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Unincorporated Associations
Temple University School of Law
Wells, Harwell

Unincorporated Business Associations (Wells – Spring 2011)
 
AGENCY
·         What is an agent
o    Restatement 2d § 1
·         A fiduciary relationship resulting from
·         A manifestation by a principle that
·         An agent will act on his behalf and
·         Subject to his control and
·         Consent by the agent to do so
 
·         Forming an agency relationship
o    Gordon v. Doty – School teacher who lent her car to coach to take kids a game
·         Court found
§  Giving the car – coach was acting on behalf of
§  Gave a few instructions – enough for control
·         Control does not have to be exercised
§  Can be the right to control and give interim instructions
·         Waiver will not necessarily be binding
§  Courts may hold liable to third parties if facts support agency relationship
o    Jenson Farms v. Cargill – Cargill loaned money to Warren who defaulted on duties to third party (Jenson)
·         Cargill argues
§  Did not know about this particular contract Jenson had with Warren
§  Court said doesn’t matter
·         You can be liable for agents actions without knowledge of those actions.
·         Court looked at facts of control
§  Cargill retained some veto powers
§  Had rights to inspect books etc
·         Acting on behalf of
§  Very thin argument for this
§  Distributing grain for Cargill
§  Warren's profit ultimately benefits Cargill
§  Court focused more on the control part, than the on behalf of part
·         In general creditors are not principles
§  This case is an outlier
o    Green v. H&R Block -H&R Block did not disclose their relationship with a bank that was handling the refund anticipation loan
·         Plaintiff argued
§  H&R Block was agent for plaintiff
§  Had fiduciary duty to disclose
·         H&R Block argued
§  It was agent during tax prep time
§  But switched to being agent for Bank after paperwork was filed
·         Court said
§  Relationship was not an on off switch
§  H&R probably screwed themselves by saying they were agents at one point
§  Another court ruled NO agency with exact same set of facts.
·         Control/acting on behalf of
§  Tax payer didn't really control H&R
·         Decided if they wanted to file or not
·         But didn't control interim steps etc.
§  Acting on behalf of?
·         Unclear for who's benefit H&R is acting
 
·         Agent's authority to bind principle
o    Williams v. Dugan – Mom has POA giving son authority to do pretty much anything on her behalf. He used it to borrow money to pay taxes.
·         Does the agent have the power to bind the principle in a contract with 3rd parties?
§  We need some kind of authority
§  This case argued for express actual authority
·         This is the most clear cut type of authority
§  POA seemed to suggest there was authority
·         BUT court said there's a presumption against unlimited authority
·         So since there was no express authority to borrow money specifically
·         Agent lacked authority to borrow money
o    Essco Geometric v. Harvard Industries- Harvard's purchasing manager entered into an exclusive contract with plaintiff to buy foam
·         Did the manager (as an agent) have the power to bind the principle (Harvard) into a two year exclusive contract?
§  Plaintiff's theories
·         Implied actual authority
·         Whether agent reasonably believed he had authority to act on behalf of principle
·         Some communication between principle and agent
·         Third party does not have to believe the authority
·         Apparent Authority
·         The principle causes the third party to reasonably believe that the agent has the authority in question
·         Requires independent communication between principle and third party
·         Is this a good idea?
·         Without it, there would be no one to bear responsibility
·         But having it increases monitoring costs
·         Comes down to principle being cheapest cost avoider
·         They are in best position to make sure people know what agent's authority is
§  Court said apparent authority might work
·         Previous managers were able to make similar deals
·         Also looks at industry practices
o    Kidd v. Thomas Edison-agent books singer for a tour, when supposedly his powers from his principle was only to look for opportunities, not to book the whole tour
·         This case was decided on inherent authority
§  Inherent authority now exists only in the case of an undisclosed principle
§  Inherent authority binds principle
§  Agent is bound on the idea that age

ntiff sues defendant for breach. Defendant claims he's just the agent for the undisclosed principle
·         When there is an undisclosed principle
§  Agent is bound to K
·         When there is a partially disclosed principle
§  Agent can protect self by putting in K that principle is liable only
 
·         3rd parties liability to K
o    Hirsch v. Silberstein – plaintiff sold land to Defendant who conveyed it the same day to a 3rd party
·         Defendant's argument
§  They were agents for the undisclosed principle
·         Court says agreement to not transfer and assign was not violated
§  There was also no harm to 3rd parties
§  So no need to disclose principle
§  K could only be voided if there was some indication that party would not have entered into K if they knew about undisclosed P
§  Restatement § 302
·         3rd party is bound to K made with agent of undisclosed principle unless they would not have entered into K if identity of principle was known.
 
·         Principle's liability for Agent's torts – Respondeat superior
o    Parker v. Domino's Pizza- Domino's driver caused an accident, Dominos corporate is being sued as principles for the agent franchise
·         Restatement 2d § 220
§  Defines a servant as someone employed to perform physical services and subject to control
·         Here, control is obvious
·         In franchise situations, on behalf of is often skipped
§  Turning over a small percentage of profits as royalties, hard to argue on behalf of
o    Wilson v. Joma- One employee went to pick up lunch for the other employees coz only one person could be gone at a time and got into accident
·         Was this in scope of employment
§  Restatement § 228
·         If actuated in part by purpose to serve master
§  Was this done for master's benefit, or friend's benefit?