#8795 - Agency - Agency and Other Unincorporated Businesses

Definition of Agency:

A consensual relationship that is created when one person acts on behalf of and subject to the control of another.

§1 Rest, 2d Agency:

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 act.

2. The one for whom the action is to be taken is the principal.

3. The one who is to act is the agent.

The Agency Relationship; The Ambiguous Principal Problem; SubAgency

Creation of an Agency Relationship:

Carrier v. McLlarky: (Plumber took responsibility to mail back hot water heater, but didn’t pursue matter to get owner paid)

Whether there is an agency relationship is a question of fact.

Agency is created when a principal gives authority to another to act on his behalf and the agent

consents to do so. (can be implied by conduct)

Here, plumber volunteered to act on lady’s behalf and had to be acting on her behalf in order to collect on the warranty.

Duty of Agent:

Duty of Care (diligence, skill, and competence)

Promise to act as an agent is interpreted as being a promise only to make reasonable

efforts to accomplish the directed result.

Violette v. Shoupe (neighbor asks other neighbor for a suggested aggressive tax shelter and it goes bad)

Simply offering to help or making a suggestion doesn’t make you an agent.

Benefit isn’t enough, purported agent must actually be carrying out the others business!

M.D. & Assoc. & Paul Hogg v. Sears Roebuck & Co.: (tenant holds over, secretary picks up the mail for

the boss guy and she is ruled his agent cause control and obo, so he is on notice)

Existence of agency and authority of an agent can be implied by proof of facts, circumstances,

words, acts & conduct of the party to be charged w/ the agency. (signatures are indicators of agency)

Prior conduct is a factor to take into account

The key to authority implied from course of conduct is the knowing acquiescence of the principal

in the past acts.

CONTROL:

Control involves and “element of subservience”

It can be ambiguous & have a broad or narrow/strict view & proof is required

Agency Liability is Strict Liability

CONSENT:

-Consent of both parties is required

-Consent can exist even where the parties involved fail to recognize that they have created and

agency relationship

-Can be express of implied

-If they underlying transaction is contractual in nature, the principal must have the capacity to

contract

Proof of Agency:

Burden of proof is on the one asserting yes agency and it must be inferred only from natural & reasonable construction of the facts

1. Agency or Sale

HUNTER MINING LABORATORIES, INC. v. MANAGEMENT ASSISTANCE INC. (computer products & failure to install completely, ?? was whether the two smaller distributors were agents of MAI)

In true agency relationship, the principal possesses the right to control the agent’s conduct (but this doesn’t mean that agency exists everytime 1 party has a contractual right to control some aspect of others party’s business)

Just cause receive goods from another for resale doesn’t make you the agent, could be a buyer, it will depend on who’s benefit (business) the sale of the goods is for.

Type of control that might suffice would be to control prices, expenditures, demand a share of profits….

UNITED STATES v. GENERAL ELECTRIC CO. (Anti-trade suit)

Here, title to the goods shifted directly from GE to the purchasers and not 1^st to the GE distributors that it was trying to argue were its agents. If were its agents then not price fixing cause like agents were itself. Ct. said here okay and were agents. (this no longer works)

-The agent basically maintains stock that is still owned by GE and when they, on behalf of GE sell the stock they only receive a commission.

-GE maintains extreme control over the price, the amt of stock, how stock returned if not sold, when payments made, etc.

-the dealer also had no real business risk related to the sale of products

-HE IS GETS THE BENEFIT IS THE ONE WHO GETS THE RISK (characteristics of ownership of business)

-Seems to be no issue w/ consent since contracts in place and cld be implied

ULTIMATE test is not about time, but whether the actor is acting primarily for his own benefit or for the benefit of the other party when acting pursuant to an arrangement between the parties.

2. Agency or Debtor-Creditor Relationship

GAY JENSON FARMS CO. v. CARGILL, INC. (Warren made contracts w/ plaintiff’s for the sale of grain & then defaulted on them, Cargill was like the bank that kept increasing line of credit and had first right of refusal on the grain, and operated other owned grain elevators)

Question if Warren and agent of Cargill such that Cargill would be liable for the actions of Warren. (ct. said yes Warren agent)

The type of control seemed to keep increasing as business started going down hill, access to books, rights of 1^st refusal, can order audits, Warren had get Cargill approval to make capital repairs or improvements, couldn’t become guarantor on other’s debts, couldn’t sell or purchase stock, or divvy out dividends, contacts daily regarding financial affairs.

Control doesn’t actually have to be exercised for the Principal to have the requisite control, rather the question is ….Did both parties believe that Cargill could actually have acted on the right to control?

Seemed that Warren didn’t really act f/b/o Cargill and never did implement the changes Cargill suggested (so maybe didn’t think actually had right to control)

3. Agency or Bailment

JONES V. TAYLOR (cab company car accident, jones arguing that lester not agent but bailee and so he can’t be held liable contributorily for negligence and so can recover damages)

Ct. said Lester not acting on behalf of or subject to control of Carl Jones (kept all own fares, was dispatched by Cab company, paid flat fee for use of car, no control of car during off hours)

-Lester was one who had all the risk and he also gets most of the benefit.

-Indication was that of two different businesses

A bailee can be an agent if subject to certain control but here was not sufficient.

4. Agency Distinguished from Other Relationships

1. The Franchise Relationship

Despite the exercise of great amts of control, most cts find that the relationship isn’t one of agency. (maybe cause element of on behalf of is lacking or missing)

“typical restaurant/franchisee didn’t act for the franchisor and on its behalf”

2. The Marriage Relationship

While involving trust & confidence marriage is not generally agency because in particular...