Restatement 2d v.

Restatement 3d
The rules and definitions in Restatement 3d
are not a significant substantive departure
from Restatement 2d.
Ill point out the differences between the two
versions if and when they become relevant.
The revision was not intended to lead to
different outcomes in the great majority of
cases.

1
 Restatement 2d 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.
The one for whom action is taken is the
principal.
The one who is to act is the agent.

2
 Restatement 3d 1.10
Agency defined
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
principals behalf and subject to the
principals control, and the agent
manifests assent or otherwise consents
so to act.

3
 Example
I ask Sally Student to be my agent and
go to a closing on a sale of corporate
assets and I authorize the student to sign
3 specific contracts on my behalf. Sally
agrees and signs the three documents:
Sally Student, as agent for Miriam Albert.
When I default on the three
agreements, who is liable?

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 Example:
What happens when Sally Student
stops by the Mercedes dealer and
decides I need a new fancy car, and
signs again, Sally Student as agent
for Miriam Albert?
Who has liability on this contract?

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 What conclusion can we
draw?
Any agent acting in the scope of
her authority binds only the
principal;
An agent acting outside the scope
of her authority binds only herself.

6
 PAT: Agency analysis
Figure out who possible P, A and TP are
Determine whether an agency relationship exists
between P & A: did P manifest assent that A should act
for him?
If we find an agency relationship between P and A
then we examine As dealings with TP to see if A acted
in the scope of the agency to see what consequences
follow to P from interaction between A and TP this
determine legal liability of P to TP (and vice-versa)

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3 primary ways to create an
agency:
By agreement
Ratification: 82 and 4.01
Estoppel: 8B and 2.05

8
 Gorton v. Doty
The players

Coach
Garst

Soda Springs H.S.

Cardinals
Teacher Doty

9
9
 Gorton v. Doty
That appellant thereby at least consented
that Russell Garst should act for her and in her
behalf, in driving her car to and from the
football game, is clear from her act in
volunteering the use of her car upon the
express condition that he should drive it, and,
further, that Mr. Garst consented to so act for
appellant is equally clear by his act in driving
the car.

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 Questions:
What did the court mean when it said it is
not essential that there be a contract
between the principal and agent?
Can you form an agency relationship
without even knowing that youre doing it?
Does an agency agreement have to be in
writing?

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 Equal dignity rule:
if the contracts the agent is
authorized to sign on behalf of the
principal need to be in writing to
be enforceable under the SOF,
then the agency agreement also
needs to be in writing.

12
 Comment b to 3.02
b. Equal-dignity requirements. Creating actual authority under
3.01 does not require a writing or other formality. However,
legislation in many states imposes what is often termed an equal
dignity requirement for the creation of authority or agency
applicable to specific types of agreements.
As with the Statute of Frauds more generally, the purpose is to
prevent fraud and perjury by safeguarding the principal against
agreements made by an agent who lacks authority. Under an
equal-dignity rule, if a transaction is unenforceable unless the
party to be charged has agreed in writing to be bound, an agent's
authority to enter into such a transaction on behalf of a principal
must likewise be in writing. Such rules also apply to ratification.

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 Restatement 3d 3.02:
If the law requires a writing or
record signed by the principal to
evidence an agents authority to
bind a principal to a contract or
other transaction, the principal is
not bound in the absence of such
a writing or record.

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 Restatement 3d 3.02:
A principal may be estopped to assert
the lack of such a writing or record
when a third party has been induced to
make a detrimental change in position
by the reasonable belief that an agent
has authority to bind the principal that
is traceable to a manifestation made
by the principal.

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 Question:
What about the presumption that the driver is the
agent of the car owner?
The court cites Willi v. Schaefer Hitchcok Co. for the
proposition that

in harmony with the clear weight of authority, that

the fact of ownership alone (conceded here),
regardless of the presence or absence of the owner
in the car at the time of the accident, establishes a
prima facie case against the owner for the reason
that the presumption arises that the driver is the
agent of the owner.

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 Planning question:
Should you draw up a written
disclaimer to be signed by the
parties that Doty and [new
coach?] are NOT creating an
agency and that no conditions are
placed on the use of the car?

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 Restatement 3d 1.02:
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.

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A Gay Jenson Farms v. Cargill

Warre
Revolving line of credit n
Right of first refusal on grain

Farmers
Grain elevator contracts

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A Gay Jenson Farms v. Cargill

Warre
n
Farmers sue Cargill Warren
defaults

Farmers

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 How did this credit extension
work?
Warren and Cargill thereafter entered into a security agreement
which provided that Cargill would loan money for working capital
to Warren on open account financing up to a stated limit, which
was originally set as $175,000. Under this contract, Warren would
receive funds and pay its expenses by issuing drafts drawn on
Cargill through Minneapolis banks.

The drafts were imprinted with both Warren's and Cargill's names.
Proceeds from Warren's sales would be deposited with Cargill and
credited to its account. In return for this financing, Warren
appointed Cargill as its grain agent for transaction with the
Commodity Credit Corporation. Cargill was also given a right of
first refusal to purchase market grain sold by Warren to the
terminal market.

21
 Restatement 144:
P is subject to liability upon contracts made by A
acting within his authority if made in proper form
and with the understanding that P is a party.
The corresponding provision is 6.01 in Restatement
3d

22
 Opinion, page 10
Cargill contends that the prerequisites of an agency relationship
did not exist because Cargill never consented to the agency,
Warren did not act on behalf of Cargill, and Cargill did not exercise
control over Warren.

We hold that all three elements of agency could be found in the

particular circumstances of this case. By directing Warren to
implement its recommendations, Cargill manifested its consent
that Warren would be its agent. Warren acted on Cargill's behalf in
procuring grain for Cargill as the part of its normal operations
which were totally financed by Cargill.

Further, an agency relationship was established by Cargill's

interference with the internal affairs of Warren, which
constituted de facto control of the elevator.

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 Controlling Creditor
Restatement 14 O: Security Holder
Becoming a Principal
A creditor who assumes control of
his debtor's business for the
mutual benefit of himself and his
debtor, may become a principal,
with liability for the acts and
transactions of the debtor in
connection with the business.

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 Restatement 14 O
comment (a)
A security holder who merely exercises a veto power over
the business acts of his debtor by preventing purchases
or sales above specified amounts does not thereby
become a principal.
However, if he takes over the management of the debtor's
business either in person or through an agent, and directs
what contracts may or may not be made, he becomes a
principal, liable as any principal for the obligations
incurred thereafter in the normal course of business by
the debtor who has now become his general agent.
The point at which the creditor becomes a principal is that
at which he assumes de facto control over the conduct of
his debtor, whatever the terms of the formal contract with
his debtor may be.

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 NOTE: Restatement (Third) has no counterpart to
Restatement (Second) 14O.
The Parallel Table for Restatement (Second) to
Restatement (Third) cites, as parallels to 14O,
Restatement (Third) 1.01, comments (f)(1) and (g).

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 Comment (f)(1) states (Vol. 1, page 44), In the debtor-
creditor context, most courts are reluctant to find
relationships of agency on the basis of provisions in
agreements that protect creditors interests. An
unusual example to the contrary is A. Gay Jenson
Farms, Inc. v. Cargill .

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