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Business Associations Fall 2010 Fendler Outline

Business Associations Fall 2010 Fendler Outline

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Published by: Joshua Ryan Collums on Dec 14, 2010
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JRC/Fall 2010/Fendler/Business Assoc
Fall 2010/Prof. Fendler/Joshua R. Collums
 Business Associations
(7th Ed.) by Klein, Ramseyer & Bainbridge
I.Who is an Agent?A.
Restatement (Third) of Agency § 1.01 Agency Defined
 Agency is the fiduciary relationship that arises when one person (a “principal”) manifest’s assent to another  person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.
Restatement (Third) of Agency § 1.02 Parties’ Labeling and Popular Usage NotControlling
 An agency relationship arises only when the elements stated in § 1.01 are present. Whether a relationship ischaracterized as agency in an agreement between parties or in the context or industry or popular usage is not controlling.
Restatement (Third) of Agency § 1.03 Manifestation
 A person manifests assent or intention through written or spoken words or other conduct.
Gorton v. Doty
(Idaho 1937)1.
. Was the coach, Garst, the agent of appellant while and in driving her car from SodaSprings to Paris, and in returning to the point where the accident occurred?2.Broadly speaking, “agency” indicates the relation which exists where one person acts foranother. It has these three principal forms:a.The relation of the principal and agent.b.The relation of master and servant; andc.The relation of employer or proprietor and independent contract.3.
. The relationship which results from the manifestation of consent by one person toanother that the other shall act on his behalf and subject to his control, and consent by theother so to act.a.Manifestation of consent by P that A will act:(1)On Ps behal(2)Subject to Ps Controlb.As consent so to act.4.This court has not held that the relationship of principal and agent must necessarily involvesome matter of business, but only that where one undertakes to transact some business ormanage some affair for another by authority and on account of the latter, the relationshipof principal and agent arises.5.Appellant could have driven car herself. Instead, she designated the driver (Garst) and, indoing so, made it a condition precedent that the person she designated should drive hercar.a.Appellant consented that Garst should act for her and in her behalf, in driving hercar to and from the game from her act in volunteering the use of her car upon theexpress condition that he should drive it.b.Garst consented to so act for the appellant by driving the car.6.It is not essential to the existence of authority that there be a contract between principaland agent or that the agent promise to act as such, nor is it essential to the relationship orprincipal and agent that they, or either, receive compensation.a.There must be an agreement but it does not necessarily have to rise to the level of a legal contract.7.The fact of ownership alone, regardless of the presence or absence of the owner in the carat the time of the accident, establishes a prima facie case against the owner for the reason-1-
JRC/Fall 2010/Fendler/Business Assoc
that the presumption arises that the driver is the agent of the owner.
 Dissenting Opinion
.a.An agent is one who acts for another by authority from him, one who undertakesto transact business or manage some affair for another by authority and onaccount of the latter. Agency means more than mere passive permission. Itinvolves a request, instruction or command.E.
 A. Gay Jenson Farms Co. v. Cargill, Inc.
(Minn. 1981) (
 Lender Liability
Plaintiffs Argument 
. Plaintiffs alleged that Cargill was jointly liable for Warren’s indebtednessas it had acted as principal for the grain elevator.2.
. Whether Cargill, by its course of dealing with Warren, became liable as principal oncontracts made by Warren with plaintiffs.3.
Agency is the fiduciary relationship that results from the manifestation of consent byone person to another that the other shall act on his behalf and subject to his control, andconsent by the other so to act.a.In order to create an agency, there must be an agreement, but not necessarily acontract between the parties.(1)An agreement may result in the creation of an agency relationshipalthough the parties did not call it an agency and did not intend the legalconsequences of the relation to follow.b.The existence of the agency may be proved by circumstantial evidence whichshows a course of dealing between the two parties.(1)When an agency relationship is to be proven by circumstantial evidence,the principal must be shown to have consented to the agency since onecannot be the agent of another except by consent of the latter.4.
. A creditor who assumes control of his debtor’s business may becomeliable as principal for the acts of the debtor in connection with the business.
