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Business Associations
University of South Carolina School of Law
Means, Benjamin

 
 
 
 
AGENCIES
 
Creation
 
Agency Defined – the fiduciary relation which results from the manifestation of consent by one person (Principal) to another (Agent) that the other shall act on his/her behalf and subject to his/her control, and consent by the (agent) to so act. – Rest. 2nd
 
So Must Have:
1)    P’s manifestation of consent to A
2)    To a relationship in which A is to act on behalf of P
3)    Subject to P’s control
4)    A’s manifestation of consent to P
 
–          Doesn’t matter if P tells A he is not his A.
 
Gorton v. Doty:
Facts: Doty loaned car to football coach to transport members of the team to a game; traffic accident; injured 3P sued Doty, arguing that coach was Doty’s A and she was liable as P
Rule – Where one undertakes to transact some business or manage some affair for another by authority and on account of the latter, the relationship of P and A arises.
teacher “designated” the coach to drive her care = condition precedent, control
Holding: agency existed.
 
Gay Jenson Farms v. Cargill:
Facts: Cargill (D), in addition to loaning funds to Warren Grain & Seed (D), also took control of the day-to-day operations of Warren.
Rule – A creditor who assumes control of his debtor’s business may be held liable as P for the acts of the debtor in connection w/ the business.
Holding: agency existed.
 
 
 
 
 
 
Liability of P to 3P in K
 
Types of Authority:
 
Actual:
–          power expressly granted, by either oral or written statements, to an A to act on behalf of P in order to effectuate the P’s objective; e.g. “sell my car.”
Implied:
–     actual authority circumstantially proven which the P actually intended the A to possess and includes such powers as are practically necessary to carry out the duties actually designate; e.g. place ads, collect money
–          Mill Street Church v. Hogan:
o   Facts: Church hired Bill Hogan to paint building; Bill hired brother to help; brother fell on job; P = Church, A = Bill Hogan, 3P = brother
o   Rule – A person possesses implied authority as A to hire another worker where such implied authority is necessary to implement the A’s express authority
o   A’s belief must be reasonable; some factors to look at:
§ A’s understanding of the authority
§ Present or past conduct by P that indicates P wants A to act a certain way?
§ Nature of the task
§ Existence of prior similar practices?
o   Holding: Church liable. 
Apparent:
–          Manifestations from P to 3P; e.g. P says to 3P, “A has authority to sell my car.”
–          Even if A contradicts instructions from P, 3P can still rely on apparent authority of A, and P is liable.
–          Flows from the conduct of the P and A.
–          Lind v. Schenley Indust.:
o   Facts: Lind (P) accepted a management job w/ Schenley (D) based on the assertion of a metropolitan sales manager that Lind would receive bonus commission on sales.
o   Rule – An A can bind a P despite a lack of authority to do so if it would seem to a reasonable person that the A possessed such authority.
o   Holding: sufficient evidence to find apparent authority.
Inherent:
–          authority rising solely from the designation by P of a kind of agent who ordinarily possess certain powers
–          3P often doesn’t know there is a P
–          relates more to the position of the A w/ respect to the P.
–          Watteau v. Fenwick:
o   Facts: Fenwick (D) had authorized Humble as purchasing A, but only for specific items, an authority Humble then exceeded.
o   Rule – when one holds out another as an A, that A can bind the P on matters normally incident to such agency, even if he was not authorized for a particular type of transaction.
o   Rule – “An undisclosed P who entrusts an A w/ the management of his business is subject to liability to 3P w/ whom the A enters into transactions usual in such business and on the P’s account, although contrary to the directions of the P.” – Rest. 2nd
o   Holding: Fenwick liable.
Ratification:
–          affirmance by P of A’s unauthorized act; retroactive agreement
–          Requirements:
o   P has to have knowledge of the material facts, i.e. agreement
o   P has to have intent to ratify
o   P must accept benefits
o   Can’t prejudice 3P
–          Botticello v. Stefanovicz:
o   Facts: Mary and Walter Stefanovicz (D) were tenants in common of a farm; Botticello (P) wanted to purchase the farm; Boticello and Walter agreed upon a price of 85k for a lease w/ an option to purchase; Mary and Walter subsequently refused to honor the option agreement.
o   Rule – Marital status cannot in and of itself prove an agency relationship
o   Holding: no agency relationship and no ratification → W’s acquiescence to improvements by Botticello is not sufficient; no intent to ratify and no knowledge of all material circumstances
Estoppel:
–          binds P where there appears to be an agency
–          3 elements:
o   an act or omission on the part of the P that creates an appearance of authority
o   3P reasonably relies on appearance of authority in good faith
o   3P must detrimentally relly
–          Hoddeson v. Koos Bros.
o   Facts: When Mrs. Hoddeson (P), intending to purchase furniture, gave cash to a man on the sales floor of Koos Bros. furniture store (D) who held himself out to be a salesperson, but later discovered he was not employed by the store but was a con artist who kept the mone

obviously had some control over the operation of Barone’s business, Barone retained full control over his operations, including what inventory to stock.
 
Murphy v. Holiday Inns:
–          Facts: Murphy (P) sought to hold Holiday Inns, Inc. (D) liable when she slipped and fell at a motel operated by a franchisee.
–          Rule – If a franchise K so regulates the activities of a franchisee as to vest the franchisor w/ control w/in the definition of agency, a P-A relationship arises even if the parties expressly deny it.
–          Holding: franchisee exercised control over the details of its operation so no agency relationship.
 
 
Tort Liability and Apparent Agency:
 
Miller v. McDonald’s Corp.:
–          Facts: Miller (P) argued that McDonald’s Corp. (D) was liable for injuries she sustained while eating at a McDonald’s franchise owned by 3K Restaurants.
–          Rule – For purposes of determining tort liability, a jury may find that an agency relationship exists b/w a franchisor and a franchisee where the franchisor retains significant control over the daily operations of the franchisee’s business and insists on uniformity of appearance and standards designed to cause the public to think that the franchise is part of the franchisor’s business.
–          Holding: Here, a jury could find that McDonald’s retained sufficient control over 3K’s daily operations, that an actual agency relationship existed, and that McDonald’s had the right to control 3K in the precise part of its business that allegedly resulted in Miller’s injuries; there is also an issue of apparent agency b/c of the centrally imposed uniformity (need reliance)
 
Scope of Employment
 
–          Rest. 2nd, Conduct of a servant is w/in the scope of employment if:
o   It is of the kind he is employed to perform (conduct incidental to task generally satisfies this element)
o   It occurs substantially w/in the authorized time and space limits (use of employer’s materials?)
o   It is actuated, at least in part, by a purpose to serve the master, and
o   If force is intentionally used by the servant against another, the use of force is not unexpectable by the master.