Agency Formation

Question 1

§ 1.01 Agency Defined

Restatement (Third) Of Agency

Answer 1

Agency is the fiduciary relationship that arises when one person (a “principal”) manifests 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.

Question 2

§ 1.02 Parties’ Labeling and Popular Usage Not Controlling

Restatement (Third) Of Agency

Answer 2

An agency relationship arises only when the elements stated in § 1.01 are present. Whether a relationship is characterized as agency in an agreement between parties or in the context of industry or popular usage is not controlling.

Question 3

§ 1.03 Manifestation

Restatement (Third) Of Agency

Answer 3

A person manifests assent or intention through written or spoken words or other conduct.

Question 4

Restatement (Third) Of Agency § 1.04(2) Disclosed, undisclosed and unidentified principals

Answer 4

(2) Disclosed, undisclosed, and unidentified principals.
(a) Disclosed principal. A principal is disclosed if, when an agent and a third party interact, the third party has notice that the agent is acting for a principal and has notice of the principal’s identity.
(b) Undisclosed principal. A principal is undisclosed if, when an agent and a third party interact, the third party has no notice that the agent is acting for a principal.
(c) Unidentified principal. A principal is unidentified if, when an agent and a third party interact, the third party has notice that the agent is acting for a principal but does not have notice of the principal’s identity.

Question 5

Restatement (Third) Of Agency § 1.04 (5) Person.

Answer 5

A person is (a) an individual; (b) an organization or association that has legal capacity to possess rights and incur obligations; (c) a government, political subdivision, or instrumentality or entity created by government; or (d) any other entity that has legal capacity to possess rights and incur obligations.

Question 6

Hanson V. Kynast (Ohio 1986) (Tort)

Answer 6

Facts: Student athlete (Hanson) gets injured by other student (Knyast), sues university claiming Kynast is university’s A.
Issue: Was Kynast an A?
Hold: No. This is buyer (student)/seller (university) K relationship.
Reasoning: Student buying education, athletics, no scholarship, no compensation for sport, voluntary member of team, buys own equipment. He receives instruction from coach (agency) but not otherwise controlled by coach.
Efficient? Yes. If other way around, too much liability for schools, sports programs would be shut down for liability fear.

Question 7

Jenson Farms v. Cargill (Minn. S. Ct. 1981) (Contract)

Answer 7

Issue: Was Cargill P to Warren’s A due to course of dealing?
Hold: Yes. Under totality of circumstances: Cargill (P) control over Warren (A). Aggressive financing.
Rule: Objective Test - Conduct of the parties (not intentions) determines the existence of an Agency relationship R.3.A §1.02 Reasoning: 9 factors of control & circumstantial evidence can prove Agency relationship.
• Agency (4/9): Constant recs; Criticism, finances, officer salaries; Provision of drafts/forms; Right of entry, periodic checks
• Creditor-Debtor (3/9): Inability to enter mortgages, purchase stock/pay dividends w.o approval; Financing of all purchases of
grain and operating expenses; Power to discontinue financing
• Borrower (1): right of first refusal (buy before everyone else)
• Generalized idiocy (1): Strong paternal guidance
Efficient? Yes. Forcing Cargills of world to be careful – if you act like a P you will be liable, even if your A sucks.