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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 from i. Consent by the principle for the agent to act ii. Agent acting on behalf of the principle 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) i. Unlike a contract (which is negotiated etc.) an agency agreement is created very easily. Once A agrees to do something for P, and A is acting on P’s behalf & is subject to P’s control the agency relationship is created. a. Gorton v. Doty , 69 P.2d 136 (1937) – woman tells the football coach who needs to transport students 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. Agency relationship 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 the control 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 is covering the woman, and the boy injured has no insurance. So looks like court just wanted to cover 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 agent promise to act as such, nor is it essential to the relationship of principle and agent that they, or either, receive compensation. ii. Agency can be terminated at the will of either party (notion that we don’t like involuntary servitude). Different from contract relationship which you cannot just breach & court will enforce. 1
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E. Creditor-debtor relationship vs. agent-principal relationship i. 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 ii. Gay Jenson Farms Co. v. Cargill, Inc . , 309 N.W.2d 285 (1981) – Warren (W) is a local firm operating as a grain storage facility & as a middle man between the grain farmers & the worldwide dealer, Cargill (C). W then insolvent; doesn’t pay farmers, and farmers sue C. W & C had an agreement 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
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