cases

Question 1

creation of an agency relationship

Answer 1

Gorton v. Doty:
Defendant lends car to coach. Ct. finds coach to be agent of Mrs. Doty and Doty is liable.
Take Away: Control is the key aspect of the creation of an agency relationship. Intention isn’t
necessary, control is determinative.

Question 2

creation of an agency relationship

Answer 2

A Gay Jenson Farms v. Cargill: Take away: Level of control within agency can make a lender relationship an agency
relationship. Too much control can equal an agency relationship.

Question 3

Church hired bill to paint the church, bill hires his brother sam as he had before, this time it
wasn’t discussed. Sam comes to help and is injured. Sam sues Church under agency theory.

Answer 3

Mill Street Church v. Hogan
Take Away: An agent can be given power by either express, implied or apparent authority.
There was possibly implied authority here becase of past deals. Apparent authority requires an
expression from the church to sam (or principal to agent). Here, church paid Sam = apparent
authority.

Question 4

Settlement agreement between each parties attorneys. Question of whether second attorney
was an agent.

Answer 4

Dweck v. Nasser: Take Away: Prior 20 years of work equaled implied authority for second attorney to be an agent
for principle. Arguably there was express authority because Nasser told him to settle the case.
And if we can’t get to express authority, we have implied authority because of past practices

Question 5

In reliance on a K, third party makes deal. Principal backs out.

Answer 5

370 Leasing Corporation: Take Away: even if an agent has limitations pursuant to principal, absent knowledge of that by
the third party who considers agent to be work in usual sense of business, the agent is given
apparent authority. There must be manifestations, however, by principal to third party signifying
agent’s authority.

Question 6

Humble sells pub to Watteau, yet Humble’s name stays on door and he continues to run
business. Watteau is non disclosed principles. Humble violates authority and buys products
he’s not supposed to buy. Fenwick sues for payment unaware of undisclosed principal.
Principle, Watteau, says Humble didn’t have authority, we’re not liable.

Answer 6

Watteau v. Fenwick: Take Away: Ct. may find inherent authority in cases of undisclosed principal. IF you set things
up where a person gets to run a pub, and he does those normal things in running pub, then the
undisclosed principal will be liable.

Question 7

Walter and Marry own farm as tenants in common. Walter gives third party option to purchase
farm without Marry’s consent or knowledge.

Answer 7

Botticello v. Stefanovicz: (ratification = intent & knowledge) Take Away: Did walter have authority to do this? Ct. looked to see if there was an agency
relationship between walter and mary. Ct. does not find agency relationship because all past
transactions indicated mary not being the principal of walter. There was not apparent authority,
there was not implied authority, nor express authority. Ct. says mary had no way of knowing
what walter had done, even though she was taking money.
Ratification requires knowledge

Question 8

Customer in furniture store dooped by fake salesman. Pays fake salesmen, never receives
furniture.

Answer 8

Hoddeson v. Koos Bros. Take Away: An agency can be created by estoppel when principal, because of carelessness,
creates an agency relationship by having third party change his or her position based on
misrepresentation caused by principal’s carelessness. It would be unjust to find otherwise.
Principal here could have monitored situation to stop this from happening

Question 9

Curran sets up companies that don’t really exist. Plaintiff selling fish to these companies, now
plaintiff wants to collect from Curran, who is saying he was merely the agent of the companies
he existed.

Answer 9

Atlantic Salmon A/S v. Curran Take Away: Agent can be liable if he does not disclose who he is working for. The agent can
be liable for what would’ve been the obligations of the principal if he or she does not disclose
his or her principal. Agent should disclose to guard against liability. Curran, in this case, was
misleading a bit as well, which didn’t help his cause. Disclose principal!

Question 10

Is the oil company liable for what happens at station

Answer 10

Humble Oil & Sun Oil (gas station cases): TORT LIABILITY Take Away: The right to control details of day-to-day operations will create an agency
relationship. Too much control = agency relationship.

Question 11

Holiday Inn:

Answer 11

lack of control over day2day operations negates agency relation

Question 12

McD

Answer 12

McDonalds not liable because no control over instrumentality of harm

Question 13

McD

Answer 13

McDonalds liable because control over instrumentality of harm

Question 14

Coast Guard:

Answer 14

Coast Guard liable because the harm was foreseeable based on employee/
employer relationship and within control of employee, requiring him to come back to boat.