a.Security holder’s mere veto power v. Becoming a principal.
a.One who contracts to acquire property from a third person and convey it toanother is the agent of the other only if it is agreed that he is to act primarily forthe benefit of the other and not for himself.(1)Factors indicating that one is a supplier, rather than an agent, are:
(a)That he is to receive a fixed price for the property irrespectiveof price paid to him. This is the most important.(b)That he acts in his own name and receives title to the propertywhich he thereafter is to transfer. 
Willi v. Schaefer Hitchcock Co.
(Idaho 1933).
A creditor who assumed control of his debtor’s business for the mutual benefit of himself and his debtor
may become a principal, with liability for the acts and transactions of the debtor in connection with the business.Restatement (Second) of Agency § 14 O.“A security holder who merely exercises a veto power over the business acts of his debtor by
preventing purchases or sales above specified amounts does not thereby become a principal. However, if he takesover the management of the debtor’s business either in person or through an agent, and directs what contracts may ormay not be made, he becomes a principal, liable as a principal for the obligations incurred thereafter in the normalcourse of business by the debtor who has now become his general agent. The point at which the creditor becomes aprincipal is that at which he assumes de facto control over the conduct of his debtor, whatever the terms of the formalcontract with his debtor may be.
., cmt. a. 
., § 14 K, cmt. a.
JRC/Fall 2010/Fendler/Business Assoc
(c)That he has an independent business in buying and sellingsimilar property.II.Liability of Principal to Third Parties in ContractsA.The Agents Authority1.2 Broad Classifications of Power
a.Actual (Real) – arises from the
manifestation of consent 
from the principal to theagent (not to a third person) that the agent should act for the principal.(1)Express Authority – actual authority contained within the “four cornersof the agency agreement between the principal and the agent,
,authority expressly granted by the principal to the agent.(2)Implied Authority – An agent’s authority includes not only the authorityexpressly granted by the principal to the agent, but also any authorityimplied by the agent from the words or conduct between the principaland the agent.b.Apparent (Ostensible) – a principal will be bound by his agent’s unauthorized actsif the principal has
manifested to a third party
, through words or conduct,
that theagent has authority
, and the third party
reasonably believes
on this manifestation.(1)An agent cannot create apparent authority by his own manifestations.The manifestations must be from the principal to the third party.(Conduct and silence can be a manifestation from the principal).(a)
. If the principal gives the agent express authority totell third parties that he has authority.2.
 Mill Street Church of Christ v. Hogan
(Ky. 1990) (
 Implied Authority
 Implied v. Apparent Authority
. Implied authority is actual authority circumstantiallyproven which the principal actually intended the agent to possess and includessuch powers as are practically necessary to carry out the duties actually delegated.Apparent authority on the other hand is not actual authority but is the authoritythe agent is held out by the principal as possessing. It is a matter of appearance onwhich third parties come to rely.(1)
 Implied Authority Rule
. In examining whether implied authority exists, itis important to focus upon the agent’s understanding of his authority. Itmust be determined whether the agent reasonably believes because of present or past conduct of the principal that the principal wishes him toact in a certain way or to have certain authority.(a)
 Nature of task/job
. The nature of the task or job may beanother factor to consider. Implied authority may be necessaryto implement the express authority.(b)
Prior similar practices
. The existence of prior similar practices isone of the most important factors. Specific conduct by theprincipal in the past permitting the agent to exercise similarpowers is crucial.b.
 Burden/Standard of Proof 
. The person alleging agency and resulting authority hasthe burden of proving that it exists. Agency cannot be proven by a merestatement, but it can be established by circumstantial evidence including the actsand conduct of the parties such as the continuous course of conduct of the partiescovering a number of successive transactions.c.
. One agent appoints someone else who will also be an agent of theprincipal.(1)When a principal engages an agent to perform a task, the principal has ineffect delegated the task to the agent. If the agent, acting with authority,in turn delegates part of all of that task to an agent of its own, then theThe power to bind is equal. The principal is equally bound whether based on actual or apparent authority.

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