Chapter 5

§ 5.10

(1)(b) — A motion to delete this subparagraph was defeated.

(2) — Consideration will be given to adding a Subparagraph (c) that would continue the obligation to make periodic payments if suspension of that obligation would work a substantial injustice.

Chapter 7

§ 7.05

The Chief Reporter indicated that, in light of the discussion, a new Paragraph will be added to the black letter providing that, if there is a childless relationship that dissolves within five years, an agreement that limits the remedies available under Chapter 6 is enforceable, even though it does not meet the other requirements of this section.

(1) — In circumstances in which there is a signed promise by the party against whom it is sought to be enforced, consideration will be given to modifying the requirement that an agreement must be signed by both parties.

(5) — A motion was defeated that would have added at the end of this Paragraph the following sentence: "This section does not apply to enforcement of an agreement that contains a voluntary and express waiver of disclosure by the party seeking to resist enforcement." A motion to insert, somewhere in this Paragraph, the phrase, "Except for early in the relationship of domestic partners," was also defeated.

§ 7.07

(2)(c) — Consideration will be given to substituting the words "reasonably unlikely" for "unable" in line 5.

(3) — Consideration will be given to adding a "findings" requirement here, as in § 5.10.

Comment b — The references to nonexistent Paragraphs (1)(a), (1)(b), and (1) (c), on pages 135, 136, 138, and 144 will be changed to (2)(a), (2)(b), and (2)(c).

Illustrations — An Illustration may be added in which enforcement of a childless couple’s agree ment to keep all the money that each of them earns if their marriage terminates would not work a substantial injustice, even though the husband, who initially earned about the same amount of money as his wife, subsequently earned considerably more as the result of a change in career.

§ 7.12

(3) — Consideration will be given to adding, at the beginning of this Paragraph, the words, "by its terms."

Comment — Discussion of the relevance of this section to the Jewish form of divorce known as the get will be added.

§ 7.15

(2) — In order to eliminate the triple negative, consideration will be given to redrafting this Paragraph to begin by stating, "A separation agreement that is not enforceable," and to conclude by stating, "The court may nevertheless enforce it if it finds…."

Comment e — Consideration will be given to discussing the fiduciary relationship between the parties, which might give rise to a duty to disclose, and how this might relate to the contractual notion of concealment.

Comment g — It was suggested that the terms "misrepresentation" and "concealment" be used in place of the term "fraud."

§ 7.18

Comment — Consideration will be given to discussing the powers of the court when one of the parties files for bankruptcy before he or she has completed the compensatory payments. The Reporter will also consider addressing the effect of a party’s death after the divorce decree is granted but before the property settlement has been completed.

Chapter 2

§ 2.03

(1)(b) — Consideration will be given to modifying this subparagraph and the accompanying commentary to indicate that, even if a husband remains ignorant that he is not the real father, as provided in Paragraph (1)(b)(ii)(A), and there is no subsequent period when he becomes aware that he is not the real father, as provided in Paragraph (1)(b)(ii)(B), he might still be a parent by estoppel.

(1)(b)(i) — A motion to delete this subsubparagraph was defeated, but consideration will be given to making subsubparagraph (ii) a predicate to all that follows and adding subsubparagraph (i) to the list of factors to be considered.

(1)(b)(ii) — See (1)(b)(i) above.

Comment — See (1)(b) above.

Illustration 5 — Consideration will be given to adding language making it clear that, after Howard learned he was not Charlie’s biological father, he continued to behave as if he were his father.

§ 2.04

(1)(d) — It will be made clear whether this subparagraph is meant to apply to open adoption agreements.

Comment — It will be indicated that Chapter 2 does not exclude proceedings by children’s agencies under other laws, such as the law governing parental abuse and neglect.

§ 2.09

(1) — The phrase "should be required to allocate," here and in Paragraph (3), may be changed to "should allocate," if consistent with the rest of the Principles.

(2) — The statement, "the court should not be allowed to consider the division of functions," may be changed to "the court should not consider the division of functions," if consistent with the rest of the Principles.

(3) — See (1) above.

§ 2.21

Comment c — In the second paragraph, the application of this Comment to open adoption agreements will be discussed.

Chapter 3

§ 3.02A

The term "estopped from" will be substituted for "estopped to" throughout this section.

(1) — Consideration will be given to providing specifically that the state does not have standing to assert an estoppel under this section.

(2)(a) — The Reporter will consider making this subparagraph a prerequisite to imposing a support obligation under this section and making the remaining three subparagraphs additional factors to be considered.

