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

Business Associations


Spring 2011


***For agency Qs first look to who is Principal, who is Agent, who is 3P, then look to who is complaining***

A. Definition/Creation (Restatement 2nd of Agency §1(1))

1. Fiduciary relationship that results from:

a. Manifestation of consent

b. By one person (principal) to another (agent)

c. That the other shall act

i. On his behalf

(A) Not simply based on whether proceeds are being transferred; must actually be on behalf

ii. Subject to his control

(A) Tricky; may not take a high level of control to establish agency relationship

d. Consent by the other so to act

2. Relation which exists where one person acts for another—regardless of intent/what parties said

3. Where one undertakes to transact some business or manage some affair for another by authority and on account of the latter, the relationship of principal and agent arises

4. Facts control

B. Elements

1. Manifestation of Consent of P to A

2. To relationship in which A acts on behalf of P

3. Subject to P’s control

4. Manifestation of consent of A to P

C. Actors

1. Principal

a. Responsible for the acts of his or her agent

b. Ownership alone establishes presumption of agency

2. Agent

D. Not Required

1. Matter of business

2. K or promise to act

a. No consideration required; simply agreeing to do the act on behalf is sufficient

3. Compensation

4. Intent to create legal relationshipàIntent not required

5. Labeling relationship as agency relationship

E. Scope

1. Parties may have multiple relationshipsàhow far does the Agency relationship extend?

F. Cases

1. Gorton v. Doty

a. Facts: D loaned car to coach to use for transporting students to football game in another town; accident occurred; Gorton sued D as principal for whom coach acted as agent

b. Issue: Whether D and coach had agency relationship such that D was vicariously for accident as principal for whom coach was acting as agent

i. Vicarious Liability: “The act of a servant is the act of his master, where he acts by authority of the master.” Jones v. Hart (1698)

Principal: Doty

3P: Gorton Agent: Coach

c. Majority focus

i. ControlàD not only handed over keys, but put conditions on useàdoes this constitute control?

d. Application:

i. Manifestation of consent?

(A) Giving keys and car?

ii. That coach will act on D’s behalf?

(A) Was driving D’s car acting on her behalf?

iii. Subject to D’s control?

(A) Conditional use: as long as coach drove?

iv. Consent by coach to act on D’s behalf?

(A) Taking keys and car and driving as told?

e. Holding: D = principal, so liable for accident

2. Gay Jenson Farms v. Cargill

a. Facts: Farmers suing Cargill; Farmers sell grain to Warren (local middle man), who sells to Cargill; Warren takes grain from farmers on credit and owes farmers; Cargill advancing money/giving credit to Warren

Principal: Cargill

3rd Party: Gay Jensen Agent: Warren

b. Issue: Whether agency relationship existed b/w Warren and Cargill such that Cargill is liable for Warren’s actions

i. Main issue is control

(A) Cargill argues that they simply managed finances

(B) Argument for agency is that Cargill was making financial decisions on Warren’s behalf and had financial interest in Warren’s welfare

(C) Evidence of control: 1-9, pp. 10-11

ii. Also at issue is whether Cargill is acting on behalf of Warren

c. R 2nd of Agency §14

i. A creditor who assumes control of his debtor’s business may become l


(C) Rules

(1) Implied authority = actual authority circumstantially proven which the principal actually intended the agent to possess and includes such powers as are practically necessary to carry out the duties actually delegated

(2) Apparent authority is not actual authority but is authority the agent is held out by the principal as possessing. It is a matter of appearances on which 3rd parties come to rely

(D) Holding: B. Hogan was an Agent of the Church b/c had implied actual authority b/c of prior dealings & the fact that church didn’t tell B he couldn’t hire S; plus S had reason to rely on B’s prior deals where church would let S help & pay him for his work

ii. Dweck v. Nasser

(A) Facts: P was formerly president, CEO & member of board of directors of Kids Int’l, Inc; D was chairman of board of directors. Dispute over whether D was operating competing businesses out of Kids’ offices, which resulted in Nasser removing P and hiring an incompetent nephew. P & D discussed settlement possibilities, but due to an impass, P filed complaint. P’s attorney reached out to Shiboleth, who was D’s primary attorney for over 20 years, and did not confer with D’s attorney of record. D instructed Shiboleth to get the settlement done, but refused to agree to settlement once Shiboleth settled w/o getting D’s approval.

(B) Issue: Whether Shiboleth was D’s agent such that he had authority to settle the dispute without having to obtain D’s approval

(1) Whether the power was simply to negotiate or to settle the matter altogether?