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

Reading 5/22/07
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 its agent Warren.
1.      By directing Warren to implement its recommendations, Cargill manifested consent that Warren would be its agent.
2.      Warren acted on Cargill’s behalf in procuring grain for Cargill as the part of its normal operations which were totally financed by Cargill.
3.      Cargill’s interference with the internal affairs of Warren constituted de facto control of the elevator. 
Factors indicating Cargill’s control: Constant recommendations, right of first refusal on grain, Warren’s inability to make decisions w/o approval, audits and checks, correspondence & criticism regarding finances, provision of drafts and forms with joint names, financing of grain purchases and operating expenses, and power to discontinue the financing of operations. Also, all portions of Warren’s operation were financed by Cargill and almost all grain sold to Cargill. Beyond the normal debtor-creditor relationship. Went from normal amount of financing influence to control. Case specific, no brightline.
Mill Street Church of Christ v. Hogan (Ky. 1990) – Actual Authority, Implied
·         Brother hired his other brother to help paint a church without express authority based on prior practices. Person alleging agency has the burden of proof.
·         Implied authority existed because of the indication that further help was needed, prior hiring situations, and the church paid the hired brother.
Lind v. Schenly Industries, Inc. (3d. Cir. 1960)
·         Case in which manager of Regional office of a distillery promised his assistant manager a percentage of the profits that was never awarded. Issue is whether the NY Sales Manager had the authority to grant that commission.
·         Inherent authority is a kind of authority arising solely from the designation by the principal of a kind of agent who ordinarily possesses certain powers.
·         The alleged earnings were not too unreasonable – court makes a finding of Inherent Authority, a doctrine used to impose liability on the principal when there is neither authority nor apparent authority.
Three-Seventy Leasing Corporation v. Ampex Corporation (5th cir. 1976) – Court finds 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. Otherwise, in every case of undisclosed principal, the secret limitation of authority would prevail. Must be a holding out of authority, which there was not. Cigars are a normal purchase for such an establishment.
Undisclosed Principal Rstmt of Agency 194-95: Is liable for acts of an agent done on his account, if usual or necessary in such transactions, although forbidden by the principal. Is subject to liability for agent manager’s transactions if they are usual in such business and on the principal’s account.
Kidd v. Thomas A. Edison, Inc. (S.D.N.Y. 1917) – Inherent Authority, Estoppel, Apparent authority all involved – weird contract outside of custom must be explicit.
·         Facts- Plaintiff is Mary Carson Kidd, defendant Thomas Edison Inc. for breach of contract to sing a series of “tone test” recitals – unconditional engagement for a singing tour. Fuller was instructed to relay that defendant would pay RR fares and expenses, act as booking agent, and see that the money was paid by the record dealers.
·         Issue- Scope of Fuller’s apparent authority on top of the actual authority limited by the instructions given to him.
·         Rationale- The customary implication for selecting an agent to engage singers for such recitals would be to send them on the road without the limitations discussed above. However, applying estoppel may be unfair in some situations. Because Maxwell delegated his authority to Fuller, he is bound by it.  
Nogales Service Center v. Atlantic Richfield Company (AZ 1980) – Inherent Authority may include cases of apparent authority – it makes not difference whether an agent disregars his principal’s directions if he continues in the larger field measured by the general scope of the business entrusted to his care.
Case in which plaintiff contracted to build a gas station in exchange for price incentives, defendant did not give these incentives and foreclosed on the station.
Botticello v. Stefanovicz (Conn. 1979) – Ratification.

e with the work or the contractor’s workmen.
·         Issue- Was the sailors conduct within the scope of his employment 
·         It would be going too far to find that turning the wheels on the drydock was thought to be within the sailors scope of employment. Test should be less rooted in proximate cause and negligence law, and more rooted in the worker’s comp test of “the employer should be held to expect risks, to the public also, which arise out of and in the course of his employment of labor.” Arises from the business of employing sailors.
Manning v. Grimsley (1st Cir.) – Scope of Employment case involving Baltimore Orioles pitcher
·         Rule- “where a plaintiff seeks to recover damages from an employer for injuries resulting from an employee’s assault what must be shown is that the employee’s assault was in response to the plaintiff’s conduct which was presently interfering with the employee’s ability to perform his duties successfully. This interference may be in the form of an affirmative attempt to prevent an employee from carrying out his assignments.
·         Jury could have found battery, vacate that judgment in favor of defendant pitcher and defendant employer. Heckling by baseball fans is conduct which was presently interfering with his ability to pitch in the game if called upon to play.
Arguello v. Conoco, Inc. (5th Cir. 2000) – Scope of Employment
·         Discrimination case against Conoco gas station employees.
·         Scope of employment factors: (1) the time, place and purpose of the act; (2) its similarity to acts which the servant is authorized to perform; (3) whether the act is commonly performed by servants; (4) the extent of departure from normal methods; and (5) whether the master would reasonably expect such act would be performed.
Majestic Realty Associates, Inc. v. Toti Contracting Co. (1959) – Exception to general rule that principal is not liable for acts of an independent contractor
·         Building demolition that went wrong due to negligence of independent contractor.
·         Rule laying out exceptions: Ordinary Doctrine: Where a person engages a contractor who conducts an independent business by means of his own employees, to do work not in itself a nuisance he is not liable for the negligent acts of the contractor in the performance of the contract. Exceptions (1) where the landowner retains control of the manner and means of the work (2) where he engages an incompetent contractor (3) where the activity contracted for constitutes a nuisance per se.
·         Section 416 propounds a rule which would impose liability upon the landowner who engages a contractor to do work which is inherently dangerous and the contractor does not take the proper precautions. This is distinguished from ultra hazardous operations where liability is absolute. Razing of buildings in a busy, built up section of a city is inherently dangerous and within contemplation of 416.
Reading v. Regem (England 1948) – Fiduciary Obligation of Agents
Rule- If a servant takes advantage of his service and violates his duty of honesty and good faith to make a profit for himself, in the sense that the assets which he has control, the facilities which he enjoys, or the position which he occupies, are the real cause of his obtaining the money as distinct from merely affording the opportunity for getting it, that is to say, if they play the predominant part in his obtaining the money, then he is accountable for it to his master. The money should go