Business Organizations Outline

BUSINESS ORGANIZATION OUTLINE

CORE CONCEPTS

AGENCY AND AUTHORITY

TERMINOLOGY
· AGENCY: A special relationship where a principal grants authority to agent to act for him.
o Manifestation of assent can be verbal or by conduct
o Equal dignities rule: if deal that agency relates to must be in writing, then agency agreement must be in writing
o Consideration is not required for agency relationship – can be gratuitous
· AGENT: An individual that acts on behalf of a principal and is subject to his control
o Co-agent: have agency relationships with the same principal
§ Can be appointed by the principal or by another agent with actual or apparent authority of the principal
o Dual agent: acts on behalf of more than one principal with regard to same transactions
§ Principals are joint principals
· PRINCIPAL: An individual that authorizes an agent to act on his behalf
o Can be person or other legally recognizable being
· DISCLOSED PRINCIPAL: If, when an agent and a third party interact, the third party has notice that the agent is acting for a principal and knows the principal’s identity.
o Agent not responsible for liability of principal
· UNDISCLOSED PRINCIPAL: If, when an agent and a third party interact, the third party has no notice that agent is acting for a principal.
o Agent is liable for any contract he makes
o Principal can be liable if he gave agent actual authority
· UNIDENTIFIED PRINCIPAL: If, when an agent and a third party interact, the third party has notice that the agent is acting for a principal but does not know the principal’s identity.
o Agent is liable unless he can get the third party to let him off the hook.
· Fiduciary – act for the benefit of another (an agent acts for the benefit of the principal)
· Duties on part of the agent:
o Follow the principal’s instructions
§ Must use reasonable care (looking to customs of industry and agents)
o Duty of loyalty – if there’s an opportunity to benefit it must be disclosed to the principal
§ Also, duty not to compete with the principal
o Duty of accounting – hold whatever agent gets in trust for the principal
· Duties on part of the principal:
o Duty of just compensation – burdon on principal to prove this
· Respondeat superior: both employer and employee liable to third party
· Employee: performs services and is controlled by employer
· Independent contractor: just hired by employer, not controlled by him
o RS does not apply to IC’s (only inherently dangerous exception)
· ACTUAL AUTHORITY VS. APPARENT AUTHORITY
o Actual Authority: At the time of taking action that has legal consequences for the principal, the agent reasonably believes in accordance with the principal’s manifestation to the agent, that the principal wishes the agent so to act.
§ Between the principal and agent
o Apparent Authority: The power held by an agent to affect a principal’s legal relations when a third party reasonably believes that the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations.
§ Between principal and third party
§ Express: Principal tells agent what to do in exact terms (actual authority) Principal tells third party of agents authority (apparent authority)
§ Implied: Powers of agent implied or inferred from authority expressly granted; those powers incidental and necessary to carry out express authority
· Agent or third party can reasonably infer authority from principal.
o Apparent authority ends when it is no longer reasonable to think the agent still has authority, not just when actual authority is revoked

AGENCY AND AUTHORITY CASES

HAMILTON HAULING V. GAF
· Bajt’s Actual Authority: Had actual authority to make purchases for less than 25,000 a year and deals for less than a year.
· Statements by agent in isolation mean nothing without something from principal to show manifestation of authority
· Three ways for principal to manifest apparent authority
o Direct manifestation
§ EG: appointing a person to a position
§ By documents or other indicia
o Acquiescence to prior acts by agent
o Prior relation of agent and principal
§ Appointing person to a position
§ Reputation as having authority to act
· Bajt had not done deals of this magnitude in the past and therefore:
o Hamilton could not have reasonably assumed there was apparent authority.

BARTON V. SNELLSON
·