Closely Held: Agency
Subagents (Restatement (Third) section 3.15)
"(1) A subagent is a person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent's principal and for whose conduct the appointing agent is responsible to the principal. The relationship between a subagent and the appointing agent and between the subagent and the appointing agent's principal are relationships of agent as stated. (2) An agent may appoint a subagent only if the agent has actual or apparent authority to do so." "An agent who appoints a subagent delegates to the subagent power to act on behalf of the principal, which the principal has conferred on the agent. A subagent acts subject to the control of the appointing agent, and the principal's legal position is affected by action taken by the subagent as if the action had been taken by the appointing agent. Thus, a subagent has two principals, the appoint agent and the agent's principal."
Specific Fiduciary Duty of an Agent: Refrain from Personal Use of Principal's Property of Confidential Information (8.05)
"An agent has a duty (1) not to use property of the principal for the agent's own purpose of those of a third party; and (2) not to use or communicate confidential information of the principal for the agent's own purposes or those of a third party."
Ethical Considerations: Client's Right to Counsel of Choice (In re: to associate leaving senior firm)
"clients have the right to expect that they may choose counsel when legal services are requires and, with few exceptions, nothing that lawyers and law firms do shall have any effect on the exercise of that right." Prohibition of an agreement "that restricts the rights of lawyers to practice after termination of the relationship, except an agreement concerning benefits upon retirement." "An agreement restricting the right of lawyers to practice after leaving a firm not only limits their professional autonomy, but also limits the freedom of clients to choose a lawyer." There is no per se prohibition against severance agreements, which may contain "reasonable and fair compensation provisions designed to avoid disputes requiring time-consuming quantum merit analysis." "severance agreements, on the other hand, that contain punitive clauses, the effect of which are to restrict competition or encroach upon a client's inherent right to select counsel, are prohibited."
An agent has actual authority to
(1) Do exactly what the principal has clearly and unequivocally instructed (2) At the time of taking action that has consequences for the principal, the agent reasonably believes, "in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act. (3) Cases in which the principal does not subjectively intend to give the agent authority, but the agent reasonably thinks the principal did so intend. REASONABLE BELIEF OF THR AGENT IS KEY.
Three basic situations: Liability of the Agent to the Third Party on a contract
Disclosed principal Undisclosed principal Partially disclosed (or Unidentified) principal
Carrier v. McLlarky: facts
Homeowner (P) retained Plumber (D) to install a replacement hot water heater. D told P that the old unit might still be under warranty and that he would try to obtain a credit for P against the cost of the new unit from the manufacturer. D took old unit to supplier to return it to the manufacturer. The supplier said that the old unit was no longer covered by warranty. P sued D for breach of duties as an agent
Reading v. Regem: Issue and Rule
Is a soldier entitled to keep the profit he made by using his military status to further the business interests of a third party? When a servant uses his or her position for personal profit without the consent of the master, the master is entitled to the proceeds of the unauthorized undertaking.
Town & Country House & Home Service v. Newberry: Issue and Rule
May persons who were employed by a company solicit that company's customers for competing business after they have terminated their employment? A customer base cultivated through a business's efforts may not be appropriated by former employees, regardless of whether they conspired to do so while employed by the business
The Agent's Duty of Care: Context Matters
Other provisions of statutory of regulatory law, or ethical rules may modify the general rule or remedy for breach. Model Business Corporation Act: provides that a corporate officer, in performing the officer's duties, must act "with the care that a person in like position would reasonably exercise under similar circumstances.." Corporation acts often supplement a statement of the standard of care with rules that limit the extent to which corporate agents can be liable for money damages. Revised Uniform Partnership Act states that a partner owes a duty of care that is limited to "refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law." Some exculpatory provisions in contracts are unenforceable as a matter of professional ethics, such as a provision in a lawyer's engagement letter in which the client waives the right to sue the lawyer for professional malpractice, waiving the right to claim punitive damages, or agreeing to submit to binding arbitration.
Johnson v. Hospital Service Plan: Continuation
Ratification may take more than one level of approval, for example, it was not enough for fire commissioners to ratify an unauthorized purchase, the mayor's consent was essential. They key is the "municipal boy charged with the responsibility for making the purchases" must have knowledge of the purchase or there can be no implied ratification.
Haynes v. Dalton (An implied contact approach)
Senior lawyer orally agreed to provide office space and overhead to associate in exchange for 40% of Associate's fees. Senior also provides support staff, insurance, CLE reimbursement, and some payments of professional fees. Four years later, associate leaves Senior's office, taking his pending cases. There was no termination agreement Senior was sued for an accounting fees on the cases initiated while associate was in senior's office. Senior contended he was entilted to 40% of the fees without regard to when the work was done. Associate said he was entitled to all the fees after he left, especially since there was no agreement to the contrary. "To allow Associate to benefit from Senior's overhead and receive all fees without reimbursement to Senior a percentage of such fees would unjustly enrich Associate and violate the parties' oral agreement."
Reliance damages
Simply restores plaintiff to the position they would have been in if the contract has never been entered into. (This is because the principal NEVER made any manifestations )
Why does it matter that the Agent's obligations are classified as "Fiduciary"
Someone entrusted with a matter of another. If an agent breaches a fiduciary duty of loyalty, distinctive remedies are available to the principal Burdens of proof are often allocated differently in cases alleging breach of fiduciary obligation than in civil litigation generally. A different limitation period may apply, and it may not begin to run until the principal discovers the breach of duty
Restatement (Third), Agency section 8.08: Duty of Care, Competence, and Diligence
Subject to any agreement with the principal, an agent has a duty to the principal to act with the care, competence, and diligence normally exercised by agents in similar circumstances. Special skills or knowledge possessed by an agent are circumstances to be taken into account in determining whether the agent acted with due care and diligence. If an agent claims to possess special skills or knowledge, the agent has a duty to the principal to act with the care, competence, and diligence normally exercised by agents with such skills or knowledge."
