Business Associations
Joseph Yockey
Fall 2015
(1) Risk of Loss
(2) Return
(3) Control
(4) Duration
(5) Cheaper Cost Avoider
(6) Industry Standard and Past Practices
Agency, R1.01 = manifestation of consent by P to A that A shall act on P’s behalf, subject to P’s control; A must also consent
– Doty: coach was agent bc subject to Doty’s control “Coach must drive it” and coach consented by driving it
– Cargill: level of control can elevate a creditor to Principal-Agent < affirmative power v. veto power
Authority R6.01(1) = when an agent acts with actual or apparent authority and makes a contract on behalf of a disclosed principal, the principal and the third party are parties to the contract; {3rd party has burden of proof; look to job description, industry standard, past practices
Actual Express R2.02 = when agent acts necessary to achieving the principal’s objectives
Actual Implied R2.02 = when an agent acts incidental to achieving the principal’s objectives [so long as reasonably accords w/ principal’s manifestations]
- Mills Street Church: past practices of whether Church knew Bill would hire additional helpers and Church never said anything; nature of the job requires hiring a helper
Apparent R2.03 = when a 3rd party reasonably believes the actor has authority to act on behalf of the principal & belief is traced to principal’s manifestation
Inherent = Watteau – Plaintiff didn’t know (undisclosed) principal existed (no apparent authority) and Humble was told he could only buy ales & mineral water (no actual express authority) but principal is held liable for authority usually confided to an agent of that character; alternative is:
Restatement R2.06 = undisclosed principal subject to liability when 3rd party is justifiably induced to make a detrimental change in position by an agent acting on P’s behalf and without actual authority if the P, having notice of agent’s conduct and that it might induce others to change their positions, did not take reasonable steps to notify them of the facts
Ratification – principal comes in after the fact to impute authority into contract by accepting agent’s acts
Estoppel R2.05 = 3rd party justifiably induced to make a detrimental change in position because the transaction is believed to be on the person’s account: 1) acts or omission by the principal, either intentional or negligent, which creates an appearance of authority in the purported agent; 2) the third party reasonably and in good faith acts in reliance on such appearance of authority; and 3) the third party changed her position in reliance upon the appearance of authority
- Hoddeson v. Koos Bros: P buys furniture, undelivered, from imposter impersonating as salesman of furniture store without business’s knowledge, negligence by store for not policing store for imposters & P has relied to make a detrimental change in position so liability follows – would not follow if she bought furniture on credit
Torts R2.04
1) employer-employee relationship
Employee = 1) works on behalf of employer + 2) subject to employer control or right to control physical conduct of employee
Independent Contractor = agrees to carry out some task, but is not subject to employer control in accomplishing task = non-agent; "agent" independent contractor = subject to limited control for
ot to deal with his P as an adverse party in a transaction connected w/ his agency without the P’s knowledge”
Use of position: Reading, soldier took $$ to smuggle ppl across checkpoint “advantage solely bc of position”
– General Automotive v. Singer: gave work to other machine shops for-profit, K required “entire time, skill, & att'n” > crt found fidiciary duty violation, not violation of K
2) Care
duty to obey P's reasonable instructions for carrying out the business
duty to notify P of anything w/in the agent's knowledge that is material to the business OR should concern the principal
Partnerships = 1) two or more persons 2) co-owners 3) for-proft **partners are agents & principals of each other
relevant factors = intention, right to share in profits, obligation to share in losses, ownership and control of the partnership property & business, community of power in administration, language of agreement, conduct of parties toward 3rd party
– Martin v. Peyton: not a partnership bc only passive veto power & profit sharing set-up was finite term with future partner option (no intention)
– Fenwick v. Cheshire: not a partnership bc only Fenwick was liable, Cheshire did not control day-to-day, no representation to 3rd parties, no initial contribution (no control)
