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B
USINESS
O
RGANIZATIONS
O
UTLINE
Hofstra Law, Professor Greenwood, Spring 2009
A
GENCY
L
AW
A
GENCY
 
I.Who is an Agent?
A.
Agency is the fiduciary relation which results fromi.Consent by the principle for the agent to act
ii.
Agent acting on behalf of the principle
(& both parties intend this)
iii.Understanding that the agent is subject to control by the principle.
a.Control only over the goal, not the means of accomplishing it (lawyers).B.There’s an asymmetrical fiduciary duty (agent has duty to principle, but not vice versa)C.An agency is inherently hierarchical - The principle controls (Courts will assume this fact)D.Formation & termination of an agency relationshipi.Unlike a contract (which is negotiated etc.) an agency agreement is created very easily. Once Aagrees to do something for P, and A is acting on P’s behalf & is subject to P’s control the agencyrelationship is created.a.
Gorton v. Doty
, 69 P.2d 136 (1937) – woman tells the football coach who needs to transportstudents to a game to use her car (but only he can drive it). She volunteered the use of her car,no compensation. Accident happens & suit against the woman, as the principle. Agencyrelationship existed here between woman & coach. Woman consented that coach act in her  behalf in driving her car by volunteering her car & her condition that only he drive it shows thecontrol she had.1.How you describe it makes the diff on whether or not it’s agency:(a)Gave permission – this is a loan, not agency(b)Directed - telling him what to do – this is agency.2.This is a little extreme b/c it almost looks like it was only a loan. But fact is that insurance iscovering the woman, and the boy injured has no insurance. So looks like court just wanted tocover the boy.3.Solution: if she had specified she is
loaning 
the car to him, then that would have settled it.
b.It is not essential that there be a contract between the principle and agent or that the agentpromise to act as such, nor is it essential to the relationship of principle and agent thatthey, or either, receive compensation.
ii.
Agency can be terminated at the will of either party (notion that we don’t like involuntaryservitude). Different from contract relationship which you cannot just breach & court willenforce.
1
 
E.
Creditor-debtor relationship vs. agent-principal relationshipi.A creditor who assumes control of his debtor's business may become liable as principal for theacts of the debtor in connection with the business
ii.
Gay Jenson Farms Co. v. Cargill, Inc .
,
309 N.W.2d 285 (1981) – Warren (W) is a local firmoperating as a grain storage facility & as a middle man between the grain farmers & the worldwidedealer, Cargill (C). W then insolvent; doesn’t pay farmers, and farmers sue C. W & C had anagreement where C finances W, C buys grain from W & C has right of first refusal on the grain.a.The court found an agency relationship was created here. Existence of an agency may be proved by circumstantial evidence which shows a course of dealing between the two parties.1.Consent by principle – C consented by directing W to implement certain procedures2.Agent acting on behalf of principle – W acted on C’s behalf in procuring grain for C, as partof its normal operation which were totally financed by C.3.Principle exercise control over agent - C had a lot of influence and control over W’s financialsituation.
b.An agreement may result in the creation of an agency even though parties didn’t call it anagency and did not intend the legal consequences of the relation to follow.
c.
Someone who contracts to acquire something from a 3rd person and convey it to anotheris an agent only if it is agreed that he is to act primarily for the benefit of the other.
d.Problem - banks giving out loans being subject to agency1.Difference for a bank is that the lender’s reason for financing is for the interest received. In
Cargill 
, the reason for the financing was to establish a source of market grain for its business& took control of the operation for this purpose.2.If you’re lending money to a borrower, you would probably take the steps Cargill did tomake sure operating properly. Any of the measures Cargill took would be appropriate, but the problem in
Cargill 
is that there is an extraordinary amount of control – too many of thesethings put together.II.
Agency Power to Bind - Liability of Principle to third parties in contract
A.
Actual Authority - principle gave the agent the authority explicitly; completely clear
B.
Implied Authority - Implied authority is actual authority circumstantially proven which theprincipal actually intended the agent to possess and includes such powers as are practicallynecessary to carry out the duties actually delegated.
i.To determine whether implied authority exists, it must be determined whether the agent reasonably believes because of present or past conduct of the principal that principal wishes him to act in acertain way or have certain authority.a.Sometimes may be necessary to implement express authority b.Prior similar conductii.Have authority because it’s something that normally goes along with the actual authority given.iii.
 Mill Street Church of Christ v. Hogan
, 785 S.W.2d 263 (1990) – Church has hired Bill to paint inthe past & has previously told Bill he can hire his brother Sam to help. Bill only uses Church’s tools& if he needs something goes to store & charges it to Church’s account. Church hires Bill again,needs help & goes to Church to ask for help. Church says to call Petty, but doesn’t tell Bill he musthire Petty, & told Bill that Petty’s hard to reach. Bill gets his brother Sam to help & Sam falls off aladder owned by the Church. Church pays Sam for hours worked. Sam wants workers comp, butonly employees get it.a.Bill is an agent of the Church (an employee – Church hires Bill & has control over Bill) b.Bill didn’t have actual authority to hire Sam, but had
implied authority
.1.
past conduct
- Bill had been allowed to hire Sam for previous work.2
 