Johnson v. Hospital Service Plan: What if the responsible officials knew of the Blue Cross contract but not the $100 per-patient limit?
The "responsible officials" who should have made the agreement are not bound by their subsequent acceptance of it through the means of ratification unless they were acquainted with all the material facts." Court found no express ratification but implied ratification. Mere silence, performance of contract, acceptance of benefits, can suffice.
Johnson v. Hospital Service Plan: Analysis
The medical director was the only one in the City who established any medical rates of payment. Apparently, the "vey officer charged by the City... with the authority to negotiate such contracts knew of its consummation in 1944 and was also familiar with the rates which the Blue Cross plan understood to pay. The then director of the department of public affairs said he "may have directed" then then-Medical Director to enter into the agreement and further states that he had "undoubtedly" approved any rates established during his term in office. The Mayor and the Director of the Department of Health admitted that in the December 1954 hearings on the proposed 1955 budget, they "learned of the 1944 agreement and subsequent modifications, limiting the city to a flat payment of $100 for Blue Cross subscribers. "Nevertheless, no steps were taken to abrogate the arrangement and the city continued to receive benefits under it."
Oxford Shipping Co. v. New Hampshire Trading Corp: The Issues
The opinion addresses Oxford's claims against the steamship agency Tager: [1] contract claim: seeks to find an implied contractual term forbidding Tager from issuing a false bill of lading; [2] Tort claim: seeks to find a negligent act; [3] Fraudulent misrepresentation: intention to deceive (court says unnecessary to get to this claim). Court: these claims "boil down" to an assertion that Tager, in issuing false bills of lading, breached a fiduciary duty it owed to P.
Curto: Scope of Authority Issue
The scope of grants of authority is often an issue: Cases have held that the grant of power of attorney to make medical decisions is not a great of power to the agent to waive principal's legal rights under an arbitration agreement. Contrast Owens, which held that attorney-in-fact was authorized to enter into an arbitration agreement as part of a contract admitting new residents. One case said that an agreement to submit to binding arbitration is "ultra vires" of a "power of attorney for health care and the duty/power to provide for the nursing home spouse's medical needs." Cited to FL case which indicated that powers of attorney that have clauses that authorize the agent "to sign any and all releases or consent required" or that were general powers of attorney or giving power to prosecute and defend all actions and "do anything" regarding the resident's affairs. Curto said there are no such clauses here.
Specific Fiduciary Duty of an Agent
[1]Refrain from Acquiring Material Benefit from Third Party [2] Refrain from acting as or on behalf of an Adverse party [3] Refrain from Competing [4] Refrain from personal use of principal's property or confidential information
Curto v. Illini Manors, Inc: Rule
1) the agency of a spouse "is a question of fact to be proved by direct or circumstantial evidence;" and 2) the party claiming an agency relationship has the burden to prove it. "The terms and extent of an agency relationship depend on the terms of the agreement between the principal and the agent and the intent of the parties"
Wells Fargo Ins. Services USA v. Tyndell
5 employees left WFIS, an insurance brokerage firm with officers around the country. Prior to their departure, they formed an LLC to run a competing brokerage firm. Within two weeks of their departure, 200 wells clients had submitted "Broker of Record" notices to Wells that they were moving their business to the LLC. 98% of the "client roster" of the LLC consisted of former Wells clients. Wells received a preliminary injunction (likelihood of success on the merits) Wells has the burden to show that each of the defendants crossed the line from "mere preparation" for competition to "active solicitation"
Breach of duty?? Punitive damages??
A breach of fiduciary duty may also subject the agent to liability for punitive damages when the circumstances satisfy generally acceptable standard for their imposition. The consequences of a breach of FD do not differ from those of other torts that an agent may commit against a principal.
Termination of Power Given as Security: Example
A contract gives A power to sell something of B's if B defaults on a loan [that A made to B]; B cannot unilaterally terminate such a power. The... power isn't especially personal, and A isn't really B's agent; B has simply given A the power to do something ignorer to compensate A for the risk of B's default in an ordinary, non-agency contract.
Town & Country House & Home Service v. Newberry: Analysis
A customer base that is procured through the business hard work and advertising is part of a business's good will, and may not be solicited by former employees. Such appropriation of a former employer's customers for competing enterprise, as D did, constitutes unfair competition. Mrs. R expended great deal of time and effort in procuring P's customers. D did not assist Mrs. R in building the client base, but learned the identity of P's customers while working for P in other capacities. Hence, D knew that P's customers desired housekeeping services and would be receptive to the solicitations of a competing company. Although D did not solicit P's customers until after they had terminated their employment with P, their built their customer base by soliciting P's customers exclusively.
Johnson v. Hospital Service Plan: What if statutes had required a state official to approve such contracts?
A municipality can ratify a contract entered into by an unauthorized agent so long as such contract is within the corporate powers and not ultra vires in the primary sense as entirely beyond the municipal jurisdiction. Ratification possibly only if municipality could have authorized it.
Expressed Ratification
A principal can ratify an agent's conduct by "manifesting assent"
Curto v. Illini Manors, Inc: Analysis--> Did Husband subsequently ratify his wife's actions?
A principal can start off not being bound by a contract that was entered into by a purported agent who had no authority to bind the principal. That is, when the contract was first signed, the principal is not a party to it and will have no rights or liabilities on account of it. HOWEVER, the principal can subsequently become bound to the contract if the principal is held to ratify it.
Principal's Duty of Indemnification (Restatement (Third) Agency section 8.14)
A principal has a duty to indemnify an agent: (1) in accordance with the terms of any contract between them; and (2) unless otherwise agreed (a) when the agent makes a payment (i) within the scope of the agent's actual authority or (ii) that is beneficial to the principal, unless the agent acts officiously in making the payment; or (b) when the agent suffers a loss that fairly should be borne by the principal in light of their relationship
Terminating an Agency Relationship
A principal has the power to terminate an agency relationship even if the principal does not have the right to terminate. If principal terminates wrongfully, A may sue for damages but NOT specific performance. Actual authority terminates, but not necessarily apparent authority. A power "given as security" or one "coupled with an interest" is not terminated at will simply because the Principal manifests intent that it terminate.
