BUSINESS ORGANIZATION CLASS NOTES
CH. 1 AGENCY
I. WHO IS AN AGENT?
a. Gorton v. Doty
i. Rst. of Agency §1 Agency DEFINEDà the relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.
1. Principal is ultimately responsible for the acts of the agent in so far as agent is authorized to act
2. Agency questions are extremely fact sensitive
ii. Agency 3 formsà
1. principal and agent,
2. master and servant and
3. employer or proprietor and independent contractor.
iii. This case provides a prima facie case for agency liability
1. the fact of ownership alone (of the car) establishes a prima facie case against the owner due to the presumption that the driver must have been the agent of the owner
b. A. Gay Jenson Farms Co. v. Cargill, Inc.
i. 3 elements of agency:
1. consent by principal to the relationship,
2. agent acted on behalf of principal, and
3. principal exercises control over the agent.
4. in looking to whether control exists one looks to many factors in the full circumstances of the transaction. An agency relationship may be shown through circumstantial evidence but in this instance it must be proven that the principal consented to the agency relationship.
a. Cargill’s constant recommendations to Warren by telephone
b. Cargill’s right of first refusal on grain
c. Warren’s inability to enter into mortgages, to purchase stock or to pay dividends without Cargill’s approval
d. Cargill’s right of entry onto Warren’s premises to carry on periodic checks and audits
e. Cargill’s correspondence and criticism regarding Warren’s finances, officer’s salaries, and inventory
f. Cargill’s determination that Warren needed “strong paternal guidance”
g. Provision of drafts and forms to Warren upon which Cargill’s name was imprinted
h. Financing of all Warren’s purchases of grain and operating expenses
i. Cargill’s power to discontinue the financing of Warren’s operations
ii. Ability to form an agency
a. 1) mutual consent,
b. 2) capacity, and
c. 3) perhaps writing (not a necessity- but helps)
i. Writing may be necessary where agent is going to enter into a K for the principal
iii. Agency DEFINEDà the fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act on behalf and subject to his control, and consent by the other so to act…
iv. RST § 14K
1. One who contracts to acquire property from a third person and convey it to another is the agent of the other only if it is agreed that he is to act primarily for the benefit of the other and not for himself.
2. Factors indicating that one is a supplier, rather than
h the Elders had decided that Gary Petty would be hired to help), Hogan was not ordered to do it. He hired his brother SAM, and his brother got hurt and filed for Worker’s compensation. The court found that Bill had implied authority (actual authority circumstantially proven) to hire his brother.
2. Principal are liable for the acts of agents to the extent that agents have the authority to act
3. Implied authority DEFINEDà is actual authority circumstantially proven which the principal actually intended the agent to possess and includes such powers as are practically necessary to carry out the duties actually delegated.
i. Focus on the agent’s understanding of his authority
1. whether the agent reasonably believes b/c of present or past conduct of the principal that the principal wished him to act in a certain way or to have certain authority
ii. Nature of the task or job
iii. Existence of prior similar practices
1. Specific conduct by the principal in the past permitting the agent to exercise similar powers is crucial
iv. BOP in proving agency relationship lies on party alleging agency