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Agency and Partnerships
University of Mississippi School of Law
Green, Christopher

I. Binding Principals to Third Parties in K and through information
a. Types of Authority – A must have at least one type to bind P in contract
i. Actual authority (can be implied based on facts)
1. An objective manifestation by the P
2. Followed by the A’s reasonable interpretation of that manifestation (objective)
3. Which leads the A to believe that it is authorized to act for P
ii. Apparent Authority (b/w Third Party and Principal)
1. An objective manifestation from “apparent principal”
2. Which somehow reaches a third party, and
3. Which causes the third party to reasonably believe that “apparent agent” is authorized to act for P
iii. Estoppel
1. Third party must change their position (rely) because of their belief that transaction was entered to by or for the “alleged principal”, and alleged principal must have
a. Intentionally or carelessly caused such belief OR
b. Knowing of such belief and that others might change their positions because of it, he did not take reasonable steps to notify them of the facts
iv. Inherent Agency Power – “catch-all” doctrine based on fairness –places loss on party that stood to benefit from the agency relationship (cost of doing business)
1. If the agent is a general agent (continuity of service) with actual authority to conduct certain transactions
a. The agent is acting in the interests of the P, and
b. The agent does an act usual or necessary with regard to the authorized transactions
2. Then the act binds the P regardless of whether the A had actual authority and even if the P expressly forbade the act.
b. Attribution Rule – When A has actual authority to receive notice, receipt of information is attributable to P.
c. Agent’s power to bind an Undisclosed Principal to a Third Party, contract is binding unless:
i. There has been an affirmative misrepresentation as to UP’s status; AND
ii. Either the UP or A had reason to know Third Party wouldn’t deal with P.
d. Bona Fides – person’s honesty and sincerity
e. Ratification
i. Preconditions
1. Agent must have purported, express or implied, to act on behalf of purported P
2. Purported agent must have acted w/o power or authority and estoppel must not apply
3. P must have existed at time of act and have had capacity to originally authorize act, and
4. At the time of the attempted ratification, the third party must not have indicated, to A or P, an intetion to withdraw from tranaction (must still be available to ratify)
ii. Affirmance – the act (or inaction of ratification) – purported principal affirms by either
1. Making a manifestation that, viewed objectively, indicates a choice to treat the unauthorized act as if it had been authorized
2. Engaging in conduct that is justifiable only if the purported P had made such a choice.
iii. All or nothing Rule – can’t ratify only part of a transaction
iv. Third party’s right of avoidance
1. Preclude ratification by giving notice of withdrawal before the P affirms
2. Changed circumstances – before ratification, circumstances change so materially that holding the third party liable to K would be unfair.
3. Conflicting Arrangements – third party can also avoid ratification if:
a. Learns that agent acted w/o authority
b. Relies on the apparent lack of authority, and
c. Makes substitute, conflicting arrangement or takes some other action which will cause prejudice to the third party if the original transaction is enforced.
f. Superior Agents, Subordinate Agents and Subagents
i. Superior agent – agent that has power to appoint, direct and discharge other agents of the principal
1. Example – CEO is superior agent (agent of Corp and appoints VPs which are subordinate agents)
2. If superior agent acts with actual auth, app auth, or inherent power, their manifestations are attributable to the P
3. Limited responsibility for misconduct of subordinate agent

4. If force is intentionally used by servant against another, the use of force is not unexpectable by master
ii. Factors to consider in determining if servant’s conduct is within SOE
1. Is act one commonly done by such servants;
2. Time, place, purpose of act
3. Previous relations b/w master and servant
4. Extent to which business of master is apportioned b/w diff servants;
5. Whether or not the act is outside the enterprise of master or, of within enterprise, has not been entrusted to any servant;
6. Whether master has reason to expect that such an act will be done;
7. Similarity in quality of the act done to authorized act;
8. Whether or not the instrumentality of the harm has been furnished by the master to the servant;
9. Extent of departure from normal method of accomplishing an authorized result; and
10. Whether the act is seriously criminal
iii. Act can be within SOE even if master has strictly forbidden the act
iv. Scope of Employment and a Servant’s Travels
1. Commuting – not normally within SOE
2. Special Errand – if servant undertakes at master’s request, even in going/coming to work, then within SOE
3. Necessary travel – when servant’s work involves travel and the master establishes a schedule that effectively, even indirectly, controls time and place of travel, the travel can be within SOE.
4. Tangential Acts – frolic and Detour
a. An act can be within SOE even though tangential to authorized work, as long as there’s some connection
When servant does something purely for own reasons – outside SOE