§ 3.10

In light of differences between Chief Reporter Ellman and Reporter Blumberg over whether deferral of the sale of the family home for the benefit of the child should affect the amount of the child support obligor’s monthly child support payment, as reflected in § 3.10, Illustration 8, § 3.16A, and § 4.15, the membership voted to approve whatever solution the Director, in consultation with the Reporters, decides upon and the Council approves. One solution proposed was to state in § 3.16A that a determination to defer the sale of the family home may entail increasing the child support for the benefit of the child. During the course of the discussion, Reporter Blumberg indicated that she favored adding the following language to the black letter of § 3.16A: "A deferral of sale order results in a housing saving when the carrying costs of the family home paid by the residential parent are lower than the cost of housing that the residential parent and child would otherwise require absent the child’s interest in remaining in the family home."

Illustration 8 — See § 3.10 above.

§ 3.16A

See § 3.10.

Chapter 4

§ 4.15

See § 3.10.

Subject to the discussion at the meeting and to final editorial revisions, the Institute completed its review of the project by giving final approval both to Tentative Draft No. 4 and to earlier drafts that had been tentatively approved. The entire work will be integrated into a coherent final text, which is expected to be published in 2001.

Transnational Insolvency Project Principles of Cooperation in Transnational Bankruptcy Cases Among Members of NAFTA Tentative Draft

Reporters:

United States: Jay L. Westbrook

Canada: E. Bruce Leonard, Jacob S. Ziegel

Mexico: Miguel Ángel Hernández Romo, Carlos Sánchez-Mejorada y Velasco

Section I. Introduction

The last full sentence on page 5 may be qualified to indicate that not all of the Advisers have agreed that all of the Procedural Principles may be properly applied in every circumstance.

Section III. General Principles

General Principle V

Consideration will be given to modifying this Principle to state: "The court should be prepared to approve the sharing of value of debtors’ assets on a worldwide basis." It was suggested that the words "appropriate sharing" be substituted for "the sharing" in line 4. A suggestion that this Principle provide that there should be a sharing of value of the debtor’s assets on a worldwide basis in order that there may be a pari passu recovery by all unsecured creditors was rejected.

Section IV. Procedural Principles

Procedural Principle 4

Comment on Paragraph B — The Reporters agreed to reconsider whether there may be circumstances in which Canadian domestic law relating to stay of proceedings would be applicable.

Procedural Principle 10

Comment — It was suggested that it be specifically recommended here that those who are responsible for court administration be especially attuned to the need for quick response and openness in proceedings of this nature.

Topic C. Administration

Subtopic 1. Single Full Bankruptcy Proceedings

It was suggested that the Illustrations under this Subtopic may be too timid when there is an oversecured creditor or no creditor at all, and that the Reporters should take into account instances in which the creditors are predominantly but not exclusively in one country and the assets are predominantly in another.

Procedural Principle 11

A disagreement was expressed with the implication that, under current Canadian law, the court has the power to grant a stay without parallel proceedings.

Procedural Principle 12

In response to a view expressed that a court, under current Canadian law, could not require an asset to be transferred to a foreign country free and clear of an existing lien, as permitted under this Principle, the Reporters agreed to consider providing for a compensating payment to affected creditors as an alternative to the transfer of specific assets.

Illustration 2 — It will be made clear that a court in Canada does not have the power currently to grant the request to expatriate inventory.

Procedural Principle 22

The typographical errors in line 1 will be corrected.

Procedural Principle 23

A motion to amend this Principle and the accompanying Comment to refer to "controlled subsidiaries" instead of merely "subsidiaries" was defeated.

Procedural Principle 26

The Reporters declined to address here whether it is fair to bind to a Plan of Reorganization creditors who have filed claims in advance of the presentation of the Plan.

Procedural Principle 27

The Reporters rejected the suggestion that they substitute the words "is given" for "received" in line 6.

Section V. Recommendations

The Reporters agreed to include recommendations for international agreement as well as recommendations for legislation throughout Section V.

Subject to the discussion and to final editorial revisions, this Tentative Draft was approved, with the understanding that the draft will be revised to take into account recent major changes in Mexican bankruptcy law. The previously approved International Statement of Mexican Bankruptcy Law will also be revised accordingly. The final, official text for the entire project is expected to be published in 2001.

International Jurisdiction and Judgments Project

Report

Reporters: Andreas F. Lowenfeld, Linda J. Silberman

An oral report supplemented the written Report, and a discussion followed. As planned, no votes were taken.