Agency by Estoppel
A third party may hold a principal liable if: (1) the third party reasonably believes that an agent is acting for the principal and suffers a loss as a result, (2) the principal has notice of this, and (3) the principal doesn't take reasonable steps to correct the third party's misimpression
The reasonableness of the agent's interpretation of their authority is determined
AT THE MOMENT "when the agent determines how to act." If the agent subsequently learns something new about the principal's intentions, it can immediately impact the agent's actual authority
The "Overarching" Fiduciary Standard
Act loyally for P's benefit in ALL matters related to agency relationship This (section 8.01) is an overarching standard that unifies the more specific rules of loyalty
Two main differences between apparent authority and agency by estoppel: FIRST REASON
Agency by estoppel can cause a principal to be liable even if the principal gave no affirmative indication to the third party that the agent was authorized- something that is normally required for apparent authority. There is no requirement in agency by estoppel that the third party's reasonable belief in authority be traceable to the "manifestations of the principal"
Two main differences between apparent authority and agency by estoppel: SECOND REASON
Agency by estoppel lets injured parties recover ONLY for their loss in reliance on the misunderstanding. Essentially, It lets them recover reliance damages rather than expectation damages. By contrast, if there is apparent authority, the third party can recover expectation damages from the principal.
Restatement Third, Agency 1.01
Agency is the fiduciary relationship that arises when (1) one person (a 'principal') manifests assent to another person (an 'agent') that the agent (2) shall act of the principal's behalf and (3) subject to the principal's control, and (4) the agent manifests assent or otherwise consents so to act.
Siegel v. Arter & Hadden (Tortious Interference)
Although a departing associate and her new firm may compete for clients of the former firm, they must do so fairly or face claims of tortious interference with existing contractual relations. Even if a contract is at will, the persona intentionally causing another "not to continue" must "not employ wrongful means." The evidence is ambiguous as to whether the departing associated and her new firm used information acquired through improper means in their competitive efforts, e.g., information protected as trade secret, or information as to the former firms fee arrangements with clients that may have been wrongfully disclosed.
Actual Authority- Restatement (Third) Agency 2.01
An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act.
Scope of Actual Agency- Restatement (Third), agency 2.02(1)
An agent has actual authority to take action designated or implied in the principal's manifestations to the agent and acts necessary or incidental to achieving the principal's objectives, as the agent reasonably understands the principal's manifestations and objectives when the agent determines how to act.
Imputation of Knowledge and Agency
An agent's notice of a fact, however acquired, will be imputed to the principal if the fact is "material to the agent's duties to the principal." The principal is vicariously liable for the facts of which the agent has notice. The law presumes that, in the normal course of things, the agent will have a duty to disclose to the principal information acquired, or that should have been acquires, in the normal course of the agency. There is no imputation of a fact from agent to principal unless the agent knows the fact or has reason to know it.
Apparent Authority- Restatement (Third) Agency, 2.03
Apparent authority is the power held by an agent or other actor to affect principal's legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf go the principal and that belief is traceable to the principals's manifestations
Progress Printing Corp. v. Janes Bryne Political Committee
Appeal from a judgement holding that a campaign had ratified contracts. Candidate told Printer that Griffin was in charge of the campaign's printing arrangements and Printer set detailed invoices to Griffin. Griffin never read the invoices, which contained sufficient evidence to permit repudiation, which he did not. Subsequently, the Campaign rejected the invoiced, saying the orders were not properly authorized and the Campaign never knew the details. The designated agent, Griffin, breached his duty "to gain knowledge of the transactions by simply reviewing the invoices, a breach that had the same legal effect as actual knowledge of the facts and which may be imputed to his principal." In addition, the benefits of the transaction "were retained in that campaign staff accepted the materials, which were then used without question." The principal's ignorance of the facts was "the direct result of its expressly designated agent's neglect."
Liability of the Agent to the Third Party on a contract
Ask "how much information the third party had about the principal"
Implied Ratification
By engaging in "conduct that justified a reasonable assumption that the person consents to becoming subject to the act's legal consequences.
An agent can be liable to the principal for damages the agent caused to the principal
By exceeding the agent's actual authority. "If the agent's interpretation is reasonable at the time the agent acts, the agent is not subject to liability to the principal even if, after the fact, the principal can demonstrate that the agent's interpretation was erroneous."
Restatement (Third) on Ratification
By ratifying an act, a principal triggers the legal consequences that would flow had the act been that of an agent acting with actual authority Ratification retroactively creates the effects of actual authority. Ratification also exonerates the agent against claims otherwise available to the principal on the basis that the agent's unauthorized action has caused loss to the principal.
Oxford Shipping Co. v. New Hampshire Trading Corp: Rule
Fiduciary duty. To be strictly liable for a failure to accurately determine the weight of the cargo before making out the bill of lading? To use reasonable care to accurately determine the weight of the cargo before making out the bill of lading?
Apparent Authority is determined
From the perspective of a reasonable third party if the appearance is traceable to the principal's manifestations
Town & Country House & Home Service v. Newberry: Procedural Posture
Trial court dismissed P's complaint, holding that there was nothing secret to D, that its customer information was confidential. The appellate division reversed the trial courts decision, finding the D, while working for P, conspired to quit, form their own Biz, and appropriate P's customers for their own gain. The appellate division held that D constituted a violation of the fiduciary obligations they owed to P as employees and thus P was entitled to relief.
Curto v. Illini Manors, Inc: Analysis--> Did Husband liable under the theory of agency by estoppel?
Under which a third part may hold a principal liable if (1) the third party reasonably believes that an agent is acting for the principal and suffers loss as a result, (2) the principal has notice of this, and (3) the principal does not take reasonable steps to correct the third party's omissions. Court did not mention this theory However there are no indications that the Husband knew about the arbitration agreement, however he did know about the sheaf of papers.
