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Business Organizations
Touro Law School
Sigman, Shayna

AGENCY: The law of agency concerns the rights and liabilities created when one person acts for another.
 
           
AGENCY: a fiduciary relationship arising from the mutual manifestation of consent that an agent shall act on behalf of and subject to the control of the principal. (objective standard used to determine manifestation of consent, not what principal intended but what agent believed) An agency can arise absent true mutual consent. (rest. 2d § 1)
            *Gorton v. Doty, permission to drive one’s vehicle creates an agency relationship.
 
 
 PRICIPAL: a disclosed principal is one whose identity is known to the person transacting business with the agent. If the person knows the agent is acting for another, but does not know the principal’s identity, the principal is a partially disclosed principal. An undisclosed principal is when the person transacting business with the agent does not know that the agent is acting for another. (rest. 2d § 4)
 
AGENT: a general agent has authority to conduct a series of transactions involving a continuity of service. A special agent has authority for only a single transaction or a series of transactions not involving a continuity of service. (rest. 2d § 3)
 
SUBAGENT:     if authorized by principal to do so (express or implied), an agent may appoint a subagent to perform functions undertaken by the agent for the principal. If there is no authority, the subagent becomes an agent of the agent, not a subagent of the principal. (Rest. 2d § 5)
 
EMPLOYER-EMPLOYEE (MASTER-SERVANT): a special type of agency relationship in which the principal employs the agent to perform services and retains control over the manner in which the employee performs the services. An employee is to be distinguished from an independent contractor , a worker over whom the principal retains no right of control)
            *determining if sub-k or employee is important to determine whether a principal is liable for the person’s tortious conduct
 
APPARENT AGENCY: a party does something to suggest that another is its agent, and a 3rd party reasonable relies on this representation. There is no agency relationship here but liability can exist if principal created appearance of agency relationship. (different from apparent authority where there is actual agency relationship, just no authority for specific act)
 
 
REQUIREMENTS FOR AGENCY RELATIONSHIP:
 
* The agency relationship is consensual, but not necessarily contractual
 
* Agency relationships ordinarily arise by prior agreement between P and A. Consent can also occur after the fact by ratification, and estoppel can serve as a substitute for consent.
 
*Agency is by agreement is express or implied by the conduct of the parties i.e. habitual business transaction (manifestation of consent by P to have A act on behalf and consent by A to act for P) 
           
Mill st. church v. Hogan, F: Hogan was injured after he was hired by a church employee to paint the inside of the church. R: continuous past authorized acts sufficiently confer implied authority
 
 
 
ACTUAL AUTHORITY: agent reasonable believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent to act. (rest. 3d § 2.01 (2.02 defines reasonable ect.))
            *express actual authority
            *implied actual authority
 
APPARENT AUTHORITY: situation in which a principal leads a third party to believe that an agent has authority to bind the principal, even where the agent lacks the actual authority to bind the principal. In such circumstances, the law will hold the principal liable for the acts of the agent, out of fairness to the third party. There must be some act or some knowing omission on the part of the principal – if the agent alone acts to give the third party this false impression, then the principal is not bound. However, the principal will be bound if the agent so acts in the presence of the principal, and the principal stands silently and says nothing to dissuade the third party from believing that the agent has the authority to bind the principal. Apparent authority can also occur where a principal terminates the authority of an agent, but does not inform third parties of this termination. (rest. 3d §2.03)
 
AGENCY BY RATIFICATION: when 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. (rest. 2d § 93)
            *ratification supplies the consent required…must be some objective evidence that the            principal knew of act in question and elected to be bound thereby.
            *express ratification or implied ratification (retains benefit after knowledge of act)
            *no partial ratification, if ratify at all, must ratify entire transaction
           
Botticello v. Stefanovicz, (lease with option to buy without wife/co-owner’s knowledge)marital status or joint property ownership alone doesn’t establish agency. Ratification requires intent to ratify or awareness of material terms.
 
 
ASQIESCENCE BY PRINCIPAL IN AGENTS CONDUCT: indicates authorization (rest. 2d § 36)
 
 
ESTOPPEL: principal can be liable to 3rd party for contract, even without manifestations by principal, if principal has created an appearance of authority that 3rd party reasonable relied on and 3rd party has had a change of position.
            *cases of negligent omission by principal which would not meet the criteria for apparent       authority…meant to protect third party who acted in reliance on belief there was authority.
           
Hoddeson v. Koos Bros(paid imposter acting as sales person in furniture store)
Proprietor is estopped from claiming lack of authority if reasonable diligence could have prevented the actions. Here the imposter did not possess sufficient apparent authority, apparent authority is manifested from principal to agent, remanded to determine defendant’s (furniture store) duty
 
 
DUTIES AND RIGHTS
 
*Agent has a duty to perform with reasonable care and obey all reasonable directions of the principal
 
            -A compensated agent has a duty to carry out his agency with reasonable care, in light of local           community standards. Must exercise any special skills… if he fails to perform all duties     assigned, is liable for breach of K, if performed carelessly, may be liable for negligence and         breach of K (rest. 2d § 379)
            -A gratuitous Agent generally has no duty to perform because the agent did not enter into a K.         If they begin performance, they are held to same standards as a compensated agent. (rest, 2d §      379)
 
           
AGENTS LIABILITY ON THE K:
 
Atlantic salmon v. curran, F: Curran purchased fish from plaintiffs who sought to recover unpaid money from curran individually. R: An agent is personally liable for his principal’s debts if he fails to disclose to a

st i.e misapplied money                        from 3rd party by one partner
            § 26 nature of partner’s liability
            § 28 a person admitted to existing partnership is liable as if he’d been in all along
            § 42 duty to render info (Meehan case)
            § 43 benefits incurred by partner in connection with partnership belongs to partnership
            § 44 right to an account ???
 
PARTNERS COMPARED WITH EMPLOYEES
 
Fenwick v. Unemployment Compensation Comm’n: F: Chesire and Fenwik entered into a partnership agreement, pursuant to which fenwick contributed all capital investments, had exclusive control over management, and bore all risks of losses. (cashier in beauty shop wanted raise, he offered her partner with % of annual profits as bonus instead of raise) R: A partnership is not formed by merely agreeing to share business profits.
            *To determine if Partnership exists, court considers:
                        1) parties’ intent
                        2) share profits?
                        3) share losses?
                        4) share ownership and control over property and business
            (if parties have all of these elements, a partnership is formed even if they do not       expressly call it a partnership)
 
 
PARTNERS COMPARED WITH LENDERS
 
Martin v. Peyton: F: elaborate loan agreement between friends R: a loan agreement that allows for sharing of profits as repayment does not establish a partnership absent intent
            *A partnership is created by an express or implied contract between tow persons with the intent to form a partnership. By receiving the firms speculative securities as collateral for a loan, the defendants are mere trustees
            *Trustees: have right to be informed of all transactions affecting the securities and the power to veto any decisions that are detrimental to their value. They do not have the power to initiate any transaction or to bind the firm by their own actions (control limited to transactions that effect their collateral’s value)
 
Southex v. Rhode Island Builders Asso.: F: Rhode island Builders replaced southex exhibitions as the promoter of its home show after terminating a contract it had entered into with the plaintiff’s predecessor R: 2 promoters’ mutual sharing of profits and intellectual property does not establish a partnership
            *sharing profits is prima facie evidence of partnership which can be rebutted with a showing            that the profits were received in payment of a debt, employee wages, rent, interest on a loan,      or the sale of goodwill.
            *the court may not enforce a label alleged by the parties (call themselves partners) if the      substance of their relationship indicates otherwise.