Business Org
Key
P: Principal
A: Agent
T/TP: Third Party
For agency analysis
● First, ask? For the purpose of [ specific consequence], is X an agent of Y?
○ 3 ways to establish agency are
■ Agreement
■ Ratification- agent does something unauthorized and P chooses to be
bound after the fact
■ Estoppel- means prohibited. When you are prohibited from denying the
existence of agency.
●
●
I.
○ Does agency relationship satisfy §1.01
2nd If applicable: Master servant relationship - Is there a master servant relationship
3rd if a tort occurs: Is the tort within the scope of that relationship?
Agency
A. Who is an Agent?
1. Who is an Agent?
a) Res. 3, §1.01
(1) Agency: is the fiduciary relationship that results from the
manifestation of consent by one person (a principal) to
another person (agent) that the agent shall act on the
principal’s behalf and subject to the principal’s control.
(a) When an agency relationship is formed, the
principal generally becomes legally liable for the
agent’s acts as though the principal had performed
the act himself. So P would generally be liable
when a 3rd party is harmed by the agent’s acts.
(b) Formation of agency is done through mutual
consent (formal or informal, expressed or implied
or in the context of industry)
(c) “Manifestation” §1.03: a person manifests assent
or intention through written or spoken words or
other conduct.
(d) §1.02 an agency relationship arises only when the
elements of §1.01 are established. It is not
controlling that
(e)
Scope of Agent’s actions:
a) An agent acting in the scope of his/her authority binds only the
principal
b) An agent acting outside the scope of her
authority binds only him/herself
3. The agency relationship: Common Issue
a) Does an agency relationship exist between P &
A?
b) If so, What consequences follow P from
interaction between A and T?
4. Approach for PAT Analysis:
a) Figure out the players, who is P, A, and TP are
b) Threshold question: Is there an agency
relationship between P and A?
2.
(1) → Then we examine A’s dealing with TP to see if A is
acting within the scope of the agency to see what
consequences follow to P from the interaction between A
and TP-- this determine legal liability of P and TP (and vice
-versa)
c)
3 ways to create an agency:
(1) By agreement
(2) Ratification: §82 and §4.01
(3) Estoppel: § 8B and §2.05
d) World of agency splits into two major worlds
(1) Master/ servant “ aka” employer/ employee
(2) Independent contractor
e) An agency agreement does NOT need to be in writing
UNLESS the kind of K the A is going to sign hits the statute
of frauds, A agreement needs to be in writing
(1) Ex. If Claire goes to a realestate to sign a deed→ this
agency btw P&A needs a written agreement bc the deed
requires a sig
(2) If the agency agreement is not in writing, equal dignity
allows P to wisely out the K A was sent to sign. P is not
bound to the deed signed by A on P’s behalf
(3) Restatement 3d § 3.02: If the law requires a writing or
record signed by the principal to evidence an agent’s
authority to bind a principal to a contract or other
transaction.
(a) Exception to Equal Dignity Rule: Estoppel:
(i)
(ii)
f)
●
The court can estop P from claiming the
equal dignity rule to avoid liability incurred
by his agent if a TP has detrimentally relied
on P’s oral manifestation of authority.
For this exception, to happen, two things
must be true:
(a) TP must be aware that P oral
manifested authority to A
(b) And TP changed their position on
that oral manifestation
Gorton v. Doty
(1) F: Pre-mandatory automobile insurance case. Involved
person loaning a car to another on condition that only that
other can drive it.
(a) Players
(i)
Doty: owner of the car (P)
(ii)
Coach: given permission to drive Doty’s
car (A)
(iii)
Gorton: son who got injured while” A” was
driving the car (TP)
(2) I: Was the driver the agent of the car’s owner?
(3) H: Yes, for there to be a principal and agent relationship
here, it is enough when the owner of a car authorizes an
individual to drive that car for a specific purpose, the driver
acts as an agent for the owner. No compensation or
business association between the parties is necessary to
create a principal-agent relationship.
(4) R: Coach acted as an agent for 𝛥 because when 𝛥
volunteered the use of her car, she provided the
expressed condition that the coach drive it. In doing so,
𝛥consented to the coach act on her behalf in driving the
car to and from the game. Further, the coach consented
to act as an agent by his act of driving the car.
Also, in Willi v. Schaefer Hitchcock Co., 25 P. 2d 167 (1933), this court
held that ownership of a car is enough to create a presumption that an
individual who drives that car acts as an agent for the owner.
g) Gay Jenson farmers Co v. Cargill, Inc
(1) F: Case arose out of financial collapse of Warren Seed &
Grain Co, a local grain elevator. C, the defendant, was a
worldwide grain dealer that had loaned money and
exercised significant influence over W. Plaintiffs want W
(now insolvent) to be C’s agent so that they can recover
from C.
(2) I: whether the agreement between Cargrill and Warren
created an agency relationship when it loaned money and
made recommendations towards the Warren’s operation.
