Select Page

Stetson University School of Law
O'Connor, Marleen

Chapter I. Introduction to Business Associations (Page 1)
A. Four Business Formats
1. sole proprietor (individual)
2. part (created by state statute)
3. limited liability (members not liable for assoc)
A. Agency: Definition and Basic Categories (6)
1. Agency Defined
a. R2d Agency § 1
(1) Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.
(2) The one for whom action is taken is the principal.
(3) The one who is to act is the agent.
b. Control by Principal §14
A principal has the right to control the conduct of the agent with respect to matters entrusted to him.
c. The Mutual Consent & Consideration §15
An agency relation exists only if there has been a manifestation by the principal to the agent that the agent may act on his account, and consent by the agent to so act.
d. Creation of Agency §26 & 27
Authority to do an act can be created by written or spoken words or other conduct of the principal which, reasonably interpreted, causes the agent to believe that the principal desires him to act on P’s account.
Apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.
e. General Ideas of Agency Relationship
Today, P is liable for acts directed by the P or acts of employee power or authority, like inherent authority.
There are three kinds of authority: actual/express; apparent; or inherent.
In finding principal/agent relationship:
1. is there manifestation of intent
2. is there control
3. is there authority
4. is there consent by parties to so act.
2. Generally: Developing Agencies
a. Master/Servant
1. R2d Agency § 2: Master/Servant
(1) A master is a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in performance of the service.
(2) A servant is an agent employed by a master to perform service in his affairs who physical conduct in the performance of the service is controlled or is subject to the right to control by the master.
2. Master Liability
b. Independent Contractors
1. R2d §2 Independent Contractor
An independent contractor is a person who contra

r party’s business. Only when a mfgr controls the day to day or operative details of the dealer’s business is an agency potentially created.
d. Edwards v. National Speleological Society, (AL 1987)
Facts: When wrongful death action, P sues the national ass’n for faulty fence b/c the members of the local group of the ass’n fixed the fence.
Held: No agency, b/c there was no right to control on behalf of the national group. 
RULE: Control is the determinative factor.  It’s the right to control, not the exercise of control. The burden of proving the agency is on the party arguing for the agency relationship. 
e. Dierksen v. Albert, (NJ 1969)
Facts: parents give stock to kids; if kids put the dividends in separate accounts and pay the parents and if kids will make a will. When daughter disappears, parents want shares back in their name. Is this an agency which can be terminated by parents/ the principals; or is this a donative trust?
Held: This is an agency relationship b/c the control of the shares remained in the parents.