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Business Organizations
West Virginia University School of Law
Amerson, Jena Martin


Business Organization

Fall 2010

– Agency law – the law that binds a principal to the activities of a second party agent who has been given the authority to act on the principal’s behalf.

o What we are studying is when the principal is bound by something the agent did.

§ Especially if the principal denies giving permission.

§ Pretend we have a triangle –

· Agent, Principal, and a third-party.

· Principal at the top. Agent receiving them. Third party – usually has been hurt somehow by the agent.

o Restatement (Second) – look at your book dumbass!!!

§ Learned individuals go through all of the jurisdictions in the country and codify the prevailing rules throughout the country. It is a common law codification of agency rules or principles.

– Agency –

o Actual –

o Implied –

o Apparent –

o Inherent –

Chapter 1 – Agency

Section 1. Who is an agent?

– Our first two cases define what an agency relationship is.

– Gorton v. Doty, Idaho 1937 –

o The car accident case where the woman let the coach take her car to a football game because the team needed one more car to transport people.

o The coach subsequently got into an accident and the question was raised as to who was responsible for the resulting injuries.

o The issue – Was the coach, Russell Garst, the agent of the appellant while and in driving her car from Soda Springs to Paris, and in returning to the point where the accident occurred.

o The court answers yes.

o Her fatal verbal mistake – “so long as you drive it”

o $5,000 verdict.

§ Agency indicates a relation which exists where one person acts for another. It has these three principal forms:

· 1. the relation of principal and agent.

· 2. the relation of master and servant; and,

· 3. the relation of employer or proprietor and independent contractor.

o “Agency” – is the relationship 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 so to act.

o Test – Agency – 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.

§ The person she designated, the coach, was the only one to drive her car.

§ A contract is not necessary for an agency

o Principal – Doty

§ Agent – The coach

· Third party – the father of the son who died.

o AKA – our triangle.

o Between Doty and the head coach – this would be implied or actual agency.

§ Was there a manifestation of consent by the agent subject to the principal’s control?

§ The majority said yes.

· In other words, she gave him the power to act on her behalf.

o There are some economic principles at work here –

§ What parties can bear the costs the best?

§ The courts will look for a finding where they can put the ruling against those who can provide the necessary compensation. Use the law to get to the best economic outcome.

o How would, if Ms. Doty wanted to let the team continue using her car, avoid this agency principle?

§ Release? But how is a release interpreted under agency law?

· Courts will typically ignore written agreements and rely on the activities of the parties.

· So you can get bit anyway.

· If they are acting in an agency relationship, the court will find it.

§ How about – use it as you wish – no conditions.

§ What is important – expressly stating someone is not your agent is of no consequence.

§ But then again, the best advice you could give – don’t loan your car or make sure you insurance is good.

o Between the principal and agent – there has to be some agreement and consent where that relationship is entered into.

– A. Gay Jenson Farms co. v. Cargill, Inc. –

o Plaintiffs, 86 individual, partnership or corporate farmers, brought this action against defendant Cargill, Inc. and defendant Warren Grain and Seed Co. to reco

discreet manners – see Footnote 6 –

§ Recommending consultants

o Can’t –

§ Have a veto power over important decisions

§ Coerce the debtor into putting certain persons into management positions – aka – putting your own people into place

§ Assuring creditors that they will be paid.

Section 2. Liability of Principal to Third Parties in Contract

A. Authority

– Ok, so sometimes the agency relationship is obvious and we come to authority.

o Authority –

§ Acutal –

· 1. Express – doing exactly as you are told to do.

· 2. Implied – the authority the principal intends the agent to have to get the express direction completed. Hines Ward, the hummer, the restaurant, and the flight.

§ Apparent – not actual authority – but the principal holds the agent out to the innocent third party somehow.

§ Inherent – the agent is not acting within his authority, although the innocent third party may believe the agent is. Furthermore, is this action within the scope of the agent’s duties, even though he was told or not allowed to do them.

– Mill Street Church of Christ v. Hogan

o Implied getting into apparent authority.

o Actual express and actual implied is between the principal and agent.

§ What did the principle say to the agent?

o Apparent – how the principal acted with the third party.

o Bill Hogan – worked on the Church – had implied authority in this case.

o Sam Hogan – Bill’s brother – got hurt painting the Church after Bill asked him for help in painting the church.

The question is did Bill have the authority to hire his brother to work for the