(3) H: sufficient evidence for jury to find an agency relationship
exists, the agreement between Cargrill and Warren is an
agency relationship.
(4) R: The elements of agency are present
(a) Consent: was manifested when it directed
Warren to implement its recommendations .
(b) Acting on behalf:Warren acted on Cargrill’s behalf
by procuring grain for Cargrill as part of its normal
operation, which was financed by Cargril
(c) Subjected to control: e facto control was
established when Cargrill interfered with Warren’s
internal affairs
(i)
The more money (3.6 million), more access
(ii)
W couldnt declare a dividend
(d) Not a buyer/ seller relationship bc for this
relationship the Rest of agency requires that the
supplier (warren) has an independent business
before it can before it can be concluded that it is not
an agent. Here , all of Warren's operations were
financed by cargril. Thus the relationship that exists
is more than merely a buyer/seller one.
B. Liability of the Principal to third parties in Contract
1.
The Agent’s Authority
a) Once agency relationship is established, there are various sorts of
authority given to the agent, and rules for attributing A’s action to
P:
b) Differences btw categories of authority are complex, subble, and
overlapping. Court does not always get it right
(1) Question: What legal consequences of an agent’s acts
depend on the type of authority the agent possessed?
c) Types of Authority:
(1) Actual authority - comes in two forms (actual express and
actual implied). Both are created through
“manifestations” from P to A. basically P makes A an
actual A, wants A to act on P’s behalf, intends that A acts
in a certain way
(a) § 1.03 Manifestation: A person manifests assent
or intention through written or spoken words or
other conduct.
(b) §7; §26;§35;§2.01; §2.02; §3.01;
(i)
Actual Expressed Authority (AEA):
Requires a “manifestation of consent” from
the principal to the agent. Verbally or
through a writing granting agency.
(a) Authority that P intentionally confers
on A
(b) P tells A to do X, and A does X
(c) P is bound on contracts A makes
acting within P’s grant of authority, if
made in proper form and with the
understanding that P is a party.
§7:
§26;
§35: Unless otherwise agreed, authority to conduct a
transaction includes authority to do acts which are
incidental to it, usually accompany it, or are
reasonably necessary to accomplish it.
§2.01(1): An agent acts with actual authority when, at
the time of taking action that has legal consequences for
the principal, the agent reasonably believes, in
accordance with the principal’s manifestations to the
agent, that the principal wishes the agent so to act
§2.02: scope of actual authority: (1) An agent has
actual authority to take action designed
§3.01: Actual authority, as defined in § 2.01, is created
by a principal’s manifestation to an agent that, as
reasonably understood by the agent, expresses the
principal’s assent that the agent take action on the
principal’s behalf.
(ii)
Actual Implied Authority(AIA): carefully
places the incentive to draft good
instructions on the right party.
(a) If P wants A to do X, but to do it only
in a certain idiosyncratic manner,
AIA gives it the incentive to draft its
authorization carefully.
(b) AIA basically says, “if you dont
bother telling your agent how to
carry out your instructions, we’ll let
him or her carry out in the usual
manner--and you’ll be bound by the
consequences.
(c) Policy behind AIA:
(i)
Res. §35: Unless otherwise
agreed, authority to conduct
a transaction includes
authority to do acts which are
incidental to it, usually
accompany it, or are
reasonably necessary to
accomplish it.
(ii)
Res. §2.01(1): An agent acts
with actual authority when, at
the time of taking action
that has legal consequences
for the principal, the agent
reasonably believes, in
accordance with the
principal’s manifestations to
the agent, that the principal
wishes the agent so to act
(d) What is considered
“reasonable”?
(i)
Res. §2.02: (2) An agent’s
interpretation of the
principal’s manifestation is
reasonable if it reflects any
meaning known by the agent
to be ascribed by the
principal and, in the absence
of any meaning known to the
agent, as a reasonable
person in the agent’s position
would interpret the
manifestation in light of the
context, including
circumstances of which the
agent has notice and the
agent’s fiduciary duty to the
principal
(ii)
(3) An agent’s
understanding of a principal’s
objectives is reasonable if
it accords with the principal’s
manifestation and the
inference that a reasonable
person in the agent’s position
would draw from the
circumstances creating the
agency.
(e) Mill Street Church of Christ v.
Hogan
(2) Apparent authority (a) § 8; §27; § 159;§ 2.03
(b)
2. Ratification and Estoppel
3. Agent’s liability on the contract
C. Liability of Principal to third Parties in Tort
1. Servant v. Independent Contractor
a) Respondeat Superior
2. Tort Liability of Principal to Third Part in Tort
3. Scope of Employment
4. Fiduciary Obligation of Agents
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
Partnerships
Corporations
Limited LiabilityCompany(LLC)
Federal securities Laws
Rule 10b -5
Insider Trading
Short Swing Profits;
Proxy voting and proxy fights
Shareholders , Proposals/inspection rights