Curto v. Illini Manors, Inc: Analysis--> Is Wife a party to the contract because she had no authority to bind the disclosed principal, her husband?
general rule: an agent is not a party to a contract by signing it if the agent purports to bind a disclosed principal but lacks actual or apparent authority. The "fact that an agent acted without power to subject the principal to liability does not make the agent a party to the contract. This is because an agent who only purports to bind a disclosed principal to a contract does not promise to render any of the performances purportedly required from the principal.
An agent has authority when an agent has the:
power to bind the principal and a third party to a contract
Specific Fiduciary Duty of an Agent: Refrain from acquiring material benefit from third party (8.02)
"An agent has a duty not to acquire a material benefit from a third party in connection with transactions conducted to other actions taken on behalf of the principal or otherwise through the agent's use of the agent's position." Rationale: "This rule stems form the ordinary expectation that a person who acts as an agent does so to further the interests of a principal and that it is the principal who should benefit from turns of good fortune that may occur in connection with transactions that the agent undertakes on the principal's behalf. This expectation may stem from the fact when the agent acts with actual or apparent authority, the principal risks being bound by transactions that may turn out to be disadvantageous to the principal in some respects." "An agent's duty under the rule state in this section is also limited by the scope of the agency relationship, including its duration." Remedies: "The principal may recover any material benefit received by the agent through the agent's breach, the value of the benefit, or proceeds of the benefit retained by the agent." "A principal may recover from an agent even when the agent's breach does not harm her- that is, even if she is not materially worse because of the agent's breach." "There are other ways that remedies for breaches of fiduciary duties can be quite broad. Injunction, recession of contracts, tort damages (including punitive) and early termination of the agent's contract with the principal." "A further potential remedy, unusual in other contexts, is the forfeiture of the disloyal agent's salary of other compensation. Thus may be the only available remedy when it is difficult to prove that harm to a principal resulted from the agent's breach or when the agent realizes no profit through the breach. Forfeiture enables a remedy to be determined at much lower cost to litigants. Forfeiture may also have a valuable deterrent effect because its availability signals agents that some adverse consequence will follow a brach of fiduciary duty."
Specific Fiduciary Duty of an Agent: Refrain from Acting as or on Behalf of an Adverse Party (8.03)
"An agent has a duty not to deal with the principal as or on behalf of an adverse party in a transaction connected with the agency relationship."
Post-Termination Duties of an Agent
"An agent's fiduciary duty to a principal is generally coterminous with the duration of the agency relationship. However, an agent may be subject to post-termination duties applicable to the agent's use of property of the principal and confidential information provided by the principal or otherwise acquired in the course of the agency relationship."
Curto v. Illini Manors, Inc: Analysis--> Did Wife have apparent authority to sign the arbitration agreement on behalf of the husband?
"Apparent authority arises when a principal creates a reasonable impression to a third party that the agent has the authority to perform a given act, BECAUSE of manifestations of the principal." "An agent's authority may be presumed by the principal's silence if the principal knowingly allows another to act for him as his agent." In Career Concepts, the sales manager was held to have apparent authority to contract with a placement agency because the company authorized him to enter other contracts and interview potential employees.
Coagents
"In contrast, an agent who appoints a cogent does not delegate power geld by the agent to the coagent. By empowering an agent to appoint a cogent, the principal creates a mechanism through which to generate additional relationships of agency between the principal and persons chosen by the agent. Cogent. although they may occupy dominant and subordinate positions within an organizational hierarchy, share a common principal."
Baseline duty of care
"In general, the standard of care applicable to a gratuitous agent should reflect what it is reasonable to expect under the circumstances. Relevant circumstances include: the skill, experience, and professional status that the agent has or purports to have. This, providing a service gratuitously may subject an agent to duties of competence and diligence.
A third party causing an agent to breach???
"Intentionally causing an agent to breach the agent's fiduciary duty to the principal is a well-established theory of liability." "A third party who provides substantial assistance or encouragement to an agent in breaching the agent's duty to the principal is also subject to liability to the principal."
Termination of Power Given as Security
"The chief idea is that when an agency power is given as part of a contract to ensure that the promisee [the agent] will be able to serve his own interests, rather than to act as a representative of the principal's interests, the principal cannot unilaterally revoke that power because doing so would undermine the contract." That is, the relationship NOT one of agency.
Restatement (Third), Agency section 8.08: Duty of Care, Competence, and Diligence. Comment b
"The duties states in this section will often overlap with an agent's duties of performance that are express or implies terms of a contract between principal and agent. However, the duties states in this section are tort-law duties because they denote the fact that the actor is requires to conduct himself in a particular manner at the risk that if he does not do so he becomes subject to liability to another to whom the duty is owed for any injury sustained by such other of which that actor's conduct is a legal cause." "Tort law imposes duties of care on an agent because [1] the agent undertakes to act on behalf of the principal, [2] because the principal's reliance on that undertaking is foreseeable by the agent, and [3] because it is often socially useful that an agent fulfill the agent's undertaking to the principal."
Oxford Shipping Co. v. New Hampshire Trading Corp
"The legal question is simply whether an innocent principal (Oxford) is barred from collection for damages caused by one set of the negligent agents (Tager) because another set of agents has also been negligent (the captain and first officer)- in other words, whether one agent's contributory negligence is to be imputed to his principal to bar the principal from recovering against another negligent agent." Tager argued successfully in the court below that the contributory negligence of Oxford's captain and first mater should be imputed to Oxford to bar Oxford's recovery against Tager for breach of duty of care.
Why do partially disclosed and undisclosed principal cases work the same way, according to the Restatement (Third), agency?
"Without notice of a principal's identity, a third party will be unable to assess the principal's reputation, assets, and other indicia of creditworthiness and ability to perform under the contract."
