Transcript Property I Fall 2008 - Donald J. Kochan

Agency & Partnership
Professor Donald J. Kochan
Class 12
Today’s Materials
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Pages 271-320
AUTHORITY and
Contractual Powers of Agents:
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Express Authority
 Implied Authority
 Apparent Authority
 Estoppel
Inherent Agency Power
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Review of Preliminaries
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First question is always, Is there an agency or
partnership relationship? What proof?
Second question always is what is nature and scope of
the relationship?
Third question always is was there a violation of the
relationship?
Fourth question always is, if there is a violation of the
relationship what are the remedies and consequences,
and to who?
Authority
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Consider reliance factors by third parties
Consider representations as key to making
the agent or the principal or both liable
Consider multiple litigation scenarios to
make things right (3 v. A, 3 v. P, P v. A,
and A v. P) (we will discuss in class)
Express Authority
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How is it granted?
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How is it proven?
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How is it limited?
When and how does it expire?
King v. Bankerd
Power of Attorney case
 Authorization to convey, bargain, grant
and/or sell property
 Does the authorization allow “gratuitous”
grants of principal property
 Focus on the SCOPE issues – what is the
breadth of the authority?
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King v. Bankerd (cont.)
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“[A]n agent holding a broad power of attorney lacks the
power to make a gift of the principal’s property, unless
that power (1) is expressly conferred, (2) arises as a
necessary implication from the conferred powers, or (3)
is clearly intended by the parties, as evidenced by the
surrounding facts and circumstances.”
Focus on the fact-specific nature of the inquiry, the need
to define the principal’s interest, the original agreement,
and the correlation between the agent’s action and the
agreement with and interest of the principal
Lamb v. Scott
Power of Attorney case
 Strict Construction/Focused on powers
expressly granted
 See focus on INTENTION
 “One who accepts a power of attorney
covenants to use the power for the SOLE
BENEFIT OF the one conferring the power and
to use it in a manner CONSISTENT with the
PURPOSES of the agency relationship created by
the power of attorney.”
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Von Wedel v. McGrath
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“In the absence of ambiguity or
incompleteness, we must deal with intent
as actually expressed in the document.”
What does that mean?
Why should “specific language” trump all
else?
Page 278, Note 3
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“Do and perform every act or thing”
Legal Effectiveness or Enforcement?
Why Not?
Implied Authority
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Understand the Restatement comments
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What is “necessary, usual, and proper”?
What does it mean to “act in a manner in which
an agent believes the principal wishes the agent
to act based on the agent’s reasonable
interpretation of the principal’s manifestation in
light of the principal’s objectives and other facts
known to the agent”?
Delegation of Authority
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What is Delegation?
Master/Servant Issues
Necessity and Contingency Issues
Was the Agent employed or appointed to delegate?
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Liability Issues
Incidental (Inferred) Authority
“Unless otherwise agreed [or disallowed]
authority to conduct a transaction includes
authority to do acts which are incidental to
it, usually accompany it, or are reasonably
necessary to accomplish it.”
Apparent Authority
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Consider reliance factors by third parties
Consider representations as key to making
the agent or the principal or both liable
Discretion, Leeway
Economics and Efficiencies in
Representation
Smith v. Hansen, Hansen &
Johnson, Inc.
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Building renovation/leaking wall case
Note on p. 282 the emphasis on “question
of fact” and “substantial evidence” and
proving “objective manifestations” of THE
principal to define authority
Why was the court talking about
“reasonable inferences” of the third party?
Restatement Sec 27 comment a
”The information received by the third person may come directly from the
principal by letter or word of mouth, from authorized statements of the
agent, from documents or other indicia of authority given by the principal to
the agent, or from third persons who have heard of the agent's authority
through authorized or permitted channels of communication. Likewise, as in
the case of [actual] authority, apparent authority can be created by
appointing a person to a position, such as that of manager or treasurer,
which carries with it generally recognized duties; to those who know of the
appointment there is apparent authority to do the things ordinarily
entrusted to one occupying such a position, regardless of unknown
limitations which are imposed upon the particular agent.”