Question 15

Orioles pitcher throws baseball into stands and injures heckling fan.

Answer 15

Take Away: Orioles liable because pitcher within scope of employment and the act was
foreseeable.

Question 16

Conoco owns two types of stores, some just Conoco brand, some owned by Conoco. In each
case, employees committed racially insensitive, discriminatory acts against customers.

Answer 16

Arguello v. Conoco: Take Away: Statutory tort claims: Relationship between employee and employer may equate
to agency relationship based on level of control. Case in book to illustrate that even statutory
claims can relate to agency relationship.

Question 17

City hires someone to knock down building. While building being taken down, it injures another
building. Is the independent contractor an agent or not

Answer 17

Majestic v. Toti: Take Away; Principal can be held liable for acts of independent contractor in three situations.
Normally they cannot be.
1. when landowner retains control over manner and means of work
2. If landowner hires an incompetant contractor
3. If the activity contracted for constitutes a nuisance per se (inherently dangerous activity)

Question 18

British soldier uses uniform to escort third party through streets of Cairo, exploiting employer.

Answer 18

Reeding v. Regem: Take Away: Ct. said that agents have a duty to principal not to use position as an agent for
their own profit. If you abuse your position as agent, you owe the principal whatever profits you
made. FIDUCIARY DUTY OF GOOD FAITH & HONESTY

Question 19

Singer subcontracted out work and benefited financially from these subcontracts

Answer 19

General Automotive v. Singer: Take Away: Duty of disclosure to principal. If you violate duty of disclosure, you forfeit profits to
principal. Duty of Good Faith & Loyalty

Question 20

Former employees of cleaning company take with them company list, solicit customers of old
company, and service those companies through their own cleaning business.

Answer 20

Town & Country v. Newberry Take Away: Former employees violated fiduciary duty loyalty. Former employees stole trade
secrets – it was the nature of the information they stole – this violated fiduciary duty they owed
to their employers and this fiduciary duty carries own PAST THE TERM OF EMPLOYMENT
-“A business proprietor may not solicit his former employee’s customers who are not openly
engaged in business in advertised locations or whose availability as patrons cannot
readily be ascertained, but whose trade and patronage have been secured by years of
business effort, advertising, and the expenditure of time and money.”

Question 21

Beauty shop owner wanted to make an employee a partner, did so through agreement, thus
not paying unemployment when she quit. Tax authority wants this NOT to be a partnership but
actually an employment agreement.

Answer 21

Fenwick v. Unemployement Take Away: This was a bogus partnership because the actual language of the partnership
allotted the “employee” no control, no capital investment, no liability, etc. Just because you call
it a partnership, it may not be.
Look to factors of agreement: is there:
- what is the intent of the agreement?
- Share in profits/losses
- capital investments
- control or management powers
- liability
- change in capacity

Question 22

Company get loan from another company, then first company goes bankrupt. Issue of the
relationship nature between lender and first company. Lender retains lender’s rights, but
creditor says the loan arrangement was a partnership.

Answer 22

Martin v. Peyton: Take Away: Ct. says the lender retained only lender’s rights, but must be careful of the amount
of control a lender assumes. If a lender takes too much control they can be deemed a partner.
Lender Rights:
- inspect books
- be consulted
- veto power

Question 23

One partnership exists wherein one company organizes trade shows and the other brings in
outside parties. Home builder show case. you remember. one guy said, we’re in a partnership,
one said we’re not.

Answer 23

Southex v. RIBA: Take Away: It doesn’t matter what an entity is called, it matters how the people involved act.
An ongoing business relationship need not create a partnership. Share of profits – OTHER
THAN IN THE FORM OF PAYMENT (DEBT, WAGES, INTEREST) is prima facie evidence
of partnership, which can be rebutted by evidence sufficiently demonstrating that the
parties did not intend to create a partnership
5
Factors:
- K not a partnership agreement
- Term of agreement was definite (5 years)[BJ1]
- No liability for one side
- Very little control of management by one side
- Didn’t file partnership tax returns
- One side entered into K w/ 3rd parties in their own name and not under pship name

