Unincorporated Associations Outline
a) Formation of Agency Relationship
i) 2nd Rest Agency §1–>Agency relationship between principal and agent created when there is:
(1) A manifestation of consent by the Principal
(2) The Agent shall act on behalf of the Principal
(3) The Agent is subject to the Principal’s control; and
(4) There is consent tot that control by the Agent
ii) 3rd Rest Agency §1.01–>Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.
iii) Requirements for Agency Relationship–>the agency relationship is consensual, but not necessarily contractual, therefore, not every contractual formality is required for its creation.
(1) Consent–>B/c agency relationship is consensual in nature, the ordinarily arise by prior agreement between principal and the agent. NOTE, consent can also occur after the fact by ratification, and estoppel can serve as a substitute for consent.
(a) Agency by Agreement–>An agency agreement must be based on some indication by the principal to the agent that the principal consents to have the agent act on her behalf. A similar manifestation is req’d by the agent.
(b) Agency by Ratification–>An agency may be created by ratification. This results whenever the principal accepts the benefits or otherwise affirms the conduct of one purporting to act on the principal’s behalf, even though there is no agency agreement. 2nd Rest Agency §93(2).
iv) Agency Relationships vs. Other Relationships
(1) Gratuitous Bailment–>A gratuitous agent generally has no duty to perform b/c the agent did not enter into a contract w/ the principal. BUT, once the agent begins performance, he must act w/ the degree of care required for a person undertaking similar tasks w/out compensation. 2nd Rest Agency §378/9
(a) Gordon v. Doty
(2) Creditor-Debtor Relationship–> A cred who assumes control of his debtor’s business for the mutual benefit of himself and his debtor, may become a principal, w/ liability for the acts and transactions of the debtor in connection w/ the business. 2nd Rest Agency §14O
(a) A Gay Jenson Farms Co. v. Cargill, Inc–>Court looked to whether Cargill had control over Warren, and to several factors of why he did. If you control a person’s actions, then you should be liable/responsible for those actions if harm results.
(3) Contract Relationship/Ind K–>One who contracts to act on behalf of another and subject to the other’s control except with respect to his physical conduct is an agent and also an independent contractor. 2nd Rest Agency §14N
(a) Green v. H & R Block, Inc.–>D argued that they had to comm w/ the bank b4 they file the return, therefore they are they wear the agent hat when they are filling out the tax return, they take off the agent hat when contacting the bank for the customer, and they eventually put the agent back on when they actually file the tax return for the customer. HELD: Court finds that consent by the agent to act on P’s behalf with H&R’s advertising campaign where they ask the customer to “trust” them
b) Liability In Contract
i) Actual Authority–>actual/real authority arises from the manifestation of consent from the principal to the agent that the agent should act for the principal. It includes the power to do whatever the principal has engaged the agent to accomplish and is controlled by the agent’s reasonable beliefs.
(1) Express Actual Authority–>Express authority is actual authority contained w/in the “four corners” of the agency agreement between the principal and the agent (i.e., authority expressly granted).
(a) Broad Powers–>Grants of authority contain phrases that could be construed as giving the agent extremely broad powers (i.e., “to conduct as business”). Courts will generally limit such broad language to what appears to be the business actually intended by the parties. 2nd Rest Agency §37
(i) Williams v. Dugan–>Black letter law that the Restatement §37 summarizes, which notes that courts will view express grants of authority of agency very narrowly. Attorney had the right to control the mortgages on behalf of the Principal. Attorney, acting as agent, borrowed $ on behalf of Principal for taxes, but only had the right deal w/ the principal’s mortgages and such, but no specific authority to borrow money, which the attorney needed. A general grant of authority is disfavored and read very narrowly.
(2) Implied Actual Authority –>An agent’s actual authority includes not only the authority expressly granted by the principal to the agent, but also any authority implied from the words or conduct between the principal and the agent.