An agent can bind a principal and a third party by
"actual authority"; "apparent authority"
Johnson v. Hospital Service Plan: Procedure
City filed a lien for the remaining money owed against the proceeds of the P's settlement with the negligent driver and his insurance company. B/c of the lien the insurance company didn't pay out P. P sued for a declaratory judgement to absolve how of any liability to the City for his daughter's care. He argued that either the $100 paid by Blue Cross to the Hospital constituted payment in full or that, if the agreement between Blue Cross and the city were held invalid, Blue Cross was obligated to pay to discharge the City's Lien. The father absolved and dropped the suit, which then became a suit between the City and Blue Cross. The trial court said the Hospital Director had authority to enter the agreement and that, even if he had not, the City had subsequently ratified the agreement. Although the Hospital provided principally charitable care for indigents, a 1937 Ordinance provided that non-indigents could be served if they paid caesars at a rate to be fixed "by the Director." in 1944, the State determined Hospital was a "possible participant" ib the Blue Cross plan. Ensuring discussions led to Hospital Director entering into agreement with Blue Cross on rates. In light of its conclusion that the City had ratified the K, the trial court declined to interpret state statutes "to determine in which local official the authority to K with the plan resides." That is, authority existed somewhere ar age municipal level. The City said the authority does NOT reside with individual hospital directors.
Reasonable assumption of ratification
Conduct justifiable only on the assumption that the person consents to be bound by the act's legal consequences. For example, knowing acceptance of a benefit of a transaction ratifies the fact of entering into the transaction
Curto v. Illini Manors, Inc: Analysis--> Is Wife liable under her implied warranties of authority?
Court did not discuss this. An agent who acts without actual authority breaches warranties of authority made expressly or implied to third parties with whom the agent deals. "A person who purports to make a contract, representation or conveyance to or with a third party on behalf of another person, lacking power to bind that person, gives an implied warranty of authority to the third party and is subject to liability to the third party for damages for loss caused by breach of that warranty, including loss of the benefit expected from performance by the principal," unless the purported principal ratified the contract, the purported agent gives notice that no warranty of authority is given, or the third party knows the purported agent lacks authority.
Admiral Oriental Line v. United States: Analysis
Court rejected the U.S. argument that there should be a different result because the agent was a general agent. The "venture is the principal's, and as the profits will be his, so should the expenses." "Since by hypothesis the agent's outlay is not due to his mismanagement, it should be regarded only as a loss, unexpected it is true, but inextricably interwoven with the enterprise." If operator was an agent of the U.S., the Outfitter was an agent of the Operator. The U.S. Shipping Board "appointed Operator 'its Agent to manage, operate, and conduct the business of such vessel as it may assign to the Agent," and Operator agreed to so act "in accordance with the directions" of the Board. It was to "man, equip, victual, and supply" the vessels, and to pay all expenses and maintain them in a seaworthy condition, "all on the Board's account." "It was to issue all documents on the Board's form, appoint sub-agents, collect freights which it must deposit in a bank approved by Board and in the Board's name, and for which it was to account on forms prescribed by the Board." Operator was to be paid in percentages on the gross receipts, out of which it was to bear its administrative expenses. Rather than charter the ships to the Operator, The U.S. Board "put them in trade on its own account" and should "bear the hazard of defending unwarranted suits." "A subagent is entitled to indemnity against either the immediate or the remote principal for appropriate expenses or losses. In order to establish subagency, a principal must know or have reason to know that the agent will hire someone else to act on behalf of the principal and consent, expressly or impliedly, to such arrangement. What if the suit had not been baseless? Even if the agent had lost suit, the agent could "recover expenses necessarily incurred in the transaction of his principal's affairs. "A principal's duty to indemnify does not extend to losses that result from the agent's own negligence, illegal acts, or other wrongful conduct."
Curto v. Illini Manors, Inc: Analysis--> Should Wife be held to have agreed to submit her own personal claims to arbitration?
Court said no, saying only that she signed the arbitration agreement as "Resident Representative"
Town & Country House & Home Service v. Newberry: Holding
D must cease its solicitation of P's customers and pay damages to P for improperly luring away its customers.
Curto v. Illini Manors, Inc: Analysis--> Did Wife have actual authority to bind husband to the arbitration agreement? Specifically Implied
IMPLIED [ACTUAL] AUTHORITY IS ACTUAL AUTHORITY CIRCUMSTANTIALLY PROVED. "It arises when the conduct of the principal, reasonably interpreted, causes the agent to believe that the principal desired them to act on the principal's behalf." Implied actual authority may be established from the circumstances of a case based on prior course of dealing of a similar nature or from previous agency relationship. Restatement (Third) 2.01 comment c, "An agent must interpret a principal's manifestations and determine how to act." "The context in which the relationship is situated, including the nature of the principal's objectives and the custom generally followed in such circumstances, affects how the agent should interpret the principal's manifestations." If the principal states directions in general or open-ended terms, the agent will have to exercise more discretion than if the directions were detailed. "It should be foreseeable to the principal that an agent's exercise of discretion may not result in the decision the principal would make individually."
Liability of the Agent to the Principal on the contract
If an agent binds a principal to a contract the Principal did not intend, but did so based on the agent's reasonable interpretation of the principal's manifestations, the agent has actual authority and is NOT liable to the principal. If an agent acts with apparent but not actual authority, "the principal is liable to the third party on the contract that the agent has made, but the agent may also be liable to the principal for any losses the principal suffers as a result of the agent's" error or intentional exceeding of actual authority.
Appointing a Coagent
If an agent creates a coagent rather than a subagent, the agent is not liable on that basis alone for the coagent's bad contracts." An agent is subject to liability stemming from a soagent's conduct "only when the agent's own conduct subjects the agent to liability." "All else equal, an agent might prefer to create coagents rather than subagents in order to reduce its own liability." -If an agent hires a bad employee, the agent is not liable on that basis alone for the bad employee's bad contracts. - If an agent hires a bad subagent, the agent is responsible for that subagent's act.