Question 24

Plaintiff deposits money in bank to be invest in an insurance company. PRICEWATER HOUSE
CASE. The bank relied on an audit letter, resulting in plaintiff allowing bank to invest money.
Plaintiff tries to sue subsidiaries of parent company PRICEWATER HOUSE Case

Answer 24

Young v. Jones: Take Away: If a third party relies on the representation of someone saying they’re a
partnership, then there can be partnership by estoppel. In this case, this did not happen. There
must be a manifestation and that manifestation must be relied upon.
Partnership by Estoppel: “A person who represents himself, or permits another to
represent him, as a partner in an existing partnership or with others not actual partners,
is liable to any person to whom such a representation is made who has, in reliance on
the representation, given credit to the actual or apparent partnership.”

Question 25

Does a de facto partnership exist? Meinhart and Salmon are in “joint venture K” – agreement allows them to lease a hotel building for 20 years and to renovate it and collect rents. Underlying owner of building gives the 20 year lease. When the 20 years end, Salmon enters into new deal with owner of the property. Meinhart says hold on we had a partnership and you are stealing a partnership opportunity that should’ve belonged to both of us. Issue of breach of fiduciary duty of loyalty

Answer 25

Meinhart v. Salmon: Take Away: Fiduciary duty of loyalty owed between and among partners. Must disclose new opportunites to partners or joint venturers. Must be in the same line as the partnership.

Question 26

Should interested partners vote on a matter of which they are of interest.

Answer 26

Perretta v. Prometheus Development Company, Inc.[BJ2] Take Away: Violation of fiduciary duty of loyalty for interested partners to vote on a matter that benefits them. Interested party casting votes that cut out disinterested party is violation of fiduciary duties. A partnership agreement that allows an interested partner to count its votes is manifestly unreasonable. The question is not whether the interested partners are benefited, but whether the partnership or other partners is harmed. 6 -Thus, a partner who takes to seek a business advantage over another partner bears the burden of showing complete good faith to the others. USE FULL DISCLOSURE

Question 27

Law Firm case, partners leave and take clients with them.

Answer 27

Meehan v. Shaughnessy: Take Away: 1. It is okay to make plans as a partner within a partnership to make plans to leave 2. Have a fiduciary duty as you leave a partnership to treat the partnership fairly – in this case it had to do with unfairly contacting the clients before the firm had time to do so as well. Also, these guys that left lied to their partners about leaving. One-sided solicitations to a partnership’s clients breach the duty of good faith and fair dealing. Must disclose everything. Full disclosure.

Question 28

Alcoholic partner of a law firm case. He was given opportunity to clean up his act – they said they would only give him one chance, but they ended up giving him another chance – he cleaned up for good and asked to have his full partnership restored, but the partnership fired him.

Answer 28

Lawlis v. K&G: Take Away: If the partnership agreement permits a partner to be terminated without cause, the agreements is binding, and the partner who is terminated without cause does not have a claim. There is no fiduciary duty to keep a partner in a partnership. The statutes say that when a partner is involuntarily expelled from a business, his expulsion must be in good faith for a dissolution to occur without violating fiduciary duties; however, as in this case, partners are free to draft their partnership agreement in any way the they see fit, and if the partners agree that a partner can be expelled not in good faith, the agreement trumps the statutes.

Question 29

Putnam sold interest to Shoaf, but sometime after this it is found out that the company is about to receive a judgment because of embellzement by a secretary. The former partner sues for a share of the settlement, arguing she had an interest in the asset.

Answer 29

Putnam v. Shoaf Take Away: Partners in a partnership do not have a specific interest in the property of a partnership. The property is owned by the partnership. A partner’s interest is in the partnership. A partner has no interest in the unknown choses of action belonging to the partnership.

Question 30

Grocery store case: one partner informed Nabisco that they didn’t want anymore bread delivered and that he would not be financially responsible from any bread purchased from 7 Nabisco. The other partner ordered more bread and Nabisco delivered it. The partnership dissolved and Nabisco sued the first partner to recover for the delivered bread.

