EO (Beny) Outline Fall 2008
Agency
1. Who is an agent?
1. A fiduciary relationship resulting from manifestation of consent from P to A that A shall act on P’s behalf and subject to control of P AND A consents to act as such
2. Can be explicit (written) or implicit (circumstantial evidence)
1. Gordon v. Doty: owner of car manifested consent that coach would act on her behalf by driving. Coach consented to act as such. Coach was subject to her control/command that only he could drive. Created a presumption that could have been rebutted if there was evidence that this was just a loan. Insurance=lowest cost
2. Cargill: Cargill had a very close relationship with W (financed all of operations, bought most of grain, lots of control over biz decisions). Circumstantial evidence shows a manifestation of consent that W would act on behalf and that W consented to do so. This was more than just creditor/debtor or buyer/supplier
1. with control comes responsibility. Reduces transaction costs on farmers of having to investigate the agent. Cargill is cheapest cost avoider (internalize social costs of its way of doing business)
3. Ways to avoid liability: give notice to 3rd parties, reduce amount of control, do not say/do things that would lead others to believe you would take responsibility
3. General agent: authorized to conduct series of transactions
4. Special agent: just a single transaction
5. Master/servant: master can control the physical conduct of the agent in performance of service
6. independent contractor: physical conduct in provision of service not subject to the principal’s control
2. Agency and K Law
1. When is P liable to T for K formed by A?
1. Agent is acting with authority, P is disclosed or partially disclosed, and K is made in proper form
1. actual authority: requires manifestation of consent from P to A (express or implied). Must be reasonably interpreted by A as manifestation of consent
2. apparent authority:manifestation of P that leads reasonable T to believe A had authority. Express (P tells T that A has authority: Lind). Implied (P holds A out as someone who normally has certain authority: 370). Does not matter if A actually had power or not.
3. Inherent:
2. Mill Street v. Hogan (implied actual authority): D hired Hogan to pain. Had allowed him to hire brother in past. Hogan needed help to do job, talked to an elder about it. Hired bro who got injured, and was still paid for the ½ hour. Hogan had implied actual authority to hire. He reasonably thought he could hire (nature of job/past actions). Also argue for apparent because it was reasonable for bro to believe too. Ratification by paying.
3. Lind v. Schenley (apparent authority): D held Kaufman out as having inherent authority to set compensation (told P to see Kaufman about duties and compensation). P reasonably relied on D’s representations to his detriment. Proof of inherent agency also shows apparent agency.
4. 370 v. Ampex (apparent authority): There was apparent authority for Kays (who worked for D) to accept P’s purchase offer. Document became offer to buy when signed by P. D held Kays out as having authority. As a salemen, it is reasonable for P to believe Kays had authority to bind D to sell. D did nothing to suggest otherwise and even enforced by certain acts.
5. Implied Apparent Auhority
1. A is a general sales manager at Macy’s and offers discount to T for slightly damaged pants? Enforceable? Yes. Reasonable.
2. A is general sales manager at Macy’s and offers pants for free. Enforceable? Not reasonable.
6. Policy rationale for apparent authority: control your employees. Shouldn’t allow P to misrepresent level of A’s authority
1. cheapest cost: cheaper for P to inform world about A’s authority than for every T to have to inquire
7. Authority v. Power
1. power is broader
2. inherent agency power: power that would normally/reasonably come with someone’s position
8. Watteau v. Fenwik (inherent agency power): Humble had business that he transferred to Fenwik, but he continued to run it under his name. Fenwik gave him authority to only buy certain things. Humble bought other stuff from P. Breached, P could recover from Fenwik. It was reasonable to believe Humble had authority to contract. D is undisclosed P. If there was no inherent authority, then undisclosed P would always get off.
1. Cheapest cost avoider, incentive to choose A carefully and monitor, prevent undisclosed P from setting up sham business
9. Inherent power is an equitable doctrine that works in cases such as Watteau when there would not be other grounds to hold D liable. There is no manifestation to A or T. When P is disclosed, apparent authority should yield same result.
10. Ratification: affirmance by a person of prior act which did not bind him but was done or professedly done on his account. Need knowledge of all material facts. Can be express or implied (if P does/says nothing)
11. Botticello: husband gave P option to purchase land at 85k thinking wife agreed. no ratification even though wife accepted payments. She thought it was nothing more than evidence of a lease and not payment for purchase of the land.
1. Paula owns mansion, Alan is her agent. Alan contracts to sell to Ted without authority. Burns down, P tries to ratify. Who wins’
1. Ted can avoid ratification (rest. 89) if there is a material change in circumstances before affirmation
12. Hoddeson v. Koos Bros (agency by estoppel): P got duped by some guy at furniture store that was not an employee. No express, implied, apparent or inherent authority. But estoppel. D has duty to protect invited customers from things like this. Transaction costs would be high if customers had to investigate every salesperson.
13. Agents liability on K?
1. If P disclosed, usually just P is liable. T knows he is contracting with P.
2. if partially disclosed or undisclosed, agent treated as thought a party to K (Salmon). T will either be relying on trustworthiness of A or believe he is contracting with A.
3. Agency and Tort Law
1. Vicarious Liability: Act of servant is the act of master where he acts with authority of master. Master not subject to liability for torts of IC (does this depend on agent v. non-agent IC?) or of servant outside scope of employment.
1. Agent ind
of loyalty to P. He should have informed P of these opportunities so that they could make decisions.
5. Town & Country v. Newberry: D’s were formally employed in P’s housecleaning business. They started their own and solicited P’s clients. Breach of loyalty. Court said D’s could not compete in this manner. P had gone through trouble to develop customer base. This would be free riding. It would be OK if D had advertised and these customers came on their own will or if they informed customers they were leaving and customers desired to keep them as their cleaner or if customers advertised that they wanted to hire cleaners. Allowing D’s to take customers in such a way would discourage P from having this business.
Partnerships
1. What is a p-ship and who are the partners?
1. Association of 2 or more to carry on business for profit. Most states follow UPA, and parties can contract around certain default rules such as profit sharing/management. Some parts cannot be contracted around (fiduciary duties most likely)
2. Partners have unlimited liability. Not just limited to their investment.
3. Fenwick v. Unemployment Comp Commission: Person in question was an employee and not a partner. Fact that she shared in profits or their agreement was called a p-ship agreement was not dispositive. Court considered Fenwick bore risk of loss, supplied all capital, made all decisions. Test is totality of circumstances. Profit sharing makes an assumption of p-ship, but if just means of compensation, then not dispositive.
4. Martin v. Peyton: Court found D’s were lenders not partners. Although they possessed some control, it was a means of protection for their loan. They had no day to day control or right to bind the borrower/firm in K. Presumption of a p-ship due to profit sharing is rebutted if it is structured as an interest payment.
5. Young v. Jones (p-ship by estoppel): PW-Bahamas issued a crappy audit report on a company that had falsified a financial statement. P invested in the company and got screwed. P tried suing PW-US saying they were partners in fact or by estoppel. Court said no argument that they were actual partners. Also, no evidence that P relied on the appearance of a p-ship between the two.
1. UPA 16(1):
1. representation to 3rd party
2. consent by alleged partner
3. reliance by 3rd party
4. 3rd party extends credit to p-ship on faith of the representation
2. Summary of Factors Relevant to P-ship existence:
1. right to share profits
2. obligation to share loss
