Select Page

Stetson University School of Law
O'Connor, Marleen

Agency & Unincorporated Entities
Fall 2006
· Agency
o Elements of an Agency Relationship
§ (1) Mutual Consent to (2) and (3)
§ (2) Agent is acting on behalf of the Principal. (Duty to obey)
§ (3) Agent is subject to control of the Principal.
o Consequences of agency relationship
§ Principal is liable for agent’s acts
· External; relationship to outside world and 3rd parties
§ Agent owes the principal a fiduciary duty.
· Internal; between principal and agent, unilateral agent à Principal, so agent should ALWAYS act in principal’s best interest and NOT her own self interest.
o Elements of a Deal
§ (1) Risk – what kind of risk is involved?
· Higher risk, greater possibility of return
§ (2) Return – how you’re making money on the deal.
· Willing to take risk for greater return.
§ (3) Control – ability to control certain elements of other person’s behavior that increase your risk.
· Credit relationship, some control is okay; negative control.
· De jure control (in law, written in the contract) à too much control. (Veto power in contract is okay.) (If it’s in the contract, it’s automatically de facto.)
· De facto control (in law) à too much control. (Can have de facto without de jure.)
§ (4) Duration – the longer the duration, the greater the risk, the more control you’re going to want.
§ (5) Termination – ability for either side to end the deal.
· Riskiest – at will, less risky – notice, time to cure, arbitration.
· Agency is voluntary, can get out of it at any time, just liable for damages.
o Inadvertent Agency
§ Intended to create something else, but facts and circumstances of relationship create agency relationship.
§ Consequences of agency relationship follow.
§ Jensen v. Cargill; too much control à actual agency.

o Actors in Agency Relationships & Resulting Liability
§ Servants – employees, employer controls the MEANS by which the employee/agent does the work. Always an agent.
· Ex. Cashier at McDonalds, extremely controlled by McDonalds.
§ Independent Contractors – Principal is just controlling the END result, not concerned with the MEANS.
· Some independent contractors are agents:
o Non-servant Agent – Contract for the principal
§ Ex. real estate broker, attorney; don’t control details, not an employee. Acting on your behalf, you have some control but not over details.
o Non-agent – Contract with the principal, people that you deal with at arms length, not even appropriate to call them a principal.
§ Ex. Bringing in your car to mechanic to get it fixed, hailing a cab – taxi driver.
§ Achieve results for you, but you’re contracting with them at arms length.

· P’s Vicarious Liability

· Liable in Tort?

· Liable in Contract?

· Servant/Agent
· (ex. hired limo driver)

· (ex. hits someone while driving you somewhere)
· Vicarious liability

· (ex. buys gas, doesn’t pay)

· Independent Contractor – Non-Servant Agent
· (ex. Real Estate broker)

· NO
· (ex. hits someone while looking for houses)

· Same as Servant/Agent

· Independent Contractor Non-Agent
· (ex. cab driver)

· NO
· (ex. hits someone while driving you somewhere)

· NO
· (ex. buys gas, doesn’t pay)

o Inadvertent Agency in Franchises
§ Register logo & other trade secrets with Federal Trade Commission; license others to use this logo
§ Governed under Latham Act, franchisee has to take control to make sure her trademarks aren’t being used incorrectly.
§ Benefits to franchising: easier to expand

ty by Virtue of Position – from prospective of 3rd party, see agent as manager or someone who would generally have this type of authority.
§ (4) Inherent – No actual or apparent agency; undisclosed principal and agent who acts outside of principal’s orders.
· If agent runs amok, Principal pays, reasonably foreseeable that agent will disobey.
· Want principals to be more careful in hiring.
· Look @ from principal’s view.
· (1) Need a general agent (continuing appointment relationship)
· (2) Acts must be incidental or usually accompany acts that are authorized.
o No basis for apparent authority, even if stretched.
§ (5) Ratification – Principal takes some sort of action (or inaction) to affirm a previous unauthorized act by the agent. Principal must have knowledge of material facts of the action.
· Ratification à Implied (future) Actual Authority
· Equal Dignities Rule – Principal has manifestation to treat unauthorized act as authorized.
o (1) If principal were doing the transaction herself and it would have to be in writing, then principal’s authorization to agent must be in writing.
o (2) If the original authority is in writing (when principal gives authority to agent, ex. power of attorney) then any ratification has to be in writing; no oral modification!
§ Cases
· Amberg v. Greene; power of attorney does not imply agent’s ability to gift to oneself; must be in writing for actual authority to apply (per statute). (Actual Express)
· Maenhoudt v. Bank; durable power of attorney is meant to be used when the principal is disabled or incompetent, can only refuse if there’s evidence of fraud. (Actual Express)
Ford Dodge Creamery Co. v. Commercial State Bank