Agency and partnership
Professor Roberts
AGENCY
Who is an Agent?
An agency relationship is created when a party merely volunteers the use of her car to transport students to a sporting match and requests that only one person drive it.
Ø Gorton v. Doty – Agency dispute after a car accident
o Facts: Father sues on behalf of son to recover expenses for his son’s hospitalization. Head football coach was the car driver for the purpose of taking himself & P’s son to a football game. D (appellant) was the owner of the car and gave her car to the coach for the purpose of driving to the football game after inquiring with the coach whether he had enough cars for the game. Was the driver/coach the agent of D/Appellant while driving her car when the accident occurred (driving to the game)?
o Holding: Yes. Purpose was to give coach authority to drive car for football game. Agency is a relationship, which results from the manifestation of consent by one person to another that the other shall act on his behalf, subject to his control, and consent by the other so to act. If driver were the agent of Appellant, the Appellant would be chargeable with the acts of the driver as if he had been driving the car herself. When one undertakes to transact some business or manage some affair for another by authority and on account of the latter, the relationship of principal and agent arises. It is not necessary that there be a contract between principal and agent or that the agent promise to act as such for the existence of authority. It is not necessary that compensation be exchanged. Here, the liability was of a principal to a third party for the acts of the agent.
o Dissent: D loaned her car to coach. Agency involves request, instruction or command. It has to be more than passive consent. This result is absurd.
o Class Notes: The π’s counsel made a statement in the closing argument relating to insurance. It was improper to raise this issue. Just because the money is not coming directly from her pocket, doesn’t mean that she should be made liable. Such evidence would not be admissible.
o Public Policy: People should not be as lenient in lending their vehicles. They should be more careful. Insurance: the court is trying to advance the social policy regarding insurance – the issue is not whether a person could pay but whether he/she is liable. The court does not want to skew the merits of the case by bringing up insurance.
Restatement 2d of Agency, § 1
Agency The fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf & subject to his control, and consent by the other so to act.
Principal The one for whom action is to be taken
Agent The one who is to act.
Thus, 3 essential elements are:
(i) Consent
(ii) Control
(iii) On behalf of
Key Agency Relationships
Þ The first step w
the principal to personal liability. D argues that he is an independent contractor under the terms of the contract and thus he has no control. P argues that D is an agent because he has significant responsibilities. The Court held that actual agency relationship may have existed even though the contractual language would indicate otherwise. Actual actions are what matters.
Ø Gay Jenson Farms v. Cargill – Creditor financing grain elevator operation
o Facts: Ps (farmers) sue Warren who defaulted on contracts for the sale of grain & is creditor Cargill. Warren operated a grain storage facility & entered into numerous contracts w/Cargill whereby Cargill would loan money to Warren. In return for the financing, Cargill was appointed Warren’s agent for certain transactions, Cargill also was given the right of first refusal to purchase grain & improve the facility, & to conduct audits. After 13 years of business, Cargill found Warren $4 million in debt. Warren owed Cargill $3.6 million & Ps $2 million. Warren falsified docs & defrauded Cargill. Was there a fiduciary relationship b/w Cargill & Warren, thereby making Cargill the principal w/a liability for the transactions entered into by its agent Warren?