Restatement of the Law Third Restitution and Unjust Enrichment

Discussion Draft

Reporter: Andrew Kull

The Reporter agreed to coordinate the treatment of restitution in this Restatement with its treatment in § 26 of Restatement Third, Suretyship and Guaranty, in the circumstance in which the principal obligor is not aware of there being a secondary obligor. It was suggested that the Table of Contents be modified to include two prominent headings, "Liability in Restitution" and "Restitutionary Remedies," and that the last topic, Part IV, which is "Defenses to Restitution," should be repositioned somewhere in the liability section. It was also suggested that an Illustration involving a government contract should be included. Consideration will be given to including Chapter 7, "Measuring Unjust Enrichment," in Tentative Draft No. 1. The Reporter rejected a suggestion that the title of the Restatement be changed to Restatement of Unjust Enrichment.

§ 1

Comment b — With respect to the requirement that the defendant must actually be unjustly enriched to enable the plaintiff to recover, it was suggested that the Reporter clarify what it means to be enriched.

Illustration 9 — There was a suggestion that the law of intellectual property be excluded from this Restatement.

§ 2

Comment f — It was suggested that the Reporter address more fully the issue of whether the officious intermeddler has the right to recover.

§ 4

(1) — It was suggested that the concept of "restoration," discussed in § 1, Comment c, also be included here or in a separate clause in the black letter.

§ 6

Comment e — The Reporter agreed to reconsider whether the Comment overstates the possibility of overcoming the voluntary payment doctrine.

Comment i — The Reporter agreed to add examples of restitution in connection with Article 4A (Funds Transfers) of the Uniform Commercial Code.

As planned, no votes were taken on the draft.

Uniform Commercial Code Revised Article 1 (General Provisions)
Discussion Draft

Reporter: Neil B. Cohen
Associate Reporter: H. Kathleen Patchel
Drafting Committee Chair: Boris Auerbach

§ 1-301

(a) — Consideration will be given to including here, or in Reporter’s Note a, some discussion of the parties’ right to choose the law governing the validity of the agreement.

(b) — The Reporters will consider modifying this subsection in accordance with Article 5 of the Rome Convention.

(c) — Consideration will be given to stating here, or in Reporter’s Note c, that courts will not apply contract provisions that violate their own fundamental policy. The Reporters will also consider modifying this subsection in accordance with Article 7 of the Rome Convention, which gives the court the discretion to apply the rules of validity of any jurisdiction that would insist on applying its own such rule despite the parties’ choice.

(d) — Consideration will be given to revising this provision to make it less potentially offensive to foreign countries.

Reporter’s Note — The Reporters were asked to clarify the extent to which the parties’ choice of law under this section extends to non-UCC issues.

Consideration will be given to adding examples showing the interaction between principles of choice of law and Article 9, including whether or not a valid security interest has been created when the collateral is located in a foreign country. Consideration will also be given to making it clearer in the commentary that the parties to an agreement may designate as governing the agreement the law of a jurisdiction that bears no relationship to the transaction. The Reporters rejected a suggestion that the draft address choice of forum clauses. It was suggested that the Reporters add a specific Comment or illustration involving usury and in dicating how the usury law would relate to the choice of law issue.

Reporter’s Note a — See § 1-301(a) above.

Reporter’s Note c — See § 1-301(c) above.

§ 1-302

Consideration will be given to stating in the commentary that the parties’ freedom to choose the applicable law, at least with regard to rights and liabilities, extends to nonterritorial normative systems, and to discussing the effect of choosing codifications of international lex mercatoria or jus commune.

As planned, no votes were taken on the draft.

Uniform Commercial Code [New] Revised Article 2 (Sales)
Discussion Draft

Reporter: Henry Deeb Gabriel, Jr.
Drafting Committee Chair: William H. Henning

§ 2-102

In response to sense of the house motions articulated by Professor Neil B. Cohen, the house favored the view that the statutorily stated scope of Article 2 should be expanded from its articulation in the current text so as explicitly to govern not only goods, but also, in many contexts, closely associated computer information, such as that found in "smart goods" and other goods with embedded software. It was the sense of the house that the present draft and Comment did not achieve that objective.

(b) — A motion was discussed, but not pressed, that the sense of the house be that Revised Article 2’s scope section, specifically § 2-102(b) and (c), should be redrafted to avoid two implications: (1) that courts should not apply Article 2 by analogy to transactions in computer information, even in the absence of a statute to govern these transactions; and (2) that "licensing" software is a means of removing it from Article 2 even when the software is embedded in goods and relatively insignificant in itself. Another sense of the house motion discussed but not pressed was that proposed new Revised Article 2 be silent as to whether embedded computer programs are within its scope. Yet another suggestion was that the first sentence of this subsection be revised to state that the "smart goods" are entirely governed by Article 2. It was also suggested that the subsection be redrafted to avoid the implication that all programs embedded in goods are outside the scope of Article 2.

