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Business Organizations
Touro Law School
Crincoli, Shayna

Business Organizations Outline

I. Who is an Agent?

A. Agency is the fiduciary relation which results from
i. Consent by the principle for the agent to act
ii. Agent acting on behalf of the principle (& both parties intend this)
iii. Understanding that the agent is subject to control by the principle.
a. Control only over the goal, not the means of accomplishing it (lawyers).
1. A asks B to pass pen in class. B in the process hits C.. Is A (principal) liable. YES.
B. There’s an asymmetrical fiduciary duty (agent has duty to principle, but not vice versa)
C. An agency is inherently hierarchical – The principle controls (Courts will assume this fact)
D. Formation & termination of an agency relationship
i. Unlike a contract (which is negotiated etc.) an agency agreement is created very easily. Once A agrees to do something for P, and A is acting on P’s behalf & is subject to P’s control the agency relationship is created.
a. Gorton v. Doty, 69 P.2d 136 (1937) – woman tells the football coach who needs to transport students to a game to use her car (but only if he drives it). She volunteered the use of her car, no compensation was given in return. Coach gets into an accident & suit against the woman, as the principle. Agency relationship existed here between woman & coach. Woman consented that coach act in her behalf in driving her car by volunteering her car & her condition that only he drive it shows the control she had.
1. How you describe it makes the diff on whether or not it’s agency:
(a) Gave permission – this is a loan, not agency
(b) Directed – telling him what to do – this is agency.
2. This is a little extreme b/c it almost looks like it was only a loan. But fact is that insurance is covering the woman, and the boy injured has no insurance. So looks like court just wanted to cover the boy.
3. Solution: if she had specified she is loaning the car to him, then that would have settled it.
b.It is not essential that there be a contract between the principle and agent or that the agent promise to act as such, nor is it essential to the relationship of principle and agent that they, or either, receive compensation.

ii. Agency can be terminated at the will of either party (notion that we don’t like involuntary servitude). Different from contract relationship which you cannot just breach & court will enforce.
E. Creditor-debtor relationship vs. agent-principal relationship
i. A creditor who assumes control of his debtor’s business may become liable as principal for the acts of the debtor in connection with the business
ii. Gay Jenson Farms Co. v. Cargill, Inc., 309 N.W.2d 285 (1981) – Warren (W) is a local firm operating as a grain storage facility & as a middle man between the grain farmers & the worldwide dealer, Cargill (C). in 1964 Warren applied for financing from Cargill. W & C had an agreement where C finances W, C buys grain from W, & C has right of first refusal on the grain. In 1977 Warren became insolvent; and didn’t pay local farmers, and farmers sue Cargill. An audit revealed that Warren was $4 million in debt.
Issue: was there an agency relationship created between Warren and Cargill
a. The court found an agency relationship was created here. Existence of an agency may be proved by circumstantial evidence which shows a course of dealing between the two parties.
D args: Cargill says that the prerequisites for an agency relationship did not exist b/c Cargill never consented to the agency, Warren didn’t act on behalf Cargill, and Cargill did not exercise control over warren.
Hold: Agency relationship did exists b/w Cargill and Warren
1. Consent by principle – C consented by directing W to implement certain procedures
2. Agent acting on behalf of principle – W acted on C’s behalf in procuring grain for C, as part of its normal operation which were totally financed by C.
3. Principle exercise control over agent – C had a lot of influence and control over W’s financial situation.
b.An agreement may result in the creation of an agency even though parties didn’t call it an agency and did not intend the legal consequences of the relation to follow.
c. Someone who contracts to acquire something from a 3rd person and convey it to another is an agent only if it is agreed that he is to act primarily for the benefit of the other.
d.Problem – banks giving out loans being subject to agency
1. Difference for a bank is that the lender’s reason for financing is for the interest received. In Cargill, the reason for the financing was to establish a source of market grain for its business & took control of the operation for this purpose.
2. If you’re lending money to a borrower, you would probably take the steps Cargill did to make sure operatin

employment at Kids Inc. Nasser and Dweck wanted to settle their case and so had their attorneys draft an agreement. D had two attorneys working to find a resolutions; Heyman and Shiboleth. Heyman is the counsel on record. Yet opposing party attorney reached out to Shiboleth. Both sides drafted an agreement to which Shiboleth agreed to. Shiboleth was under the impression that Nasser had directed him to settle the dispute. Nasser had looked over the agreement before signing it and refused to some of the terms in the document, and had not signed the agreement
D args: Nasser believes he is not bound by the agreement
Issue: Did Shiboleth have the authority to agree to the agreement between the parties on behalf of Nasser?
Held: Yes, Shiboleth had authority to sign the document and agree to its terms
Reason: Nasser directed Shiboleth to settle the action and speak in his name. Shiboleth had been Nasser’s attorney for 20 years. Moreover, Nasser had told his attorney that he would execute any agreement that his attorney’s presented to him. All these reasons go to show that Shiboleth had actual authority to work this deal.
Nassar = principal
Shiboleth = agent of principal
Dweck = third party

iii. Three-Seventy Leasing Corporation v. Ampex Corporation, 528 F.2d 993 (1976) – Joyce, the only employee of 370 corp, is in negotiations to buy computer equipment from Ampex. Negotiations were held between Joyce and Ampex employee Kay (salesperson). Kays sends Joyce an offer at the direction of Kays’ superior. The document is signed by Joyce and sent back to Kay for her signature.
Issue: Does Kay have apparent authority to accept such an offer.
D args: Kay has no authority to accept an offer b/c company has a set of procedures which goes through a hierarchy.
Held: Kay does have authority. Offer was an acceptance b/c Kays sent a memo about delivery dates.
Ampex = principal
Kays = agent
370 = 3rd party