Reading v. Regem: Analysis
If an agent unjustly enriches him or herself by engaging in unauthorized activities while acting in the capacity for which he or she was hired, the principal is entitled to keep any profits made thereby. The only reason P was hired to transport the cargo was because, as a British soldier in full uniform, he could ensure that the trucks he escorted could pass easily through the police checkpoints in Cairo. P thus violated his duty to the government by taking advantage of his status as a member of the armed forces to personally profit thereby. This case is distinguishable form those involving servants profiting from unauthorized ventures that have nothing to fo with the master's enterprise while on duty. In those cases, the servants did not act in their official capacities when they made their money, and were adjudged entitled to keep it. In this case, by contrast, the government is entitled to keep the money P made because he acted as a representative of the armed forces while engaged in his illicit enterprise. Accordingly, this court holds that the money belongs to the government and finds for the Defendant.
Example when the agent may also be liable to the principal for any losses
If the Agent binds the principal to a contract that was expressly unauthorized, the principal may sue the agent for any losses the principal incurs
Johnson v. Hospital Service Plan: Holding
If the City Hospital medical directors had no authority to enter agreements with Blue Cross, "the city by its course of conduct has by this time rectified the deficiency through implied ratification. Additionally, the doctrine of estoppel applied against municipal corporations.
Undisclosed Principal
If the agent doesn't inform the third party that the agent is working for a principal- for example, if the agent pretends that that the agent is operating on their own behalf rather than acting for another- than the agent IS a party to the contract, and the third party can recover against the agent. Both the undisclosed principal (by actual authority) and the agent (by apparent intent) can be liable to the third party.
Disclosed Principal
If the agent with authority tells the third party whom he's working for- that is, if the agent 'discloses' the identity of the principal to the third party- then the agent is NOT considered a party to the contract and is not ordinarily liable if the Principal breaches
Oxford Shipping Co. v. New Hampshire Trading Corp: Facts
Oxford (P) owned one cargo ship, the "Eastern Saga," which Avon paid to use to ship scrap metal it purchased from NHT (D) and was selling to Yuslan. P retained a captain, crew, and Tager Steamship Agency "to issue bills of lading and perform other tasks associated with loading and shipping the scrap. Avon tried to cheat the buyer by loading only 17,000 tons of scrap rather than 20,000 tons. "Avon used various false documents to conceal the fraud, including bills of Lading issues by Tager that overstates the weight of the scrap by a several thousand tons. Tager apparently relied on a letter of representation to Avon from D (which sold the scrap tp Avon). D says Avon urged it to sign the letter, claiming it did not know of the misrepresentation. Oxford's captain and first officer apparently knew that he ship had been "short weighted." Although they failed to report the short weighting either to P or to Yuslan, they did not affirmatively participate in the wrongdoing of Avon or Tager. The ship was confiscated in N. Korea after the authorities discovered it had been "short weighted." Because it accepted the bills of lading, the buyer Yuslan, automatically paid through letters of credit- it paid for the shortfall. Yuslan sued, among others, Oxford, to recover for the value of the shortfall. Oxford also had to post a bond to recover possession of the boat.
Example of a subagent
P hires a law firm to represent him. The law firm assigns the case to an associate who begins to deal with him and handle the case.
Johnson v. Hospital Service Plan: FACTS
P's infant daughter was injured by an allegedly negligent driver, who was insured. She was taken to Newark City Hospital, a public institution owned by the municipality and primarily dedicated to charitable care of indigents, and treated there for 70 days. Daughter was covered by P's insurance policy with Blue cross. Her hospital bill was 1190 but Blue Cross only paid 100 citing an agreement that it had first entered into 12 years ago with a predecessor city hospital medical director. The City accepted the 100 check from Blue Cross but said it was owed more. City said that the Hospital director had no authority to enter into the agreement that limited the amount Blue Cross could be charged to 100.
Miller v. Jacobs & Goodman (Ethical Considerations of Lawyer Autonomy and Client Choice)
P's personal injury firm represented clients on a contingent fee basis. Associated agreed not to solicit firm clients. They also agreed that, if they leave with a client, the firm is to receive 75% of the fees earned. Departing associates took 100 cases and claimed that the provision was invalid because it placed an economic burden on the client's right to choose: associated might decline representation because net feed would be lower if they had to share the compensation. Court stated "Florida courts are uniform in enforcing such fee splitting arrangements between lawyers and law firms." The Florida rules "may not be used to invalidate or render void fee splitting agreements." "We reject the argument that such agreements are unenforceable as against public policy because they place an undue economic burden on a client's freedom to choose representation." Court held: "In the instant parties' employment agreement, however, we find the liquidaruin clause to be unenforceable and invalid due to its failure to adequately measure damages." "Because the stipulated formulas was not an agreed-upon sole remedy and the firm was free to pursue additional remedies, the provision cannot be upheld as a valid liquidated damages clause."
Town & Country House & Home Service v. Newberry: Facts
Plaintiff was a house cleaning business run by Mr. R. Mrs. R, wife of P's president, built the company's customer base by randomly calling residents in a certain section of town that she determined might contain likely prospects. Selling P's service was very difficult. Mrs. R typically made hundreds of calls to gain a small number of prospects. After interested prospects were contacted. Mrs. R would make appointments to visit them personally to close the sale and determine the prices they would be charged. D and some associates worked for P for nearly three years. After terminating their employment with P, D formed their own house cleaning company which directly competed with their former employer. D built their customer base by soliciting P's customers. After discovering D solicited its customers, P sued, alleging that D had engaged in unfair competition. In its complaint, P contended that is business was "unique, personal, and confidential" and that D breached their confidential relationship with P by appropriating its trade secrets.
