Business Associations Outline

 
Business Associations
Wagner
Fall 2014
 
 
 
The Agency Relationship – Who is an Agent?
·         Restatement 3rd of Agency, Section 1.01: Formation of Agency Relationship
o   Manifestation of consent (assent) by principal
o   That the agent shall act on principal’s behalf and subject to principal’s control
o   Consent (assent) by the agent so to act for the principal
·         Gorton v. Doty, Idaho 1937
o   FACTS: Doty offered to let HS football coach use her car to take team to away game – use conditioned on the coach driving; Gorton injured in car accident, wants to hold Doty liable on a P-A theory
o   HOLDING: coach was Doty’s agent; P-A relationship existed
o   RULE/ANALYSIS:
§  Consent by P that A act on behalfàDoty volunteered her car to the coach and wanted the coach to drive it
§  Control à had to be the coach that drove it
§  Consent by A à coach did drive it
§  For any agency relationship to arise, don’t need contractual relationship; neither party need be bound by duties to the other; no exchange of promises required, etc
·         A.Gay Jenson Farms Co. v. Cargill, Inc., MN 1981
o   FACTS: Cargill (D) was creditor of Warren.  Because it was going under, Cargill (D) took over the Warren Co.’s day-to-day operations.  Warren still defaulted on money owed under Ks with local farmers (P) for grain.  Farmers (P) sued Cargill to recover for breach of K.
o   HOLDING: Cargill's control and influence over Warrant establishes that Cargill was a principal with liability for the transaction entered into by its agent Warren
o   RATIONALE
§  Manifestation of consent à Cargill directed Warren to enter into Ks with farmers
§  Act on behalfà Cargill totally financed Warren’s procurement of grain from farmers
§  ControlàCargill interfered with internal affairs of Warren (see notes for evidence/factors)
§  Rest. Agency 14K: debtor/creditor
·         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
·         **Creditor can exercise veto power over business acts of debtor by preventing purchases or sales; but if he takes over the mgmt. of the debtor’s business, he becomes a principal
§  Rest. Agency 14K: buyer/supplier
·         One who contracts to acquire property from a third person 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: better argument for no agency relationship if supplier: (1) receives fixed price for property, (2) acts in own name and receives title to property later transferred and (3) has an independent business
 
 
 
 
 
Liability of Principal to 3rd Parties in Contract – Attribution Rules
·         Issue: when does the agent have authority to bind the principal to a 3P and the 3P to the principal?
·         Theories used to say the principal is bound by the actions of the agent:
o   Actual authority
§  Express
§  Implied(Mill Street)
o   Apparent (370)
o   Inherent (Watteau, Nogales)
o   Ratification (Boticello)
o   Estoppel (Hoddeson)
ACTUAL AUTHORITY
·         Restatement 2nd of Agency, §7 – Authority
o   Power of A to affect legal relations of P done in accordance with P manifestation of consent to A
·         Restatement 2nd of Agency, § 35:  authority to conduct a transaction includes authority to do acts which are incidental to it, usually accompany it, or are reasonably necessary to accomplish it
·         **can never have actual authority when an agent is acting contrary to principal’s instructions**
·         Express:
o   Restatement 2nd of Agency, §26 – Creation of Authority [Express] §  Objective manifestation by P
§  A’s reasonable interpretation of that manifestation
§  A’s belief that she is authorized to act for P
·         Implied:
o   Actual authority circumstantially proven which the principal authority intended the agent to possess and includes such powers as are practically necessary to carry out the duties actually delegated.
o   Important to focus upon the agent’s understanding of his authority.
o   It must be determined whether the agent reasonably believes because of present or past conduct of principal that the principal wishes him to act in a certain way or to have certain authority.
o   The nature of the task/job may be another factor to consider
o   The existence of prior similar practices is very important
o   Specific conduct by the principal in the past permitting the agent to exercise similar powers is crucial
Restatement 2nd of Agency, § 35 – When Incidental Authority is Inferred [Implied] Unless otherwise agreed, authority to conduct a transaction INCLUDES authority to do acts which are incidental to it, usually accompany it, or are reasonably necessary to accomplish it.
Sometimes the implication is based on custom or past dealings.  Other times, the principal’s objectives and other facts known to the agent cause an agent to infer that a particular act is authorized.
·         Mill Street Church of Christ v. Hogan, KY 1990
o   FACTS: Hogan was hired to paint church building; Hogan was able to hire Sam in the past to help out; Hogan needed help so he hired Sam, Sam was injured, wants to collect work comp but Church claims he wasn’t employee bc Sam didn’t have power to hire him (not an agent)
o   HOLDING: Hogan had implied authority to hire Sam – Sam an employee of the church
o   RULE/ANALYSIS:
§  Agency cannot be proven by mere statement but it can be established by circumstantial evidence including the acts and conduct of the parties such as the continuous course of conduct of the parties covering a number of successive transactions
§  Although Church did not expressly tell Bill he could hire Sam as an employee (express actual authority), Church DID give Bill authority to paint the whole church
·         AND “authority to conduct a transaction includes authority to do acts which are inciden