Select Page

Business Associations/Corporations
SUNY Buffalo Law School
Westbrook, David A.


II. Agency

Gorton v. Doty (Idaho 1937) – Unintended Agency Relationship

Facts- Father and son commenced separate actions consolidated for trial to recover expenses and damages for injuries sustained as a part of an accident. The jury returned a verdict of $870 for the father and $5,000 for son. Defense moved for a new trial and was denied in each case. Son, Richard Gorton, was a member of the Soda Springs High School team. He was injured while riding in the private car of defendant teacher that was driven by his coach, Mr. Garst. Defendant knew the team was playing that day, volunteered her car if the coach would drive it, did not receive any compensation, the school paid for the gas, did not employ the coach or at any time direct his work or services.

Rule- Agency: Indicates the relation which exists where one person acts for another. Three principal forms are:
1. The relation of principal and agent.
2. The relation of master and servant; and
3. The relation of employer or proprietor and independent contractor.
Rationale- Agency is the relationship 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. Principal is responsible for the acts of his or her agent. Defendant made it a condition precedent that the person she designated should drive her car. Thus both consented – a contract or compensation is not necessary. Prior ruling states that a prima facie case against the owner is established on the presumption that the driver is the agent of the owner.

Everyone working for someone is an agent, making agency important. Also, for manifestation of consent you do not have to actually intend to agree

A. Gay Jensen Farms Co. v. Cargill, Inc. (Minn. 1981) – Unintended agency relationship
· Facts- Farms brought action against defendants Cargill and Warren Grain & Seed Co. to recover losses sustained when Warren defaulted on its contracts. Court ruled that Warren was an agent of Cargill due to amount of control.
· Rule- Agency is the fiduciary relationship that 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 so to act. To create agency there must be an agreement and evidence of consent and control.
· Liaibility: A creditor who assumes control over his debtor’s business may become liable as principal for the acts of the debtor in connection with the business. The point of assumption of control is de facto control over the conduct of the debtor. Regardless of contract.
· 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 it is agreed that he is to act primarily for the benefit of the other and not himself. Factors indicating that one is a supplier:
1. That is to receive a fixed price for the property irrespective of price paid by him.
2. That he acts in his own name and receives the title to the property which he thereafter is to transfer.
3. That he has an independent business in buying and selling similar property.

Rationale- Cargill by its control and influence over Warren, became a principal with liability for the transactions entered into by

ty nor apparent authority.

Three-Seventy Leasing Corporation v. Ampex Corporation (5th cir. 1976) – Court findsd Authority, manifestation not crystal clear (company letterhead), may have been better decided under Inherent authority or Estoppel
· Breach of contract case – large computers were supposed to be delivered but were not. Plaintiff relies on a letter and promise of salesman.
· Was reasonable for third parties to assume a salesman has the authority to bind his employer to sell. Ampex reinforced this belief by submitting the agreement and directing all communications through Kays. Any limitations were not communited to Joyce.

Watteau v. Fenwick (1892) – Inherent Agency
· Facts- Defendants are brewers, Humble is the previous owner and continued manager of a beerhouse that was transferred to them. The license was always in his name and his name painted over the door. Humble did not have authority to purchase anything outside of beverages. Plaintiff seeks to recover the price of goods delivered to the beerhouse over the years on credit to Humble only.
Rationale- This is what is done, custom – leads to Inherent Agency. In the case of a dormant partner no limitation of authority as between the dormant and active partner will avail the dormant partner as to things within the ordinary authority of a partner.