Reading v. Regem: Facts
Plaintiff was a sergeant in the Royal Army Medical Corps (d), stationed in Cairo, Egypt. P decided to make money by encoring a truck loaded with cargo through the streets of Cairo and delivered them to a third party, Manole. Manole paid P handsomely for his efforts. P was in full uniform while he was transporting the cargo. When the army discovered that P had a great deal of money in his Egyptian bank accounts and in his apartment, it launched an investigation. When it was discovered how P had made the money, the army impounded the funds. The army kept the money on the ground that P violated his duty by using his status as a soldier to escort the trucks through Cairo for pay. P sued to get the money back, contending that it rightfully belonged to him.
Purpose of the "judged at the moment of agent action" rule
Protect principals by making sure agents cannot unreasonably act for them in light of newly acquired information
Expectation damages
Put plaintiff in as good as a position if the contract has been FULLY performed
Curto v. Illini Manors, Inc: Analysis--> Did Wife have actual authority to bind husband to the arbitration agreement? Specifically Expressed
Question to ask: Did Husband make "manifestations that supported a reasonable belief in Wife that she had his authority to enter the arbitration agreement? Actual Authority can be expressed or implied. 1. Express [actual] authority: can arise by a contract, a power of attorney, or a court-ordered guardianship. According to the court: "No evidence indicated that husband was present and directed wife to sign the arbitration agreement as his representative, nor is there any indication that husband knew wife signed the agreement and agreed to or adopted her signature as his own." Purported agent can not get authority from Principal simply by signing a document that says she has authority.
Admiral Oriental Line v. United States: Facts and Procedure
The USA owned the ship Elkton, which was lost with all hands in a typhoon. The Elkton "had been entrusted to Atlantic Gulf & Oriental S.S. Co. (defendant operator) as ship's agent under an operating contract." Plaintiff alleged that it had been employed by Defendant Operator as ship's agent in the Philippines. Plaintiff had charged of fitting out the steamship for the voyage in which she was lost and: was described as a "genera; freight agent" for all ships the operator was operating in the Far East; agreed to hire subagents at all ports where it has no offices; agreed to perform all the principal (operator) duties under its contract with the US; received commission "on the gross frights without brokerage." Plaintiff was sued by the owners of the ship's cargo. It cost money to defend the suit, which it did successfully. Plaintiff in turn sued the Defendant Operator to recover these litigation expenses "on the theory that as agent it had paid them on the principal's account." The Operator in turn sued the U.S.A for: Operator's expenses in defending the earlier suit, to which the Operator had also been made a party, AND for any expenses for which it would have to pay Plaintiff Operator alleged that the USA was the "principal in the whole venture" and liable for any amounts that Operator would incur defending suits as well as any amounts it would be required to pay its subagent, the Plaintiff Outfitter. "An agent, compelled to defend a baseless suit, grounded upon acts performed in his principal's business, may recover form the principal the expenses of his defense."
Ratification, continued and applied to Curto
The act of ratification is a unilateral act of the ratified because its legal effect does not depend on communication to the agent or a third party. This presumably means that the Husband's ratification did not need to be communicated to either the wife or nursing home. However, courts will not allow a purported principal to use the possibility of a secret ratification as a way to speculate at a third party's expense. In particular, ratification becomes unavailable after a third party makes any attempt to withdraw from the transaction to after 'any material change in circumstances that would make it inequitable to bind the third party, unless the third party chooses to be bound. A principal may not ratify only one element of a single act or transaction; if the principal wishes to retain the benefits of the agent's action, the principal must also become subject to the legal consequences of the totality of the agent's conduct.
Actual authority is determined by
The agent's reasonable belief, provides it is based on the principal's manifestations to the agent
Appointing a subagent
The agreement by an appointing agent to be responsible for the new person the agent appoints (thus making that person a subagent) can be express or implied. "Employees of an appointing agent whom the appointing agent designates to act on behalf go the appointing agent's principal are presumed to be subagents..." "When an agent is itself a corporation or other legal person, its officers, employees, partners or members who are designated to work on the principal's account are subagents." An appointing agent is responsible to the principal for the subagent's conduct. "A contract between the principal and the appointing agent that requires or permits the appointing of subagents will often delineate the extent of the appointing agent's liability and will require indemnification by the principal of the appointing agent."
Curto v. Illini Manors, Inc: Analysis--> Was the Husband bound by Wife's inherent authority?
The concept seems to be the authority to bind, or power to bind, that arises out of the agency relationship itself. Restatement (second) agency 8A: an agent's inherent authority or inherent agency powers include "the power of an agent which is derived not from (1) authority, (2) apparent authority, or (3) estoppel, but solely from the agency relation. It exists for the protection of persons harmed by or dealing with a servant or other agent. "The core idea behind inherent authority is that it handles inevitable errors that arise when agents are involved." A principal might expect the agent to commit hard-to-avoid errors Think vicarious liability in tort The Third restatement eliminated it tho
Oxford Shipping Co. v. New Hampshire Trading Corp: 1st circuit help
The courts that have imputed the negligence of one agent to bar the principal's recovery from another agent have reasoned by analogy to a different situation without understanding the difference. Analogy to the situation in which Principal A seeks to recover damages from a third party driver who negligently collides with Principal's truck. "In such circumstances, courts often have geld that the contributory negligence of the [principal's] driver, if sufficient to bar the driver's own recovery, is sufficient to bar recovery by [the principal] as well. The agent's contributory negligence is 'imputed' to the principal. This rule is presumably grounded on the theory that the Principal should recovering from the agent, rather than the third party. But that makes no sense to apply it if the third party is another agent of the P and each agent can raise the defense of the other agent's negligence/ This "waning defense" of contributory negligence should not be "extended by imputation."