Answer 30

Nabisco v. Stroud: Take Away: When you have two equal partners, neither one can tell the other how to behave. Each one can act independently for the company and cannot be restrained by the other. Every partner is an agent of the partnership for the purpose of its business, and every partner’s acts for apparently carrying on in the usual way of the partnership’s business binds the partnership, unless the acting partner has in fact no authority to act for the partnership AND THE PERSON WITH WHOM HE IS DEALING KNOWS THAT HE HAS NO SUCH AUTHORITY.

Question 31

Summers wants to hire a third employee and does so without dooley’s consent. Dooley refuses to pay this third person’s salary.

Answer 31

Summers v. Dooley Take Away: Partners need a majority to control, if not, the acts of one partner are imputed to the other partner[BJ3] . Whether a partner is bound by an employment contract entered into by another partner depends on the facts of the situation: if the hiring is an ordinary business matter in the partnership’s operation, the employment contract will bind the partnership in the absence of an objection by the majority. If the hiring is not an ordinary business matter, such as when the partnership has not previously hired employees, the employment contract is considered to be with the individual partner, not the partnership.

Question 32

Equal rights in management can be overridden | by contract.

Answer 32

Day v. Sidley SEE PAGE 147 Take Away: If you look at structure of firm, it is perfectly legitimate for a partnership to delegate management authority to a committee. Equal rights in management can be overridden by contract. Managing partners have no fiduciary duty to disclose changes in the partnership’s internal structure if the changes do not generate a profit or loss for the partnership. While the UPA generally requires complete disclosure of all information material to the partnership’s business operations, the partnership agreement may temper this requirement. If a partner relinquishes his management rights in ceratin areas by executing the partnership agreement, the managing partners need not disclose info that does not affect the partner’s interests.

Question 33

Bowling alley case. One partner belittled the other. One wanted out.

Answer 33

Owen v. Cohen (Heitzinger v. Deery) Take Away: Ct. will grant a petition of dissolution when the actions of one partner make the partnership untenable. Despite an implied term of existence, the misconduct of a partner will justify it’s dissolution. “Courts of equity may order the dissolution of a partnership if the partner’s quarrels and disagreements are of such a nature and such an extent that all confidences and 8 cooperation between the parties has been destroyed or if a partner’s misbehavior materially hinders the proper conduct of the partnership’s business.

Question 34

Cafeteria development.

Answer 34

Collins v. Lewis:[BJ4] Take Away: You always have the power to terminate, but you don’t always have the legal right to terminate and if you want to limit your partnership you need to do so in the partnership agreement. In this case, no badly behaving partner – just unhappy with situation – so no justification to terminate this contract. A partner may not obtain a judicial dissolution of the partnership if his own interference causes the partnership to be unprofitable.

Question 35

Linen supply business. Laundry company about to succeed, then one brother didn’t want to share profits with the other - he was essentially financing the company - once they made money he tried to cut him out.

Answer 35

Page v. Page:[BJ5] Take Away: Partnerships can be terminated by the express will of any partner when not definite term or particular undertaking is specified. MUST BE A SPECIFIED TERM OTHERWISE A PARTNER CAN DISSOLVE. Partnership at will is terminable at will. A partnership at will can arise IF the original partnership agreement contains no specified duration or undertaking (more than a simple hope of profits to recoup investment). Although a partner is not bound to remain in an unprofitable partnership at will, he must not use outside pressures to appropriate the partnership’s business for his own use.

Question 36

Shopping center – two owned 85% one owned 15%. At-will partnership that was dissolved when the plaintiff’s had frozen out the defendant. The business went to auction. Ct. found that even though some general disharmony existed among the parties, the evidence fails to show that the plaintiffs wrongfully excluded the defendant from the partnership’s management. Issue: May two partners in a three-man partnership-at-will, who have excluded the third partner from partnershp management, purchase asset at a judicially supervised dissolution sale?

Answer 36

Prentiss v. Sheffel[BJ6] Take Away: Cts. Do allow a fair share sale of business and purchase by partners or former partners. Upon dissolution of a partnership, a former partner may bid on the partnership assets a judicial sale. Cannot wrongfully exclude from participation in he sale a former partner. IF ONE PARTNER IS EXCLUDED FROM BIDDING, IT IS A VIOLATION OF FIDUCIARY DUTIES.

Question 37

One wants to dissolve, but cannot because he would have to leave behind his IP licencse. Issue: IS a partner entitled to retain a former partner’s trademarks and patents used in the partnership business upon the former partner’s WRONGFUL DISSOLUTION OF THE PARTNERSHIP?