(b)(1) — It was suggested that the words "or include" be added after "are" and that commentary be added concerning this change. It was suggested that "computer peripheral" be defined.

(c) — See (b) above.

Comments — See (b)(1) above.

§ 2-103

(a)(1) — It was suggested that, here and throughout the draft, the word "sign" be substituted for "authenticate." It was also suggested that the word "encrypt" be deleted from the definition of "authenticate."

(a)(32)(B)(ii) — It was suggested that consideration should be given to whether this subsubparagraph, combined with § 2-104, improperly overrides existing state consumer protection laws concerning telemarketing.

(a)(34) — It was suggested that, here and throughout the draft, the word "writing" be substituted for "record."

§ 2-104

(a) — The Reporter indicated that the first clause should read, "Except as otherwise provided in subsections (b) and (c)."

(b) — A motion to move § 2-104( b) and (c) into § 2-211 was deemed a drafting and structural point not here subject to motion and debate, but the house favored a related motion to expand the Comments to this section to call for a stronger requirement that there be a record of pretransaction disclosure of terms in the context of electronic commerce.

(c) — See § 2-104(b) above.

Comments — See § 2-104(b) above.

See § 2-103(a)(32)(B)(ii).

Part 2

The Reporter indicated that these provisions will be reexamined to make sure they cannot be read as sweeping in telephone communications and thereby requiring that such communications be reduced to some form of record. He also indicated that the dispatch receipt rule will be reexamined for clarity. It was suggested that it is inappropriate to make this Article consistent with the Uniform Electronic Transactions Act in a piecemeal fashion and that the Reporter should take into account the effect of two provisions of UETA that were not carried over into this Article, one requiring that an electronic communication be downloadable and printable in order to be enforceable and the other covering mistake in dealing with electronic agents. Finally, it was contended that there should be more attention to the problem of notice under the receipt rule.

§ 2-204

It was suggested that the concept of "electronic communication" be incorporated here and that "electronic material" not be included in § 2-211 and the following sections.

§ 2-211

See §§ 2-104(b) and 2-204 above.

§ 2-213

(a) — Consideration will be given to substituting the word "person" for "individual" in line 1.

Preliminary Comment — It was suggested that here and elsewhere in the draft, when it is stated that provisions have been adapted from other provisions, that the nature of any changes be set forth, including whether or not the change is substantive, and, if substantive, the reason for the change.

§ 2-302

Comments — A sense of the house motion to add a sentence to the Comments, at a place to be chosen by the Reporter, and to delete inconsistent language, was not pressed, in light of an agreement that the Reporter and Drafting Committee would engage in a continuing dialogue with the movant to work towards language expressing their common understanding. The motion, as amended on the floor, would have added to the Comments the sentence, "It is recognized that disclaimers that meet the conspicuousness and language requirements of Section 2-316 or terms that limit remedies so as to deny a minimum adequate remedy can be held unconscionable under the traditional test," and would have deleted the last sentence of the first paragraph of Comment 1, beginning "However," and the two cases there cited. Consideration will be given to making it clear that form contracts provide the context in which many unconscionability issues arise.

Comment 1 — See § 2-302, Comments, above. A motion to substitute for the first sentence of the second paragraph the sentence, "In finding unconscionability, most courts have found both procedural and substantive unconscionability to be present," was not pressed, in light of an agreement by the Drafting Committee Chair to reexamine the issue. A motion to delete the second sentence of the second paragraph and to add the words "legitimate business" in front of "allocation of risks" in the third sentence of the second paragraph was withdrawn, in light of the Chair’s agreement to reexamine the Comment and consider inserting the language "legitimate business concerns."

§ 2-313B

Comments — Consideration will be given to stating that the obligation created under this section is limited to the traditional subject matter of warranties under this Article and is not intended to create additional warranties regarding the content of a product.

As planned, no vote was taken on the draft as a whole.

Restatement of the Law Third Agency
Tentative Draft No. 1

Reporter: Deborah A. DeMott

Consideration will be given to including in this Restatement a comparative law note relating to the law of other countries on the same topic. Members were encouraged to submit relevant comparisons from the law of other countries. Consideration will also be given to addressing in this Restatement conflict of law principles, either by cross-reference or otherwise.

§ 1.01

The Reporter rejected the suggestion that the word "fiduciary" be deleted from the definition of "agency."