ICC v. Holmes Transportation
The determination of an attorney-client relationship is a "question of fact, or, at most, a mixed question of law and fact." There was a first question whether the attorney had signed a consent decree and related escrow agreement on behalf of the purported principal. Then the questions was, given the attorney had authority to enter the agreement on behalf go the purported principal, did the attorney have authority to modify the escrow agreement? Although the "general powers" of an attorney to represent a client "do not entail the authority either to settle a case or to make substantial modifications" to a contract, the "principals consent to be bound may be implied by showing the agent's actual or apparent authority to act in the principal's behalf." "An agent's actual authority to bind his principal may be implied in circumstances where the principal has acquiesced in or adopted conduct by the agent which is reasonably considered to encompass the authority to undertake the subject conduct on the principal's behalf." In this case, the previous authority to negotiate and execute an escrow agreement was held to encompass the authority to subsequently modify it as necessary.
Specific Fiduciary Duty of an Agent: Refrain from Competing (8.04)
Throughout the duration of an agency relationship, an agent has a duty to refrain from competing with the principal and from taking action on behalf of or otherwise assisting the principal's competitors. During that time, an agent may take action, not otherwise wrongful, to prepare for competition following termination of the agency relationship. Comments: Underscores the duration of the duty is limited to the duration of an agency relationship, unless otherwise agreed. "A former agent may use skills and more general knowledge, although learned in the course of work done for the former principal in such competition." "However, a former agent's right to compete with the principal is not absolute and does not privilege conduct that would be tortious if committed by third party." "A former agent remains subject to duties concerning confidential information and property of the principal." "If a former agent continues to have a confidential relationship with the principal, for example by furnishing advice to the principal on which the principal relies, the former agent may owe fiduciary duties to the principal derived from their confidential relationship that prohibit competition on that ground."
Carrier v. McLlarky: Issue and Rule
Was the Plumber (D) the agent of the Homeowner (P)? "An agency relationship is created when a principal gives authority to another to act on his or her behalf and the agent consents to do so." What duty did D have with respect to obtaining credit on the warranty? "Under ordinary circumstances the promise to act as an agent is interpreted as a promise only to make reasonable efforts to accomplish the desired results." "The degree of skill requires by an agent in pursuit of the principal's objective is limited to the level of competence which is common among those engaged in like businesses or pursuits."
Partially disclosed (or Unidentified) Principal
When the agent informs the third party that the agent us acting for a principal but does not identify that principal. The case of the unidentified principal "normally works similar to cases of undisclosed principals; both the agent and the principal can be liable to a third party"
Siegel v. Arter & Hadden (Trade Secrets)
Whether a law firm's particular knowledge or process is a trade secret is a question for the trier of fact. "Where information is alleged to be a trade secret, a fact-finder may consider, the amount of effort or money expended in obtaining and developing the information, as well as the amount of time and expense it would take for others to acquire and duplicate the information. P's client list was sixty-three pages in length and included the names of property owners, contact persons, addresses, and telephone numbers of hundreds of clients. The extensive accumulation of this information may well be shown at trial to represent the investment of P's time and effort over a long period of time." A strong dissent said that, because of the ethical rules protecting client choice, "the mere listing of clients' names cannot confer trade secret protecting. Useful information formatted into an attorney's or law firm's client list, however, may be protected by trade secret."
Adler, Barish, Daniels, Levin & Creskoff v. Epstein (Use of Confidential Information)
While still working for their employer firm, associated took several steps towards starting their new firm. They subsequently called and wrote clients and sent them forms to discharge the old firm and retain the new one. Court said the solicitations violated the Code of Professional Responsibility on effect at the time, which barred a lawyer's self recommendation "to a non-lawyer who has not sought his advice regarding employment of a lawyer." In particular, the package sent to clients, including the self-addressed stamped envelopes, provided the associated "a means of benefitting from a client's immediate, perhaps ill-considered, response to the circumstances." Under the circumstances of this case, the interests of informed client choice cut against the competing associates. The associates "were actively attempting to induce the clients to change law firms in the middle of their active cases. The associates concern for their new line of credit and the success of their new firm gave them an immediate, personally created financial interest in the client's decisions. In this atmosphere, the associates contacts posed too great a risk that clients would not have the opportunity to make a careful, informed decision." A departure from recognized ethical codes is significant in determining whether the conduct was proper under the Restatement (Second) of Torts on interference with contractual relations. The associates behavior adversely affected the "informed and reliable decision making" of the clients and hurt the former firm. It is no defense that agents can compete with the former principal after termination. the right of the associates "to pursue their own business interests" after termination is not absolute. "Unless otherwise agreed, after the termination of the agency, the agent has a duty to the principal not to take advantage of a still subsisting confidential relation created during the prior agency relation." The associates' "contacts were possible because their former firm trysted the associated with the high responsibility of developing its clients' cases. From this position of trust and responsibility, the associates were able to gain knowledge of the details, status, of each case to which they had been assigned." "In the atmosphere surrounding their departure, their client contacts unduly suggest a course of action for their firm's clients and unfairly prejudiced the firm. No public interest is served in condoning use of confidential information which has these effects. Clients too easily may suffer in the end."
Curto v. Illini Manors, Inc. FACTS
Wife "entered into a contract" with the Nursing Home to admit and care for her Husband. The care contract named Husband as the resident and wife as the "Guardian/Responsible Party." Wife signed the form on the preprinted signature line that designated her as the "Legal Representative" Husband did not sign the care contract. "The parties also entered into a separate arbitration agreement, which provides that 'any and all disputes arising hereunder shall be submitted to binding arbitration and not to a court for determination." In the arbitration agreement, "each party waived it's right to trial by jury." Wife signed the arbitration agreement above the line that stated "Signature of Resident Representative." Husband did not sign the arbitration agreement.
Curto v. Illini Manors, Inc. : Procedure
Wife sued nursing home under Illinois Nursing Home care act for (1) personal injured her Husband suffered while a resident at the nursing home and for his wrongful death; and (2) for personal claims had under various statutes for his wrongful death and for medical expenses. Nursing home filed a motion to dismiss the lawsuits and to compel arbitration. It argued that Wife was Husband's agent and thus bound home and his estate to honor the arbitration agreement. Court below concluded that one spouse is not an agent of the other "for purposes of an agreement to arbitrate."
