Business
Association:
Master
Outline

I. Agency
A.
Who
Is
an
Agent?
1.
Gorton
v.
Doty:
Football
Case
a)
Rule:
Where
one
undertakes
to
transact
some
business
or
manage
some
affair

for
another
by
authority
and
on
account
of
the
latter,
the
relationship
of

principal
and
agent
arises.
b)
Reason:
‘Cause
she
volunteered
use
of
her
car;
she
could’ve
driven
car
herself

but
instead
designated
a
driver
thus
making
a
condition
precedent
that
the

person
she
designated
should
drive
thereby
consenting
the
coach
should
act

for
her
and
in
her
behalf.
2.
Restatement
Definitions
a)
2nd
Restatement
(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
so
to
act.
(a)
The
one
for
whom
action
is
to
be
taken
is
the
principal.
(b)
The
one
who
is
to
act
is
the
agent.
b)
3rd
Restatement
(1)
Agency
is
the
fiduciary
relationship
that
arises
when
one
person
(a

“principal”)
manifests
assent
to
another
(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.
c)
Misc.
Definitions
(1)
Fiduciary
(a)
Duty
of
Care
i)
The
duty
to
act
with
the
care,
competence,
and
diligence
normally

excercised
by
agents
in
similar
circumstances.
(b)
Duty
of
Full
Disclosure

i)
The
duty
to
inform
the
principal
of
all
facts
relevant
to
a

transaction
that
the
agent
reasonably
believes
the
pricipal
would

want
to
know.
3.
Principal
or
Creditor?
a)
A
controlling
creditor
runs
certain
risks
under
the
law
of
agency
particularly
if

the
creditor
engages
in
trade
with
the
debtor
and
bargains
for
a
stronger
trade

position
as
part
of
the
consideration
for
the
loan.
If
its
control
over
a
debtor’s

business
is
substantial,
particularly
if
it
is
affirmative
in
nature
and
includes

the
right
to
initiate
transactions,
the
creditor
may
be
classified
as
a
principal

with
the
debtor
its
agent,
exposing
it
to
liability
for
losses
incurred
by
the

debtor’s
business.
b)
A.
Gay
Jenson
Farms
Co.
v.
Cargill,
Inc.:
Trade
Creditor
Grain/Farmers
Case
(1)
Holding:
Court
held
Cargill
liable
for
Warren’s
$2
million
debt
to
the

farmers.
(2)
Reasoning:
Creditor
Cargill
was
Warren’s
principal,
based
on
its:
(a)
Right
of
control,
and
the

(b)
Benefits
it
received
as
trade
creditor,
including
obtaining
a
source
of

grain.

 Business
Association:
Master
Outline
B.
Liability
of
Principal
to
Third
Parties
in
Contract
1.
The
Agent’s
Authority
a)
Actual
Authority
(1)
Express
(a)
Granted
authority
either
orally
or
in
writing.
(2)
Implied
(a)
Mill
Street
Church
of
Christ
v.
Hogan:
Actual
Authority:
Implied
i)
Definition:
Implied
Authority:
Is
actual
authority
circumstantially

proven
which
the
principal
actually
intended
the
agent
to
possess

and
include
such
powers
as
are
practically
necessary
to
carry
out

the
duties
actually
delegated.
ii)
Implied
Authority
Analysis:
Whether
Implied
Authority
Exists?
(1)
Factors
to
be
Considered
in
making
your
Determination:
(a)
Reasonably
Believes:
Whether
the
agent
reasonably

believes
because
of
present
or
past
conduct
of
the

principal
that
the
principal
wishes
him
to
act
in
a
certain

way
or
to
have
certain
authority.
(b)
Nature
of
the
task
or
job.
(c)
Existence
of
prior
similar
practices.
(d)
Specific
conduct
in
the
past
permitting
the
agent
to

excercise
similar
powers.
iii)
Burdern
of
Proof
(1)
Rule:
The
person
alleging
agency
and
resulting
authority
has

the
burden
of
proving
that
it
exists.
(2)
Agency
cannot
be
proven
by
a
mere
statement.
(3)
Can
be
established
by
circumstantial
evidence:
(a)
Acts
and
conduct
of
the
parties.
b)
Apparent
Authority
(1)
Dweck
v.
Nasser:
Kids
International
Case:
Apparent
Authority
(a)
Rule:
A
principal
is
bound
by
an
agent’s
apparent
authority
which
he

knowingly
permits
the
agent
to
assume
of
which
he
holds
the
agent
out

as
possessing.
(2)
Restatement
Definition
(a)
3rd
Restatement

i)
Apparent
Authority
is
the
power
held
by
an
agent
or
other
actor

to
affect
a
principal’s
legal
relations
with
third
parties
when
a

third
party
reasonably
believes
the
actor
has
authority
to
act
on

behalf
of
the
principal
and
that
belief
is
traceable
to
the
principal’s

manifestations.
ii)
Elements:
Third
Party:
(1)
Reasonably
Believes,
and

(2)
Traceable
Manifestation.
(3)
Three‐Seventy
Leasing
Corporation
v.
Ampex
Corporarion
(4)
Watteau
v.
Fenwick:
Undisclosed
Principal
Liability
(a)
Rule:
An
undisclosed
principal
can
be
held
liable
where
reasonable.
2.
Ratification
 Business
Association:
Master
Outline
a)
Botticello
v.
Stefanovics
b)
Restatement
Definition
3.
Estoppel
a)
Hoddeson
v.
Koos
Bros
b)
Restatement
4.
Agent’s
Liability
on
the
Contract
a)
Atlantic
Salmon
A/S
v.
Curran
(1)
Rule:
When
the
agent
does
not
disclose
the
principal
the
agent
can
then

