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Business Organizations
University of Connecticut School of Law
McCoy, Patricia A.

Business Organizations
Spring 2010
I.        Overview of class
a.       There are several forms a business can take
                                                               i.      Partnership
                                                             ii.      Limited liability forms
1.      Corporations
2.      Llc
3.      LLP
b.      Corporate governance
                                                               i.      What duties do Officers/directors owe to shareholders
c.       Role of atty giving advice
d.      Example from beginning of class
                                                               i.      The case of the housewife who bakes good cookies. As sole proprietor has sole responsibility and sole liability
                                                             ii.      But getting busier- more employees- worry about vicarious liability- Agency-
                                                           iii.      What about money to invest- Get partners, but then whe do partners have to worry about- Partnership is bad. Then they are liable as well even if only the money.
1.      They would want some form of limited liability
II.      Agency law
a.       Overview- Agent is 1 person the Principal designates to act on the principal’s behalf-
                                                               i.      In the business setting and sometimes out.
b.      Basic test for agency
                                                               i.      Gorton v Doty.
1.      Facts- Teacher allows coach to use her car to transport students- MVA>student injured>is she liable even though he was driving
2.      If He was acting as an agent, then she is liable- comes down to agency v lender/borrower
3.      What is necessary to create a P/A relationship (Authorize.designate.consent)
a.       P consents for A to act on Ps behalf
b.      A consents to act on Ps behalf
c.       A agrees to act subject to Ps control
4.      Because no express K- the court looks to spoken words and testimony
a.       “If he drove it”
5.      Her exercise of control was minimal, but enough to create a P/A relationship
6.      Advising- BE smart about how/who you allow use cars- 3rd party insurance
                                                             ii.      Jensen v Cargill
1.      Facts- Grain elevator buying from farmers- fails doesn’t pay farmers. Warren owns elevator, but sells it to Cargill- Farmers sue Cargill on Agency theory
2.      Follows 3 step process in Groty- All comes down to control
a.       Cargill controlled Warrens business practices- Not only loaned money- not a buyer/seller arrangement.
b.      Comes down to a lot of factors- managing books, daily reporting, when to buy/sell stok/dividends
c.       Crosses line into active management- not just credit-giving
c.       New flavors
                                                               i.      Actual Authoprity- works on 3 part test of Cargill/Groty
1.      Express authority
2.      Implied authority
                                                             ii.      Apparent authority- different test
1.      Mill street Church v Hogan
a.       Facts- Church hired member, Bill, To paint. He needed help. One elder mentioned a name of who to hire, but said to use who you want. He hired brother. Brother fell and got hurt. At hosp- church rep says pay for work and that the curch has insurance
b.      Actual authority- Was there express authority? No no explicit authority
                                                                                                                                       i.      Implicit- was there circumstantial evidence that Bill had authority to hire brother
1.      Looks to past dealings, hired brother before- church knew he needed help, paid wages, said they have insurance
c.       Even if you can’t prove Express of Implied can still look to apparent authotiry
d.      Apparent authority
                                                                                                                                       i.      Look through eyes of 3rd party.
1.      Through Sam’s eyes- did church give sam reason to believe that bill had authority to hire him
2.      Is there evidence he had auth (Past pract, someone saw him etc)
                                                                                                                                     ii.      Honors 3rd party (Sam) reliance on what church did. Relied on appearance that he could be hired
e.       Also look to inherent agency
2.      Dwek V Nasser
a.       Facts- Long protracted suit/breakup of business. Suit is to enforce settlement.
b.      Issue was whether or not atty had authority to settle the case. 
                                                                                                                                       i.      Actual authority- there is evidence to suggest that he had express authority to “get it done”- “do what you want”
                                                                                                                                     ii.      Implied authority- there is evidence of past dealings that he had authority to act on Nasser’s Behalf
                                                                                                                                   iii.      Here there are mixed express statements and some evidence of past dealings
c.       Apparent authority
                                                                                                                                       i.      Not enough to create apparent authority based on the fact that N told Dwek’s husband that H and S had authority.
3.      Walteau v. Fenwick- Inherent agency
a.       Beerhouse- Humble sold borvil to F. Was H W’s agent. 

            i.      Had to disclose there was a Principal
                                                                                                                                     ii.      Had to disclose the Identity of the Principal
c.       Who is in the best position to prevent the loss
6.      Issue of Agency and franchises
a.       Franchise
                                                                                                                                       i.      is a national corp that allows local people to set up businesses using their TM ©- like fast food/hotels
                                                                                                                                     ii.      But some franchises are not independent- more like EEs
                                                                                                                                   iii.      Brings about classic principal/agent questions
1.      If Franchisee is an independent contractor of the franchisor then not liable for franchisee’s harms
2.      If they are an EE then Franchisor is liable-           
a.       Comes down to control
b.      Fact-based analysis
b.      Gas station cases
                                                                                                                                       i.      Cases of actual agency because of the agreements- NOT apparent agency
                                                                                                                                     ii.      Humble v Martin
1.      Facts- Tx filling station- Love leaves car and doesn’t set the brake. EE didn’t set brake- car rolls and hits Martin
2.      Who is liable?? Humble- the franchisor here
                                                                                                                                   iii.      Hoover v. Sun Oil
1.      Facts- EE of station caused fire and damages Õs car. Õ sues Station owner (Franchisee) and Sun (Franchisor)
2.      Who is liable? Franchisee here
                                                                                                                                   iv.      Opposite outcomes despite similar cases
1.      Facts- Control- Agreements-
2.      Test is whether there is an EE-ER relationship (who controls the day to day)