Butler v. Bunge Corporation

United States District Court for the Northern District of Mississippi · 1971 · Corporations

329 F. Supp. 47 (1971)

Updated August 22, 2026

CorporationsAgencyactual authorityimplied authorityindependent contractorright of controlgrain elevatorprincipal-agent liability

Facts

Bunge built and owned the Roundaway grain facility and entered an operator's agreement with Bayles, who ran it as Coahoma Grain Elevator while regularly receiving Bunge's quoted prices and delivering 97% of the grain he acquired to Bunge. Bunge controlled the destination of the grain, fixed the price paid to Bayles, and determined the weights and grades at Hurricane Point, while Bayles paid his own employees and operating expenses from funds generated by Bunge's purchases and advances. Butler sold his 1968 soybean crop to Bayles in February 1969 at a price slightly above Bunge's direct quote, and the entire crop was received at Hurricane Point. Bayles paid Butler with Coahoma Grain Elevator checks that were dishonored, and Butler then sued Bunge for the unpaid sale price.

Issue

Whether Bayles, in purchasing Butler's soybeans through Coahoma Grain Elevator, acted as Bunge's agent with actual authority, or instead as an independent contractor so that Bunge would not be liable for Bayles' failure to pay Butler.

Rule

An agency relationship exists when the principal manifests that another shall act on its behalf and subject to its control, the other accepts, and the parties understand that the principal is to control the undertaking. Actual authority may be express or implied, and the decisive test distinguishing agency from independent-contractor status is the principal's right of control over what shall be done and when and how it shall be done; labels in the contract do not control if the parties' actual relationship shows otherwise.

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Prairie Delta Commodities built and owns a receiving elevator outside Topeka, Kansas. Under its arrangement with operator Nolan Price, Prairie Delta quotes grain prices several times a day, requires Nolan to deliver all grain he acquires to Prairie Delta's terminal unless Prairie Delta gives permission otherwise, and Prairie Delta makes the final weights and grades at the terminal; Nolan hires and pays his own workers and uses his own checking account to pay farmers.

A farmer sells wheat to Nolan, who pays with a check that is later dishonored. In the farmer's suit against Prairie Delta, which is the strongest argument that Nolan was Prairie Delta's actual agent rather than an independent contractor?

Explanation. Actual agency may be implied from conduct showing the principal's right of control. The decisive test is who has the right to direct what shall be done and when and how it shall be done. Control over the grain's price, destination, weights, and grades shows dominant control over the undertaking, outweighing labels and the fact that Nolan paid his own employees.