I. Define agency at the beginning of any exam question dealing with agencies
II. In some cases, it is good to talk about apparent and inherent agency
III. Any time you start a scope of employment analysis, you must start with the 4 part test
IV. Always look at who the parties are and what their relationship is with each other – start your answer with this analysis
V. Never say the same thing on the exam twice
I. Who is an Agent?
A. In general
1. Agency defined – “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.”
2. Three elements of agency
a. Consent – (both parties must consent to the creation of the agency)
b. Control – (An agent defines the parameters of how the relationship will exist.)
(1) Refers only to the right to control, not necessarily actual control
c. Action on the principal’s behalf – you are actually taking the place of the principal and furthering the principal’s interest. If the agent was not there, the principal would take the action.
3. Only time there is not agency is when you have a sole proprietorship
4. Refers to the relationship between parties
5. Spouses can be agents of each other, but they do not have to be
6. Agencies are created by contracts
7. Both parties must intend to create an agency
8. Vicarious Liability – Liability without fault. A principal is liable for the actions of the agent even if the principal was not at fault.
9. Vicarious liability is in ADDITION to one’s own liability
a. EX: the owner hires a known drunk to drive his truck. Driver gets drunk and kills somebody. The owner is directly liable for negligent hiring and vicariously liable for the subsequent actions of the driver.
B. Gordon v. Doty – teacher lends football coach her car so he can get the team to Paris for a game as long as he drives the car – he gets into an accident and injures P, who sues D for damages
1. Goes to the element of acting on the agent’s behalf because this is a bailor/bailee relationship (different from an agency because a bailee does not further the interest of the bailer, but the interest of the bailee), not an agency relationship because the interest of the principal are not furthered, as she had no interest in the football team of getting them to Paris
2. Valet is a bailment relationship because the valet works for the restaurant and not you – difference between agency and bailment is that bailment does not refer to the nature of the relationship of the people, but it refers to the nature of possession
C. MJ & Partners Restaurant Limited Partnership v. Zadikoff – Δ wanted to open up his own MJ restaurant, but Π said Δ acted as an agent, had a fiduciary relationship to them and can’t do that – Trying to find out if Δ was an agent of Π and thereby couldn’t open the restaurant with a similar theme
1. When he uses information that he has acquired from Π to open a new restaurant, which furthers his interest, he is in conflict with his fiduciary duty, because he had an obligation to keep the information to himself and further their interests, not his own
D. Rose v. Giamatti – Commissioner was given complete autonomy by MLB with regards to disciplinary matters therefore no agency relationship exists as to those matters. MLB does not have the requisite control over the commissioner to establish an agency relationship.
E. A. Gay Jensen Farms Co. v. Cargill, Inc. – Π is 86 farmers who sold grain to Warren (W), owner of a grain elevator; 1964 W entered security agreement with Δ, where Δ loaned $ for working capital on an “open account;” proceeds for W were deposited with Δ. Δ was given right of first refusal to purchase grain from W; 1967 renegotiated K: Δ kept books for W, expanded credit line; W couldn’t make capital investments w/o Δ approval; W went broke and didn’t pay Π for grain, Π sued Δ on theory that W was an agent of Δ.
1. The implication of agency comes from the amount of control and oversight that D had over W
2. Creditor/debtor relationship does not create an agency, but D crosses the line from credit
they shouldn’t have to pay
a. If true, then Sam would be an agent of D (who is still an agent of P, but just acting independently)
b. Three possible agency relationships
(1) Co-agency – there can be different levels of authority, but that doesn’t make someone your principal; you can be someone’s boss without being their agent
(2) Sub-agency – Sub-agent is hired by an agent with the Principal’s authority to perform the duties that the agent was hired to perform. The agent must have been authorized by the principal to hire the sub-agent.
(3) Separate agency
c. There is agency here because there were manifestations by P, namely the fact that the church had allowed D to hire Sam before and there is nothing different about this time than the others
d. Could also claim ratification because P paid him and let him do the work
B. Apparent Authority
1. In General
a. What the 3rd party reasonably understands about the authority given to the agent based on the manifestations of the principle
b. Manifestations include a variety of different communications that the 3rd party is capable of receiving where the 3rd party can trace the communication to the principal (ads)
c. Apparent authority exists only to the point where it is reasonable for the third party to think that such authority exists. Evidence that the 3rd party knows that the authority does not exist makes it impossible for the party to prove the existence of apparent authority.
2. Lind v. Schenley Industries, Inc. – AA for VP sales entered into an agreement with P saying he could get 1%, who considered the agreement definite; corporate D re
Inherent authority and agency can be accomplished by the same evidence