ Background: Warren bought grain, Cargill purchased from Warren while financing, knowing he was incompetent w money
§ Application (R2d 140): 1) Consent, Cargill financed on condition they received majority of grain. 2) Cargill controlled finances (restructure, audits, loan limits). 3) Warren took money and continued business.
§ Holding: Cargill acted as Principal, so they are liable for Warren Debt
Liability of principal to 3P in contract
· LAW:
o R2d 7: 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 manifestation of consent to him.
§ 1) Express: Expressed consent to Authority
§ 2) Implied: R2d 35: When Inferred: acts that are incidental to accompany or are reasonable necessary to accomplish transaction
· Mill Street Church of Christ
§ 3) Apparent: R2d 8 / R2d 27
· 1) Objective manifestation from one party 2) which reaches 3P 3) Causing 3P to reasonable believe that another party (apparent agent) is authorized to act for principal.
o Mill Street: no actual authority but the authority the agent is held out by the principal as possessing
o 370 Leasing Corp
§ 4) Inherent: R2d 8a, 161, 194, 195:
· Principal Liable for acts done on his account that usually accompany or are incidental to transaction agent authorized to conduct. Exists for protection of persons harmed by or healing with a servant/other agent.
· 3(a): General Agent: is an agent authorized to conduct a series of transactions involving continuity of service.
· 3(b): Special Agent: is an agent authorized to conduct a single transaction or a series of transaction not involving continuity of service.
o MUST FALL INTO ONE OF 2 CATEGORIES!
· Fenwick, Nogales
§ Estoppel: R2d 8(b)
· 1) Principal allows another, w no authority, to create appearance of authority and does not correct misimpression, 2) Reasonable belief by 3P, 3) Change of position for 3P (reliance)
· Hossesdon
o Ratification: R2d 82, 83, 91
§ Retroactive approval of a previously unauthorized act 1) Affirmative through words, conduct, silence indicating consent. 2) Requirement of intent and knowledge of all material facts.
o R2d 321: Partially disclosed principal
§ Person purporting to make a contract with a 3P for a partially disclosed principal (defined in section 4) is a party to the contract
· Atlantic Salmon
· CASES:
o Mill Street Church:
§ Background: Church painter hired brother who was injured
§ Implied Authority: is actual authority circumstantially proven by principal actually intending the agent to possess and include such powers as are practically necessary to carry out the duties actually delegated?
§ Test: 1) Agent’s Understanding of his authority. 2) Do they believe present/past conduct of principal proves that principal wishes him to act with certain authority? (Knew he needed help, had hired Brother before)
§ Holding: Brother was employee.
o 370 Leasing
§ Background: Salesman lock in sale/financing for 370 to purchase
§ Analysis: Conversations implied salesman was rep. for transaction
§ Holding: reassurance allowed for reasonable belief
o Watteau v. Fenwick
§ Background: Owner bought bar, Humble retained licenses, he was restricted on what he could buy but still bought, sellers thought he was owner. Undisclosed Principal.
§ Analysis: He was the manager of bar, Managers customarily are allowed to make purchases, reasonable for sellers to believe he had authority
§ Holding: Principal Liable
o Nogales v. Arco
§ Apparent: Objective Manifestation: must actually meet 3P and come from the Principal. 3P must act on reasonable belief, trusting agents authority
§ Inherent: Customary duty of the salesman to conduct transaction like this
o Hoddeson v. Koos Bros.
§ Background: Random guy sells furniture and runs off in store w money
§ Holding: Defendant, as a furniture store, still owed a duty of care to Plaintiff when she enters the store and has an expectation that she will be tend to by an actual salesperson rather than an impostor
o Atlantic Salmon
§ Fake fish salesman liable for contracts he made for his fake company because he did not disclose the actual name of the company.
Liability of Principal to 3P in Tort
· LAW:
o R2d 219: Respondeat Superior
§ Master is subject to liability for torts for his servants committed in the scope of employment.
o R2d 2: Master, Servant, Independent Contractor
§ Master: employs agent to perform service/controls or has right to control physical conduct of other
§ Servant: agent employed by master performs service/physical conduct in the performance controlled or is subject to the right to control by the master
§ Independent Contractor: Person who contracts with another to do something for him but is not controlled by the other nor subject to the others right to contro
7(4): Sharing of Profits
§ Share of profits is prima facie unless it appears to be wages.
o UPA §18(a) Sharing of Profits/Loss
§ Partners share equally in profits and losses
o UPA §15: Joint and Severally Liable
§ All partners are jointly and severely liable for losses and profits
o LIMITED PARTNERS
§ RULPA §303(a): Limited partner is NOT LIABLE FOT OBLIGATIONS of limited partnership unless
· Limited Partner is also a general partner OR
· Limited partner takes part in control of the business
o In this case, limited partner is liable to 3P who transact business with limited partnership and who reasonably believe based on limited partner’s conduct, that she is a general partner
§ RULPA §303(b): Limited partner does not participate in control solely by consulting/advising with general partner on partnership business.
· CASES:
o Fenwick
§ Background: Secretary wants raise. Boss agrees to $15 per week plus 20% of sales. She was still an employee because only proved one factor of the test.
§ Factors: Sharing of profits, obligation to share losses, ownership and control, conduct towards 3P, rights of dissolution, contribution of capital and share in capital when dissolved, languages in agreement, intentions.
o Martin
§ Broker lends money to keep business afloat, broker gains minimal control to protect assets including veto power.
§ Rule: an agreement that offers a degree of control by a 1st party to protect the first party’s assets should not be considered a partnership if factors as a whole indicate that the other party maintains day-to-day operations. (Veto Power alone not enough)
o Young
§ Background: P. invested in Bank after being reassured by a lie. Discovers that bank is part of US bank, want to claim they are partners through estoppel because the joint and severally liable
§ RULE: Partnership by Estoppel: create liability when 3P relies on representation that partnership exists (Not in this case)
o Holzman
§ Background: When is limited partner liable? Limited partners were controlling money, and making business decisions
§ RULE: a limited partner will be held as general partner if they act to take part in control of the business.
· General partner in limited partnership generally takes on unlimited liability through partnership.
§ How to Form Limited Partnership:
· 1) Formalities: need to file certificate
· 2) Profit Sharing: LP only gets what they put in
· 3) LP are passive investors
