Select Page

Business Organizations
University of Florida School of Law
Siebecker, Michael R.

Business Organizations
Overview of Agency:
1. Law
                – Elements:
                – Sources:
                                – Statutes, cases, RSTs (2nd and 3rd)
                – Jurisdictional differences
2. Facts
                – Elements – using the fact creatively to establish all element of the law (theory)
                – Cases
3. Alternative Theories (EXAM: March through all these theories of Agency)
                – Categories of Agency:
                                – Actual Authority
                                                – Express
                                                – Implied
                                                                – Custom, necessity, past practices, nature of task
                                – Apparent Authority
– Inherent Authority (seems only to make sense when there is an undisclosed principal, RST 3rd got rid of this concept and tied it in w/ apparent authority).
                – Fairness, policy preferences, and economic principles
                – General Agent
                – Special Agent
– EXAM: Paretoà Coase à Theories of efficiency (what individuals want; what all people want (survey them; ask legislature); people really want fairness (judge decides; judge looks to legis; judge asks parties); people really want $$)à Facts (attach to the theory for whichever side the theory and facts work)à Conclusion.
– Look at “rational actor” theory; sophisticated person; specific person barg’d for; survey everybody; look to legis; look to $ maximizers; crime maximizers; etc.
– Extend the analysis through time? Look at a snapshot moment?
– Pareto efficiency no one can be made better off w/o making someone worse off.
– Coase theorem: Parties will reach Pareto Efficient resolution when there are no transaction costs, including perfect knowledge and freedom to negotiate, regardless of entitlements or legal rules. 
– Corollary: In real world, we should use the Coase Theorem to fill the gaps of law/ CL to lessen the chances of reaching inefficient results.
– Law and economics, accd’ing to SIEB, is aimed at simply providing default rules. 
Basic Triangle of Agency:
Actual Authority
– RST (2) § 7 Authority: “Authority is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to him.”
– RST (3) § 2.01 Actual Authority: “An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.”
Actual Implied Authority
– RST (2) § 35 When Incidental Authority Is Inferred: “Unless otherwise agreed, authority to conduct a transaction includes authority to do acts which are incidental to it, usually accompany it, or are reasonably necessary to accomplish it.”
– RST (3) § 2.01 Actual Authority, Cmt. B: The term “implied authority” has more than 1 meaning. “Implied authority” is often used to mean actual authority either (1) to do what is necessary, usual, and proper to accomplish or perform an agent’s express responsibilities or (2) to act in a manner in which an agent believes the principal wishes the agent to act based on the agent’s reasonable interpretation of the principal’s manifestation in light of the principal’s objectives and other facts known to the agent. These meanings are not mutually exclusive. Both fall within the definition of actual authority. Section 2.02, which delineates the scope of actual authority, subsumes the practical consequences of implied authority.
– RST (3) § 2.02 Scope Of Actual Authority:
(1) An agent has actual authority to take action designated or implied in the principal’s manifestations to the agent and acts necessary or incidental to achieving the principal’s objectives, as the agent reasonably understands the principal’s manifestations and objectives when the agent determines how to act.
                (2) An agent’s interpretation of the principal’s manifestations is reasonable if it reflects any meaning known by the agent to be ascribed by the principal and, in the absence of any meaning known to the agent, as a reasonable person in the agent’s position would interpret the manifestations in light of the context, including circumstances of which the agent has notice and the agent’s fiduciary duty to the principal.
                (3) An agent’s understanding of the principal’s objectives is reasonable if it accords with the principal’s manifestations and the inferences that a reasonable person in the agent’s position would draw from the circumstances creating the agency.
– RST (3) § 3.01 Creation of Actual Authority: Actual authority, as defined in § 2.01, is created by a principal’s manifestation to an agent that, as reasonably understood by the agent, expresses the principal’s assent that the agent take action on the principal’s behalf.
Apparent Authority:
– RST (2) § 8. Apparent Authority: “Apparent authority is the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other’s [the P’s] manifestations to such third persons.”
– RST (2) § 27 Creation of Apparent Authority; General Rule: Except for the execution of instruments under seal or for the conduct of transactions required by statute to be authorized in a particular way, apparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.
– RST (3) § 2.03 Apparent Authority: “Apparent authority is the power held by an agent or other actor to affect a principal’s legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations.”

ncipal must ratify the entire transaction or repudiate it entirely.
– It may be possible for purposes of ratification, however, to make a single transaction appear to be a series of severable transactions or to make a series of transactions appear to be a single one.
– Principal’s Knowledge
– In order for there to be a valid ratification, at the time of the alleged affirmance, the principal must know or have reason to know [ALL] the material facts relating to the transaction.
– Pay attention to shifting burden of proof under the Restatements. Under RST (2) § 91, the principal bears the burden of proving ignorance to avoid ratification. Under RST(3) § 4.06, the party seeking to enforce the contract must prove the principal’s knowledge. 
                        – § 91 Knowledge of Principal at Time of Affirmance:
(1) If, at the time of affirmance, the purported principal is ignorant of material facts involved in the original transaction, and is unaware of his ignorance, he can thereafter avoid the effect of the affirmance.
(2) Material facts are those which substantially affect the existence or extent of the obligations involved in the transaction, as distinguished from those which affect the values or inducements involved in the transaction.
– § 4.06 Knowledge Requisite To Ratification: A person is not bound by a ratification made without knowledge of material facts involved in the original act when the person was unaware of such lack of knowledge.
– RST (3) §4.08 Estoppel To Deny Ratification: If a person makes a manifestation that the person has ratified another’s act and the manifestation, as reasonably understood by a third party, induces the third party to make a detrimental change in position, the person may be estopped to deny the ratification.
1. Who is an Agent?
– RST (2) § 1. Agency; Principal; Agent
(1) Agency is the fiduciary relation 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.
(2) The one for whom action is to be taken is the principal.
(3) The one who is to act is the agent.
– RST (3) § 1.01 Agency DefinedAgency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.