be
held
liable
to
the
third
parties.
C.
Liability
of
Principal
to
Third
Parties
in
Tort
1.
Servant
Versus
Independent
Contractor
a)
Issue:
Organization
within
the
firm
versus
organization
across
markets.
b)
Case
Involvement:
The
liability
of
the
oil
companies
for
personal
injuries

negligently
inflicted
by
gasoline
station
personanel.
c)
Legal
Issue:
Whether
the
operator
of
the
station
was
an
employee‐a
“servant”

in
the
language
of
the
law‐or
an
independent
operator
(independent

contractor)
or
a
franchisee.
d)
Humble
Oil
Refining
Co.
v.
Martin
(1)
Rule:
Where
there
are
items
of
evidence
indicating
a
master‐servant

relationship,
contrary
items
cannot
be
given
conclusive
effect.
e)
Hoover
v.
Sun
Oil
Company
(1)
Rule:
The
test
to
be
applied
is
whether
the
principal
has
retained
the
right

to
control
the
details
of
the
day‐to‐day
operation
of
the
service
station;

control
or
influence
over
results
alone
being
viewed
as
insufficient.
2.Tort
Liability
and
Apparent
Agency
a)
Miller
v.
McDonald’s
Corp.
3.
Scope
of
Employment
a)
Ira
S.
Bushey
&
Sons,
Inc.
v.
United
States
b)
Manning
v.
Grimsley
4.
Statutory
Claims

a)
Arguello
v.
Conoco,
Inc.
5.
Liability
for
Torts
of
Independent
Contractors
a)
Majestic
Realty
Associates,
Inc.
Toti
Contracting
Co.
(1)
Issue:
What
is
the
liability
of
principals
to
3rd
parties
for
torts
created
by

independent
contractors?
(2)
Rule:
Liability
will
be
imposed
upon
the
landowner
in
spite
of

engagement
of
an
independent
contractor
if
the
work
to
be
done

constitutes
a
nuisance
per
se.
(a)
The
court
equated
nuisance
per
se
with
“inherently
dangerous”.
i)
The
razing
of
buildings
in

a
busy,
built
up
section
of
a
city
is

inherently
dangerous.
D.
Fiduciary
Obligations
of
Agents
1.
Duties
During
Agency
a)
Reading
v.
Regem
 Business
Association:
Master
Outline
(1)
Rule:
If
a
servant
takes
advantage
of
his
service
and
violates
his
duty
of

honesty
and
good
faith
to
make
a
profit
for
himself,
in
the
sense
that
the

assets
of
which
he
has
control,
the
facilities
which
he
enjoys,
or
the
position

which
he
occupies,
are
the
real
cause
of
his
obtaining
the
money
as
distinct

from
merely
affording
the
opportunity
for
getting
it,
that
is
to
say,
if
they

play
the
predominant
part
in
his
obtaining
the
money,
then
he
is

accountable
for
it
to
his
master.
b)
General
Automotive
Manufacturing
Co.
v.
Singer
(1)
Duty
of
Full
Disclosure
(a)
Rule:
An
agent
has
a
duty
during
agency
to
disclose
all
facts...
i)
The
duty
of
full
disclosure
includes
a
duty
to
inform
the
principal

of
all
facts
relevant
to
a
transaction
that
the
agent
reasonably

believes
the
principal
would
like
to
know.

2.
Duties
During
and
After
Termination
of
Agency:
Herein
of
“Grabbing
and
Leaving”
a)
Town
&
Country
House
&
Home
Service,
Inc.
v.
Newberry
(1)
Trade
Secrets:
Customer
List:
Confidential
information
used
in
the

employor’s
business
that
gives
the
employor
an
advantage
over

competitors.

(a)
Facts:
Customer
List:
Compiled
by
business
effort;
expenditure
of

time
and
money;
constituted
a
part
of
the
good‐will
of
a
business

which
enterprise
and
foresight
have
built
up.
(b)
Rule:
It
is
considered
unfair
for
an
employee
to
use
confidential

information,
including
trade
secrets,
against
the
employer
after

terminating
the
relationship.
The
employee
is
given
access
to
the

customer
list
or
other
trade
secret
while
in
a
position
of
trust.

Subsequent
use
of
that
list
or
other
secret
without
consent
is
an
abuse

of
trust.
(c)
Remedy:
An
employer
is
entitled
to
pursue
an
injunction
against

unconsented
use
of
a
trade
secret
and
to
seek
damages
for
losses

sustained
by
the
misuse.