Bucher & Willis v. Smith
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“Mere relationship” between principal and
agent sends some signal of authority
But what does the “representation of
some authority” mean? What signals are
required for a third party to realize there is
not authority? What responsibilities are
there for the principal to disavow third
party beliefs of agent authority to third
parties?
Rosenblum v. Jacks or Better of
Am. West, Inc.
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Client Consent Case for Lawyers
“[T]he fact of an attorney’s employment
alone implies no authority to settle or
compromise the client’s case.”
When can a principal rescind on a promise
made by an agent?
Common Business Practices
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How do these affect reasonable reliance?
What efforts can be taken to avoid
invocation of this argument – i.e. what
should you as a principal do?
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Duty to Inquire
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The duty to inquire is a defense for the
principal against a third party whose agent
acts outside authority
The duty to inquire also falls on an agent
to ask the principal before acting if he
questions whether he has authority to act
in the face of ambiguity
Good faith/blind faith/scope are all issues
Suaber v.
Northland Insurance Company
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Car insurance case
Presumptions of apparent authority
Principal responsibility “knowingly or negligently”
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How is the presumption rebuttable?
“Apparent authority is power of an apparent agent to
affect the legal relations of an apparent principal with a
third person by acts done in accordance with such
principal’s manifestations of consent to such third person
that such person shall act as his agent.”
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Foley v. Allard
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Read for “ordinary prudence” and
“business acumen”
The problems following ask you when it
matters when the third party knew or
should have known that there was or was
not authority.
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Herbert Construction Co. v.
Continental Insurance Co.
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Office Tower case – Insurance and bonding case
Duty of Inquiry not necessary if there is
“reasonable reliance” on an agent’s
representation.
Compare with the next case, Continental
Insurance Co. v. Gazaway and realize these are
very fact-specific
Read Note 4 on Page 302 for important
background principles
Gizzi v. Texaco
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Vehicle repair and sale case; personal
injury when the brakes failed
Apparent authority and agency by
estoppel issues
Note this is only an appeal of a directed
verdict – facts never litigated; Do you
understand why that is important?
Gizzi v. Texaco (cont.)
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Majority finds that there must be “a reasonable reliance
by the third person that the alleged agent is authorized
to bind the principal” before the principal can be held
liable.
“The manifestations of the principal may be made
directly to the third person, or may be made to the
community, by signs or advertising.”
Were the slogans or advertisements “indicia of control”
to the reasonable consumer?
Note the dissent’s focus on the “ordinary prudence” and
reasonable consumer test – placing a level of
responsibility on the third party
Was there “justifiable reliance”?
Estoppel and
Hoddeson v. Koos Bros.
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Furniture salesman and promise of
delivery case
Is the proprietor responsible for his
salesman’s promises?
Note the court’s focus on the adequacy of
evidence in assumpsit
Again, Estoppel requires evidence of
justifiable reliance to hold the principal
responsible
Hoddeson v. Koos Bros. (cont.)
“Certainly the proprietor’s duty of care and
precaution for the safety and security of the
customer encompasses more than the
diligent observance and removal of banana
peels from the aisles. Broadly stated, the
duty of the proprietor also encircles the
exercise of reasonable care and vigilance to
protect the customer from loss occasioned by
the deception of an apparent salesman.”
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But what about caveat emptor?
Restatement (Third) on
Estoppel
Section 2.05 Estoppel to Deny Existence of An Agency Relationship
“A person who has not made a manifestation that an actor has
authority as an agent and who is not otherwise liable as a party to a
transaction purportedly done by the actor on that person’s account
is subject to liability to a third party who justifiably is induced to
make a detrimental change in position because the transaction is
believed to be on the person’s account, if: (1) the person
intentionally or carelessly cause such belief, or (2) having notice of
such belief and that it might induce others to change their positions,
the person did not take reasonable steps to notify them of the
facts.”
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Break down all the elements in the above . . .
Inherent Agency Power
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Understand it as an independent theory
and read the notes and do the problems
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But recognize it is a disfavored theory
Concluding Thoughts
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Revisit the preliminaries above
Authority issues pervade liability concerns and
you must understand the various theories
Realize that the alleged agent may be
individually liable even if the alleged principal is
not
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But also realize the principal is often the deeper
pocket