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Business Associations
West Virginia University School of Law
Cummings, Andre Douglas Pond

Business Organization
Professor Cummings
Spring 2008
 
 
AGENCY
 
Restatement 2nd of Agency § 1:
Manifestation of consent by one person to another that the other shall act on his behalf and subject to his control and consent by the other so to act.
 
Gorton v. Doty [coach transport football players in teacher’s car] Implies principal liable for torts of agent when agent is acting with the scope of the relationship
 
Jenson Farms v. Cargill [major grain co. exercised too much control over smaller co.] A creditor who assumes control of his debtor’s business may become liable as a principal for the acts of the debtor in connection with the business.
 
5 categories of agency authority
a. actual express authority
b. actual implied authority
c. apparent authority
d.  ratification
e. inherent agency power
 
ACTUAL-EXPRESS AUTHORITY
Agent has express authority in that the principal has directly instructed agent to so act and agent acts according to that instruction.
 
ACTUAL-IMPLIED AUTHORITY
 
Restatement 2nd § 26:
Conduct by the principal that can be reasonably interpreted by the agent to believe that principal desired him to act on the principal’s account
 
Mill Street Church v. Hogan [hired brother to help paint the church] If in order to carry out Principals explicit instructions Agent takes some other steps necessary to carry out those instructions, Principal is bound. Must be a necessary step.
 
Factors in considering implied authority
1. Prior or similar practice (most important)
2. Agent’s reasonable belief based on present or past conduct of the principal
3. Nature of the task or job
4. Must focus on the agent’s understanding of his authority
5. Specific conduct by the principal in the past permitting the agent to exercise similar power
 
APPARENT AUTHORITY
 
Restatement 2nd § 8:
Arises when principal holds out to a third party that an agent has the power to act.
 
Restatement 2nd § 159:
Principal can be liable for acts of agent even if principal forbids act
 
Three-Seventy Leasing v. Ampex [all communication about computers shall go through Kay] An agent has the apparent authority to do things, which are usual and proper to the conduct of the business, which he is employed to conduct
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INHERENT AGENCY POWER
 
Restatement 2nd § 8a:
Principal is bound by acts of agents usually made by such agents (within the scope of employment), even though the agent is forbidden and there has been no holding out between the principal and third party.
 
Watteau v. Fenwick [case of the dormant partner] An undisclosed principle that entrusts an agent with the management of his business is subject to liability to third persons with whom the agent enters into transactions usual in such business and on the principal’s account, although contrary to the directions of the principal.
Kidd v. Thomas Edison (1917) [recital tone case]  
Policy Reasons for apparent authority
1. Reliance in an agent
2. P will be

sonable surveillance and supervision an impostor falsely impersonates in the place of business an agent or servant of his.
 
Hoddeson v. Koos Bros. [frosted gray hair at the temples case] Where a party seeks to impose liability upon an alleged principal on a contract made by an alleged agent, the party must assume the obligation of proving the agency relationship.
 
Common accepted elements for estopple
1. Principal creates through intentional or negligent acts appearance of authority in the imposter
2. The victim changed their position in reliance of that authority.
 
–            Difference between apparent authority and estopple is the change of position.
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MASTER-SERVANT RELATIONSHIP
 
Restatement 2nd § 2
(1) A master is a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of service
 
(2) A servant is an agent employed by a master to perform service in his affairs who physical conduct in the performance of the service is controlled or is subject to the right to control by the master.