2.
necessary to implement the express authority
- in order to finish the work, Bill
had 
to hirea helper.3.
agent reasonably believed he had the authority
- practice in the past; Bill never toldotherwise; Church even paid Sam for hours worked.C.
Apparent Authority – when a principle acts in such a manner as to give the impression to a thirdparty that the agent has certain powers which he may or may not actually possess. It is a matterof 
appearances
on which third parties come to rely.
i.3
rd
parties have the right to believe the agent has the authority it is reasonable to believe they have.ii.
 Lind v. Schenley Industries, Inc
.
, 278 F.2d 79 (1960) – Lind (Π) worked for Park. Park’s vice- president, Herrfeldt (Herr) gave Π job with Kaufman, & told Π that Kaufman would tell him dutiesand salary. Kaufman tells Π he will get a specified commission, and Herr confirms this. Is kind of commission is not common in the industry (very weird to get it). Π later terminated & sues for thecommission. Kaufman didn’t have actual authority to give this commission.a.Park can be held accountable for Kaufman’s action on the principle of apparent authority.Kaufman is Π’s direct supervisor; as far as Π is concerned, Kaufman is spokesperson for Park.Π reasonable to think Kaufman has authority to offer commission
.
iii.
Three-Seventy Leasing Corporation v. Ampex Corporation
, 528 F.2d 993 (1976) – Joyce, the onlyemployee of 370 corp, is in negotiations to buy HW from Ampex & is speaking to Ampex’semployee, Kays (salesperson). Kays sends Joyce an offer at the direction of Kays’ superior.a.
An agent has apparent authority sufficient to bind the principal when the principal acts insuch a manner as would lead a reasonably prudent person to suppose that the agent hadthe authority he purports to exercise.
 b.
Absent knowledge on the part of 3rd parties to the contrary, an agent has the apparentauthority to do those things which are usual and proper to the conduct of the businesswhich he is employed to conduct.
c.Kays was employed by Ampex as a salesman; it is reasonable for 3rd parties to presume that asalesman has the authority to bind the employer to sell.d.Ampex's actions furthered this belief; Document was given to Joyce at the direction of Mueller,Kay's superior, and also Mueller agreed that all communication with 370 would be throughKays. Doesn’t matter if, internally, Kays really didn’t have this power.D.
Inherent Agency Power – authority that comes from the role/status that comes with being anagent. The agent (in the role/status) ordinarily possesses certain powers.
i.A servant acting within the scope of his employment has inherent authority to commit torts - basically same thing as
respondeat superior.
ii.
Watteau v. Fenwick 
, Queen's Bench (1892) - Humble sold business to Fenwick, but Humble stillmanager, and Humble name on the door. Humble was only supposed to buy bottled ales andmineral water, but he buys cigars and other supplies on credit. Π, 3
rd
party, sues to recover payment.3rd party doesn’t even know Fenwick exists, and that he actually owns it.a.Rest (2nd) Agency § 194 -
an undisclosed principle is liable for acts of an agent done on hisaccount, if usual or necessary in such transactions, although forbidden by the principle.
 b.Rest (2nd) Agency § 195 - an undisclosed principal who entrusts an agent with the managementof his business is subject to liability to third person with whom the agent enters into transactionsusual in such business and on the principal’s account, although contrary to the directions of the principal.iii.
 Kidd v. Thomas A. Edison, Inc
.
239 Fed. 405 (1917) - Kidd (3rd party) enters into K with Fuller (Δ's agent) believing she was signing up for an unconditional singing tour/recitals. Δ says that3
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Jason Keith

you are my favorite person in the world right now, christina

reply12 / 04 / 2011
the860sfinest

i love you crlstinaaa!!!!

reply02 / 14 / 2010
ansteel

gr8 wrk. very helpful

reply08 / 07 / 2009
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