Business Associations
I. AGENCY
v Agency – did the Agent have authority to bind the Principal
o Agency Relationship – may be created by written words, orally, or other conduct by the P which, reasonably interpreted, causes the A to believe the P desires the A so to act on the P’s account
o Agency defined – A fiduciary relationship that results from the mutual manifestation of consent the one person (the agent) shall act on behalf of & subject to control of another (the principal) R §1
A. Authority & Liability of Principal In Contract
v Interpreting Authority in General – authorization is a totality of circumstances analysis;
o Situation of the parties & their relationships & their business
o General usages of the industry, business methods of the Principal
o Facts of which the Agent has notice
o Nature of the Subject Matter, circumstances under the which the act is to be performed & the legality or illegality of the act
o Formality or Informality of Grant of Authority
v Authority of Agent
o Actual Authority – communication between Principal – Agent
o Apparent Authority – communication between Principal – 3rd party
o Inherent Agent Power – power derived from the Agency itself
o Ratification – Principal accepts the acts of the Agent w/ the intent to ratify & w/ full knowledge of the material circumstances
o Estoppel – 3rd parties detrimental reliance on Principal’s representation as to the Agent’s power
v Contract Liability of Agent
o Implied Covenant of Authority
o Principal – (1) Fully Disclosed; (2) Partially Disclosed; (3) Undisclosed
v Termination of Agency Power
o Generally – either Principal or Agent can terminate relationship
o Exception – power coupled w/ an interest
o Termination of Actual Authority will not thereby terminate Apparent Authority of Agent
1) Authority of Agent:
a) Actual Authority – Principal must have empowered Agent, expressly or implicitly to act on the P’s behalf
i) The communication between P – A
ii) Express Actual Authority – P telling A what to do or knowingly acquiescing to the A’s acts
iii) Implied Actual Authority – Unless otherwise agreed, authority that is incidental or reasonably necessary to carry out the express authority – R§35
(1) Reasonably necessary; within the context of that authority & of that transaction
(a) Context – custom of industry, relations of the parties, conduct of P – A
(b) Those po
pe of A’s authority
(2) But; 3rd person, needs to reasonably believe that A has that level of authority
v) Effect of Apparent Authority – gives A the power to bind P, but not the right to bind P è the right can only come from grant of actual
(1) Therefore, although a P can be bound to a 3rd party by apparent authority, the P can usually hold the A liable for breach of duty
c) Inherent Agent Power – P is liable for all the act of the A which are within the authority usually confided to an A of that character, notwithstanding limitations, as between the P & A, put upon that authority
– Power derived from the agency itself & protects people who innocently deal w/ the A
i) The communication between A – 3rd Party
ii) 3rd Party must have believed that Agent had this power & in most situations Agent would have had this power è equitable remedy that rarely applies – limited application
R §8A – the power of an A which is derived not from authority, but solely form the agency relation & exists for equitable relief
