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

Ch. 1 — AGENCY
I.      Who is an Agent? – One who acts for another; A P is liable for the actions of it’s A.
1.      Gorton v. Doty (Car Loan): A P/R relationship arises where one undertakes to transact some business or manage some affair on account of the latter. 
a.       Rest 2d §1: “Agency is the fiduciary relation which results from the 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 to so act.”
b.      Three Elements:
1.      Agreement/Consent:
a.       Manifestation by P that A will act on P’s behalf;
b.      A must consent to be so bound
c.       No K needed; can be implied thru conduct circumstantially
2.      Control:
a.       A is Subject to P’s Control;
b.      Interference w/ A’s affairs
3.      Action “on behalf of” Principal.
c.       Focus on the actions of the parties;
d.      Advise to avoid imposing any requirements like “so long as you drive you can have the car”; and Advise to get insurance.
2.      Cargill (Grain Elevator): A creditor who assumes “control” of debtor’s business “may” be liable as P for actions of the Debtor in connection w/ the business. Rest. Agency 2d § 14.
a.       Advice to Cargill: don’t tell 3rd pty Pl.’s “we got you” and later disclaim; don’t exercise absolute control over finances.
b.      Focus on the “Unique fabric of the relationship” and the “totality of the circumstances”
c.       Cargill tried to argue C/D relationship which would be ok
d.      To maintain the C/D relationship safely:
1.      Insist on info on Financial reports
2.      Provide counseling on discrete matters
3.      Don’t write on paychecks (signatures)
4.      Recommend consultants
e.       Crossing the Line from C/D into P/A and thus liable:
1.      Veto power over important decisions
2.      Coercing D into putting certain people in certain positions
3.      Assuring Creditors that they’ll get paid. 
3.      Policy: Who should bear/is best suited to bear the consequences (Big Co. or the little guy?)
II.      Liability of Principal to 3rd parties in CONTRACT (Who should bear the cost?)
1.      Mill Street Church of Christ (Painter hires Brother): Where implied authority is necessary to implement A’s Express Authority, a person possess the implied authority necessary to perform the express duties as an Agent [like hiring your brother painter to do a two man job where you’d hired your brother painter in the past].
a.       Focus on A’s understanding of his authority
b.      Determine if A Reasonalby believed b/c of past or present conduct that P meant for him to act in a certain way
c.       What’s the

     3 elements:
a.       Manifestation from P to 3rd pty (direct or indirect)
b.      Reasonable belief: Was it Usual and Customary for this K
c.       Actual Belief
d.      Inherent Authority: Power of A to bind P, emanating solely from the agency relationship, solely for the protection of persons dealing w/ A’s
1.      An equitable doctrine
3.      370 Leasing (Salesperson w/ Expensive Computers): An A [salesperson] binds his P [Emp’r] to a sale if he agrees to that sale in a manner that would lead a reasonably prudent buyer [3rd pty] to believe a sale had been consummated.
a.       Policy: In big picture, economy will be hindered if cant rely on word of co.’s salespeople
b.      Held: B/c Co. issued intra-office memo and b/c co. communicated w/ Pl. thru A informing Pl when equipment would be installed, P created the apparent authority of A to bind P.
c.       If counsel to Ampex advise:
1.      Train sales people effectively
2.      Put clause in K that it’s not binding until signed person with authority
Beware of the unequal bargaining power k’s