Gay Jenson Farms v. Cargill (1981) Brief

Gay Jenson Farms v. Cargill
309 N.W.2d 285, 290 (Minn. 1981)

Facts: The plaintiffs were farmers that sold grain crops and extended credit to Warren, a local grain elevator grain operator. Cargill was an international grain dealer. According to Cargill, Warren bought grain from farmers and sold it to Cargill. According to the plaintiffs, Warren bought grain as an agent for Cargill. Cargill had provided financing for Warren for many years. During those years, evidence shows that Cargill was very involved in Warren’s business. Warren became insolvent and didn’t pay the farmers for the grain, and they sued Cargill for Warren’s default on their contracts.

Issue: Whether Cargill, by its course of dealing with Warren became liable as a principal on contracts made by Warren with plaintiffs?

Holding: Yes, Cargill was a principal of Warren within the definitions of agency. The court held that Cargill (the international dealer) was liable because it exercised control and influence over Warren (the local operator). The basis for their conclusion is that there were several factors that indicated Cargill’s control over Warren. Cargill was an active participant in Warren’s operation, rather than simply a financer. All portions of Warren’s operation were financed by Cargill and Warren sold almost all of its market grain to Cargill. That is, Cargill tried to play too many roles, and it backfired on them – they were held to be an agent. An agreement may result in the creation of an agency relationship, although the parties didn’t call it an agency and didn’t intend the legal consequences of the relationship to follow.

Rule: A creditor who assumes control of his debtor’s business may become liable as a principal for the acts of the debtor in connection with the business.

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