Answer 37

Pav-Saver v. Vasso: Take Away: If a partner is entitled to take over a business on dissolution, then he may also be able to use the partnership’s assets, including IP license. Watch out for whether the dissolution was appropriate or not. Upon a wrongful dissolution of a partnership in violation of the partnership agreement, each partner who has not wrongfully dissolved the partnership is entitled to damages for breach of contract and may continue the partnership business for the term required under the partnership agreement with the right to possess the partnership property upon posting a bond.

Question 38

Kovicik put in money, reed put in services. Now it dissolves and the ct. finds that since reed hasn’t put in any money then he didn’t have to put in any money to balance anything out.

Answer 38

Kavicik v. Reed: FAMOUS FOR BEING WRONG[BJ7] Take Away: Generally partners in a partnership have to share losses. BUT: UPA fashions a default rule that differs from the rule established in this cae: each partner shares losses in proportion to their share of the profits – UPA does not base the burden of losses on the type of contribution made by each partner, but rather on the share of profits to which each partner is entitled. HOWEVER, elsewhere in the UPA, losses realized upon dissolution are treated differently – parties may agree to share operationg losses differently than capital losses in the event of dissolution.

Question 39

BJ8] One partner is on drugs and the others want to get rid of him on the basis of his bad behavior. He dies however and they cancel the dissolution. Issue: May a surviving partner continue the partnership business upon the death of a partner with payment of the deceased partner’s interest to his estate as determined by the partnership agreement?

Answer 39

G & S v. Belman Take Away: Actually starting a dissolution action is not the same thing as actual dissolution. Filing a suit for dissolution does not dissolve a partnership. Courts must honor a partnership agreement’s term providing for the buy-out of a partner upon death.

Question 40

Issue: Do limited partners who give business advice and dictate business transactions have sufficient control of the limited partnership’s business to convert them into general partners?

Answer 40

Holzman v. De Escamilla[BJ9] Factors that lead the LP to be GP: - free to dictate business transations through their own initiative - could veto any business transaction by refusing to sign checks - actively chose which crops to plant - replaced De Escamilla (GP) as manager with someone not else, not them 10 Take Away: Limited partners who take too much control can be liable as general partners. LP rights that do not constitute too much control: -consulting with GP - acting as GP’s agent - voting or conferring on bus. decisions that relate to financing or dissolution - or deciding on a change in the business

Question 41

Two companies enter into an agreement, one to build a ship, one to buy the ship, except that one of the companies was not incorporated. Issue: Does a party’s failure to have incorporated before signing a contract with the DEFENDANT render the contract unenforceable?

Answer 41

Southern-Gulf Marine Co. No. 9, Inc. v. Camcraft, Inc.:[BJ10] Take Away: A defendant may not interpose as a defense to a breach of contract that a plaintiff corporation lacked the capacity to contract because it was not incorporated at the time it executed the contract, unless the failure to incorporate actually harmed the defendant. As long as the lack of legal standing doesn’t adversely affect the defendant, the standing of the plaintiff is not relevant.

Question 42

Guy struck by taxi cab. Taxicab owned by one corporation. Carlton (D), is a stockholder in ten taxicap corporation – one of which owned the taxi that struck the guy (Walkovsky). The ten companies share the same financing, suppliers, repairs, employees and garages. May a plaintiff recover against individual stock holders if a corporate structure limits the corporations’ liability for personal injuries, even if there is no showing that the stockholders used the companies for personal, rather than corporate, gain?

Answer 42

Walkovsky v. Carlton[BJ11] : No. Take Away: In deciding whether to pierce the corporate veil and reach an individual’s assets, courts are guided by general agency rules. If an individual controls a corporation for personal gain rather than the corporation’s gain, the individual is responsible under Respondeat superior of the corporation’s acts in commercial dealings and in tort claims. A court may disregard corporate form to prevent fraud or achieve equity, but may not overlook corporate formalities to provide a plaintiff with resources for his injuries. To Pierce corporate veil look for: - individual stockholders commingled funds - companies are undercapitalized - stockholders are operating the businesses without regard to corporate formailities - purchase supplies through one source