Business Association Outline

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I. Agency (Chapter 1)
A. Who is an Agent
i. Agency Definition
Agency is a fiduciary 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 to so act. 1. Contractual relationship is not necessary, nor do either need to receive compensation 2. Agent - the one to act

3. Principal - the one for whom action is taken
4. Agency means more than mere passive permission; it involves request, instruction, or command 5. Agency cannot exist when it is against public policy or illegal 6. Agency is like an enforceable contract (offer + acceptance) but does not require consideration 7. 3 Different forms of agency: (1) Principal-Agent; (2) Master-Servant; (3) Employee-Employer or independent contractor 8. Principal cannot delegate a non-delegable act

ii. Allocation of risk and responsibility based on principals of agency 1. A way to get someone to act on behalf of another
2. Agency allows things to get done in a way that otherwise is not possible 3. Agents are force multipliers which allows a concentration of resources behind a collective purpose Principal-Agent-Third Party (PAT) Triangle

1. Principal is typically the lowest cost avoider and in the best position to mitigate damages 2. Agent - one authorized to act for another
3. Third Party - what does this party "see"? would a reasonable person believe that the agent had authority to bind the principal Gorton v. Doty
Facts: Gorton injured in an automobile accident after Doty loaned her vehicle to coach to transport Gorton and others to football game ROL: An agency relationship results from one person's consent that another will act on his behalf and subject to his control and the other person's consent so to act Gay Jenson Farms Co. v. Cargill, Inc

Facts: Plaintiffs entered into grain contracts with Warren Grain & Seed Co., which was financed and controlled by Cargill, Inc., a separate entity ROL: A creditor who assumes control of his debtor's business may become liable as principal for the acts of the debtor in connection with the business 1. One who contracts to acquire property from a third person and convey it to another is the agent of the other only if it is agreed that he is to act primarily for the benefit of the other and not for himself 3 Factors indicating that one is a supplier, rather than an agent: (1) that he is to received a fixed price for the property irrespective of the price paid by him - most important factor; (2) that acts in his own name and receives the title to the property, which he is to transfer; (3) that he has an independent business in buying and selling similar property Existence of agency may be proved by circumstantial evidence which shows a course of dealings between two parties Criticism and recommendations could be viewed as control

B. Liability of Principal to Third Parties in Contract
1. Actual Authority (Express & Implied)
Actual Authority: Agent must believe there is authority to act for the principal, must look through the eyes of the agent using reasonable person (RPP) standard Express Authority
Express Authority: affirmative statement of authority to act, given either orally or in writing. Principal can mistakenly grant express, actual authority, but authority must be given either orally or in writing Implied Authority

implied authority: is actual authority circumstantially proven which the principal actually intended the agent to posses and includes such powers as are practically necessary to carry out the duties actually delegated. Look through the agent's eyes- does the agent reasonably believe she is acting within the scope of the authority 3 ways implied actual authority can arise

1. Incidental - absent a clear, contrary instruction by the principal, the agent can use all reasonable means necessary to carry out the goals of the agency 2. Custom - if it is customary in an industry for an agent to have...
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