(a) Incidental to Express Authority–>the principal does not expressly grant detailed authority to the agent, instead the agent is given a general authority or objective. Such as express grant includes the implied authority to act in any way that is a natural and general consequence of the express authority, including acts reasonably necessary to accomplish the objective.
(b) Implied from Conduct–>Actual authority may be impliedly conferred by the conduct of the principal indicating his intention to confer it, or by otherwise causing the agent to believe that she possesses it. 2nd Rest Agency §26
(c) Implied from Custom or Usage–>An agent also has implied authority to act in accord w/ general custom or usage, provided the agent has knowledge of the custom or usage.
(i) Essco Geometric v. Harvard Industries–> Case about industry foam standards and how they conduct business shows that implied authority can be obtained two ways:
1. Prior Acts; by allowing an agent to carry out prior similar transx, a principal creates the appearance that the agent is authorized to carry out such acts subsequently.
2. Position; if principal places agent in a position which according to ordinary habits in the trade or profession, carries a particular kind of authority, then anyone dealing w/ the agent can reasonably believe that they have authority.
(d) Implied from Emergency–>P ships his crops to a factor, A. Upon arrival, A notes that the crops are infested and must be treated immediately to prevent their entire loss. If A cannot reach P, A has implied authority to order the necessary treatment on P’s behalf, and P is liable thereof. 2nd Rest Agency §47
(3) Effect of P’s Mistake in Creating Authority–>As long as the P objectively manifests his intention to create authority in another, there is valid, actual authority–even though
v) Ratification–>The affirmance by a person of a prior act supposedly done on his behalf by another, but which was not authorized. The essence of ratification is that the prior unauthorized act is treated as if it were authorized by the “principal” at the outset 2nd Rest Agency §82
(1) Agreement Treated as Offer–>before the affirmation, the relation of the 3rd party to the principal is similar to that of an offeror to an offeree.
(a) No Affirmation–No K–> It follows that if the P never affirms, there is no K between the 3rd party and the principal. The agent, however, can be held liable to the 3rd party for breach of her warranty of authority.
(b) Affirmation–Acceptance of Offer–>If the P affirms, he is deemed to have “accepted” the 3rd party’s offer and becomes bound by the K. The 3rd party is generally free until affirmation to rescind the K w/ the unauthorized agent. 2nd Rest Agency §88
(2) Effects of Ratification–>Ratification may establish both the agent’s authority and the agency relationship. Thus, after ratification, the principal becomes liable for the agent’s act and the agent is relieved of liability to the principal.
(a) “Relation Back” Theory–> traditional rule is that once an agent’s act is ratified, it is treated as though it had been authorized from the outset. All rights and liabilities are therefore said to “relate back” to the date of the original unauthorized act. 2nd Rest Agency §100A
(3) Evans v. Ruth–>Oral K created between unidentified foreman w/ Evans to haul stone on behalf of Ruth. Ruth did not know who the foreman was and it is unclear that the foreman had actual authority.
(a) HELD–>Foreman/Agent didn’t have authority and there was not A-P relationship between Evans and Ruth, but as soon as Ruth tells Evans that he was going to pay him, a ratification of the agreement existed and A-P thus existed. Ruth had knowledge
(4) Botticello v. Stefanovicz–>Husband sells land to B for $ and he owned the land as tenants in common w/ wife. B buys the land, makes improvements and then a 3rd party sought an easement over the land on behalf of Wife.
(a) HELD–> Marriage does not equal agency relationship. There was no ratification by Mary/Principal about the deal on the sale of land.
(5) NOTE–>When a 3rd party does not know he is dealing w/ an agent, but the undisclosed principal wants to ratify the unauthorized act of her agent. In this situation, ratification would be ineffective. An undisclosed principal cannot ratify the unauthorized act of her agent b/c one of the reqs of ratification is that the agent purport to act on principal’s behalf. 2nd Rest Agency §87
(6) Approach to Ratification