Select Page

Business Associations/Corporations
University of Mississippi School of Law
Bullard, Mercer E.

1) Agency –
a) The fiduciary relationship that results when
i) T the PRINCIPAL CONSENTS that someone 2) act for him as his agent, subject to his CONTROL, and 3) the AGENT CONSENTS to so act. The principal is responsible for the acts of the agent where the agent is acting within the scope of the agent’s authority. Once consent has been established, how does fact pattern suggest control?
b) Test Approach: Argue both Actual & Apparent Authority on both sides
i) Actual Authority p.16
(1) Cargill, Inc.: p. 12 Actual Authority Case. Cargill, Inc. financed Warren Seed, Inc. to sell grain to farmers. Warren Seed defaulted on its Ks and the farmers sued Cargill, claiming that Cargill and Warren had surpassed the basic debtor/creditor relationship and that Warren had become Cargill’s agent. Held- Agency requirements met.
(2) Actual Authority Factors – Agent/Principal or just a Debtor/Creditor?
(a) Principal’s Consent to Delegate Decision-making Authority
(i) Directing the “agent” to implement recommendations
(ii) Determination the “agent needs “strong paternal guidance”
(b) *****Principal’s Control*****
(i) day to day interference – checks and audits, constant recommendations and criticisms regarding finances, salaries, and inventory,
(ii) veto power over mortgage entry, stock purchases, dividend payments
(iii) financing of all operations
(iv) power to discontinue financing
(v) providing forms for the “agent” with the principal’s letterhead
(c) Agent’s Consent to above
ii) Apparent Authority –
(1) Policy: to allow 3rd parties to rely on “reasonable perceptions of agency” without having to investigate the validity of the agency before every transaction
(2) Butler v. McDonald’s Corp: p 22 Apparent Authority Case. Kid cut his hand when a glass door shattered at a McDonald’s leased under a franchise agreement to Mr. Cooper. The parents sued McDonald’s claiming that Mr. Cooper 1) had held himself out as McDonald’s agent and 2) P believed and relied on this. Held – Survived summary judgment. (Hoffnagle found that corp. intrusion only applies to uniformity and standards) contra (Miller holding that message sent to public creates link for agency).
(3) Apparent Authority Factors – Can a RP distinguish between corporate-owned and merely franchised?
(i) Franchiser’s “image of uniformity” led a RP to think that he or his employees were employees or agents of the D “principal”: national-corporate advertising; common signs and uniforms; common menus; common standards of maintenance, appearance, operation; national-corporate logos
(ii) P actually believed it
(iii) P relied to his detriment on “agents’” care and skill
2) Partnerships
a) 1) An EXPRESS OR IMPLIED K 2) between two or more persons to carry on as CO-OWNERS 3) a business FOR PROFIT. General partnerships may be created without a filing, limited partnerships cannot. Types of Problems: Has someone gotten sucked into a partnership without intending to be in one? OR Has someone been kicked back to a partnership because the corporate form was defective? Also, argue the creditor/debtor/partnership tension in light of limited liability policy.
b) Default Rules (p44-46) These rules may be overridden by a partnership agreement:
i) J&S Liability
ii) Profit Split regardless of Investment
iii) Equal voting Rights
c) Factors in Finding a General Partnership where Denied – * Statements that no partnership is intended not being conclusive, the court will consider:
i) Written K Provisions – Provisions Properly Inserted to Protect Lenders (focus on the re-payment of the loan) or Provisions Contemplating a Controlling interest in a Business for Profit (focus on making money)?
(1) Implying an close partnership association with the business: power to initiate transactions, power to bind the other like a partner, option to

his own venture. If partnership has gone bad, find out why and see if it is fixable, then can offer a deal, if they don’t accept then it is dissolved.
e) Binding Authority – A partner is an agent of the partnership and has the authority to bind the partnership and copartners when acting in the ordinary course of business. Partners have equal rights in the management of the partnership business and disagreements are to be settled by a majority vote. See p 36
i) Dooley: p. 36 Partner Action Deemed Outside the Ordinary Course of Business. When one of two partners became unable to work, he decided to hire an employee to replace him over the other partner’s objections and then charged the dissenting partner with the costs incurred as a result of his unilateral decision. The dissenting partner refused to pay. Held – Dissenting partner not liable b/c he continuously objected and the expense was incurred for the benefit of only one partner
ii) Stroud: p 38 Partner Action (buying bread) Deemed Inside the Ordinary Course of Business. One partner of Stroud Food Center told a bread maker (3rd party) not to sell bread to his partner anymore. His partner entered into a K to buy the bread anyway. The dissenting partner refused to pay the 3rd party. Held – What either party does with a third party is binding on the partnership when acting in the ordinary course of business
f) Limited Partnership
i) Essential Characteristics
(1) Created by statute
(2) Triggered by a written filing
One or more general partners with unlimited liability