Agency & Partnership Outline
Fall 2006
Agency
I) Who is an Agent?
a) Gorton v. Doty
i) Agency relationship exists when there is a manifestation of consent by one person (principal) that another person (agent) act on the principal’s behalf and subject to the principal’s control and the agent consents to so act.
ii) Agency relationship can also be created through custom
iii) Here there was presumption that the driver of the car was an agent of the owner
(1) Who benefited?
(2) Rebut presumption by showing person stole car or car was lent with no conditions.
b) MJ & Partners v. Zadikoff
i) The difference between an independent contract and agent is that the agent has a fiduciary duty to the principal (investors). If independent contractor relationship found then only claim is on the contract (misappropriation of funds).
ii) The “legal right to control” is the key distinction between the two, although actual control can be probative of legal right to control.
iii) Court doesn’t distinguish b/w non-servant and servant agency-
(1) Servant – more like an employee who takes director orders.
(2) Non-servant – hiring someone b/c can do something you can’t do. If not careful and don’t set up as independent contractor, you have an agent.
c) Jensen Farms v. Cargill –
i) Case demonstrates the anatomy of control that is not master-servant in nature
(1) This started as a buyer / seller relationship and creditor / debtor relationship, but Cargill crossed line and made it a principal / agent relationship so creditors of Jensen could come after Cargill. How?
(2) Cargill exercised too much control
(a) Really bad:
(i) Had veto power over important decisions (entering mortgages, purchasing stock, or paying dividends)
(ii) Made Jensen give control to Cargill’s creditor designee and provided other creditors with assurances that debtor would meet the obligation.
(b) Also Cargill
(i) Made constant recommendations
(ii) Had right of first refusal on grain purchase
(iii) Had right of entry onto premises
(iv) Had input into salaries and inventories
(v) Determined that debtor needed strong paternal guidance
(vi) Provided Financing
(vii)Had power to discontinue financing
(viii) Provision of drafts and forms to Warren which Cargill’s name was imprinted
II) Principal’s Liability to 3d Parties in Contract
a) Authority in General (What the agent believes)
i) Mill Street
(1) Issue: whether Bill (clearly an agent) had authority to hire Sam to help Bill work for church.
(2) Implied Authority – based on need defined by job and past experiences
(a) Includes powers practically necessary to carry out duty
(b) Actual Authority – looks at the relationship: if agent reasonably believes she has authority, implied actual authority exists but if 3d party knows agent has no authority, then principal is not bound.
(c) Apparent Authority – based on past experience (Sam had worked for Bill before)
ii) Karl Rove & Co. v. Thornburgh
(1) D, T’s campaign manager (agent fo
ed by the “hidden” owners for their own purpose.
ii) Kidd v. Thomas Edison
(1) If a man selects another to act for him with some discretion, he has by that fact vouched to some extent for his reliability.
(2) When a disclosed principal in one occupation wishes to get leverage from another occupation, she must bear the cost of confusion about how the two occupations mesh in the public forum.
iii) Nogales Service Center v. Atlantic Richfield
(1) Agent cannot confer authority on self merely by claiming it.
(2) Inherent authority – derived solely from agency relation & exists for protection of persons harmed by dealing with a servant or other agent.
(a) Principal is sending agent out in world but still might be liable even though agent departs from instructions.
(b) Examples:
(i) General does something similar to w hat he is authorized to do, but in violation of explicit orders
(ii) Agents acts purely for own purposes when entering into a transaction which would be authorized if there were proper motive
(iii) Agent is authorized to dispose of goods but departs from the desired method of disposal
(c) 3d party beliefs must be reasonable.
Tactical decisions reasonably within authority
