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Business Organizations
Touro Law School
Miller, Meredith R.

BUSINESS ORGANIZATIONS FINALS OUTLINE
 
 
BASED ON CLASS NOTES/RESTATEMENT DEFINITIONS
 
Default Rules–à Regarding business law, there are default rules contained in the restatements (however, these rules may be contracted around by agreement)
BUT–à mandatory rules (i.e. the duty of good faith, ect…) may not be contracted around
 
Agency—à Defined (2nd RT) —- The relationship which results from the manifestation of assent by one person to another that the other shall act on his behalf and subject to his control, and the agent manifests assent or otherwise consents so to act
Agent:—à The person who is going to act is the agent
Principal:-à The person for whom the action is to be taken is the principal
Manifestation:-à (3rd RT) — a person manifests assent or intention through written or spoken words or other conduct
 
Subject to principal’s control: This is an important element to discuss …Ex: Coach was considered teacher’s agent b/c the teacher expressed a condition that coach was only person that could drive her car (she controlled the situation and was therefore deemed to be principal) Ex: Case of lender to farmer where they exercised control over how they invested the money, their client base, other parts of the business -à the issue, is the amount and extent of control the potential principal has been using
 
– Agreement: There must be an agreement b/w the parties but there does NOT have to be a K (there could be an agency relationship even though the parties do not call it that)
 
Once you can establish that there is “agency” relationship than the principal will be liable for the agent’s actions that were within his scope of authority
 
TYPES OF AUTHORITY
* you must establish there is authority for the agent to act, to hold the principal liable
 
 
ACTUAL AUTHORITY (two types)
1) Expressed Authority—à Where principal tells agent, “you are authorized to do this”
            – you always look at the manifestations from the principal to agent
 
2) Implied Authority—-à Different ways that authority can be conferred that might not be expressed –à gives agent authority to do acts which are incidental to it, usually accompany it, or are reasonably necessary to accomplish it
Ex) Joe tell real estate agent, that he can sell his house — he did not give the agent expressed authority to take an ad out in the paper, BUT taking the ad out in the paper is incidental to selling the house (its incidental) and therefore the agent has the implied authority to do it
 
 
* Minor deviations from the actual authority conferred will still bind the principal when the 3rd party is unaware that the agent exceeded their authority (voice recording K case)
 
– An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act (RT 3rd)
Principal actually intended the agent to possess and includes such powers as are practically necessary to carry out the duties actually delegated
Giving the agent the power to conduct the business (what powers are reasonably necessary for the agent to do what the principal wants him to do)
 
Factors:–à The court will look toward past conduct (what the principal allowed the agent to do in the past)
Agent would have actual authority to take action when its necessary or incidental to achieving the principal’s objectives, as the agent reasonably understands the manifestations and objectives of principal to be
What is reasonable? When the manifestation reflects any meaning known by the agent to be ascribed by principal and in absence of such meaning, as a reasonable person in agent’s position would interpret the manifestations in light of the circumstances
Court looks toward what is the custom in what were dealing with as well as prior dealings b/w the parties
 
Burden on Agent: -à The agent must prove by circumstantial evidence that his belief was reasonable that the principal wished him to act in a certain manner
 
APPARENT AUTHORITY (dealing with 3rd parties)
–          The agent wasn’t authorized to act the way he did, BUT it appeared to the world that the agent had the authority to do what he did
–          (RT 3rd) Power held by agent or other actor to affect principal’s legal relations with 3rd parti

ustomer know that it wasn’t a real sales person they were dealing with) OR
2) having notice of such belief and it might induce others to change their positions, the person did not take reasonable steps to notify them of the facts
– this argument is made in order to find an “agency” relationship b/w the agent (who really wasn’t an agent and had not authority) and the principal
 
* Were estopping the principal from denying liability b/c it was reasonable for the 3rd party to have detrimentally relied on the false agent
 
2) RATIFICATION:–à Affirmance by a person with full knowledge of the material terms of a prior act which did not bind him but which was done or professedly done on his account
Ex) I told you not to do something; you go ahead and do it—and then I say, its ok (than its said that I ratified the action taken)
o       A party must be aware of the material terms of the K that its ratifying and intended to ratify the K by agreeing to it (the option to buy case) – husband didn’t have the authority to bind his wife and she didn’t ratify
o       Just accepting the benefits of the K is not necessarily a ratification
 
 
 
DOES THE PROFESSOR WANT US TO ARGUE ALL 3 — INHERENT, ACTUAL, ESTOPPEL — B/C INHERENT WAS GOTTEN RID OF BY 3RD RT AND NOW WE HAVE APPARENT —- SO DO WE NOW ARGUE, APPARENT, ACTUAL, AND ESTOPPEL— ASK THE PROFESSOR
 
 
INDEPENDENT CONTRACTOR (agent type)–à This is a person who had agreed to act on the behalf of another (the principal), but NOT subject to the principal’s control over how the result is accomplished
Ex) Carpenter hired to build garage and carpenter is just responsible for getting the job done and doesn’t take directions from home owner; than carpenter is IC and not acting as agent of homeowner