Comment c — The Reporter rejected the suggestion that the term "independent contractor" should be utilized in this Restatement.

Comment d — It was suggested that the efficacy of "Chinese walls" as a means of avoiding conflict of interest within an enterprise be discussed here.

Comment e — Consideration will be given to indicating here that the extent of the agent’s duty of obedience, and whether the agent may in particular circumstances have the right to disobey the principal’s instructions, will be further developed later. Consideration will be given to modifying the blanket statement on page 31 that directors are not shareholders’ agents as defined in this section by noting that there are statutory contexts in which directors are in effect deemed to be agents.

Illustration 10 — See Reporter’s Note to Comment f.

Comment h — Consideration will be given to discussing here, or in another Comment that discusses advisers, whether a lawyer who provides a service for a client, such as drafting a will, is an agent to the same degree as a lawyer who represents the client in a trial or litigation matter.

Reporter’s Note to Comment f — Regarding Illustration 10, the Reporter agreed to make it clear that there is some controversy about whether a licensee is an agent of the licensor with respect to the goods licensed, and whether the licensor might be liable to third parties for defects in these goods.

§ 1.02

Consideration will be given to substituting "might" for "will" in line 3.

Comment a — The phrase, "to be bound by an agent’s act even if not previously authorized," will be substituted for the phrase, "to be bound by an agent’s unauthorized act," in the last sentence.

Comment b — Consideration will be given to distinguishing here, or in the Reporter’s Note, between silence by the principal to third parties with regard to the agent’s conduct and silence with regard to whether an agency relationship exists at all. Consideration will also be given to adding an Illustration, similar to Illustration 1, but involving a new industry in which there is no established practice from which to infer the apparent authority of the agent.

Reporter’s Note to Comment b — See Comment b above.

§ 1.03

The Reporter indicated that she will add to the black letter a definition of the term "power coupled with an interest." Consideration will be given to defining the term "authority" and taking into account what implications that definition has for the definitions of "actual authority" (see § 2.01) and "apparent authority" (see § 2.03). It was suggested that the Reporter also define "employee" and "independent contractor."

(1) — Consideration will be given to substituting the word "control" for "direct" in the second sentence.

(4) — The Reporter indicated that she will delete the term "gratuitous agent" if it later proves to be unnecessary.

(5) — The word "individual" in line 2 will be changed to "person."

(6) — The Reporter indicated that she is considering including unions or labor unions as persons in circumstances in which the union itself can be the object of legal rights and duties.

(6)(b) — See § 1.03(6)(e) below.

(6)(e) — See Comment f below. Consideration will be given to including here the qualification in § 1.03(6)(b) that the organization has to be capable of incurring legal obligations and having legal rights.

Comment f — It was suggested that it be noted here that the "legal or commercial entity" set forth in § 1.03(6)(e) need not be a United States legal or commercial entity.

§ 1.04

The word "elements" will be substituted for the word "factors" in line 2 of the first sentence. The Reporter will also consider stating here or in the Comment that the parties’ characterization of their relationship as an agency relationship is controlling as between them but not as to third parties. Consideration will also be given to changing the title of this section to "Parties’ Characterization and Industry or Popular Usage Not Controlling" and to adding the words "as an agency or not being an agency" after "relationship" in line 1 of page 81.

Comment — See § 1.04 above. It was suggested that examples be added of common legal relationships that are not agency relationships.

Comment b — Consideration will be given to revising the last full sentence on page 81 to reflect that the last two stated factors are always important under the common law and that these factors may be important in some statutory contexts. It may also be indicated that the definition of "agency" in an antitrust or NLRB case is not necessarily identical to the common law definition used in this Restatement.

Comment c — It was suggested that the discussion of insurance agents, real estate agents, and the like be amplified by indicating that whether or not they are actually agents, and if so who are their principals, depends on the context.

§ 2.01

See § 1.03. Consideration will be given to adding the words "or failing to take action" after "action" in line 3 and to substituting the words "to do so" for "so to act" in line 6. The Reporter will also consider substituting the words "based on" for "in accordance with" in line 4 and "permits" for "wishes" in lines 5-6. Consideration will be given to combining this section with § 2.02 by adding to the black letter the phrase, "or the agent’s acts are necessary or incidental to achieving the principal’s objectives." The Reporter will also consider whether the principal’s manifestations to the agent or the agent’s reasonable understanding of what the agent has been authorized to do should be given greater weight. Consideration will be given to changing the focus of this section from the agent’s subjective state of mind to the objective standard of what a person in the agent’s position would reasonably believe.

Comment — Consideration will be given to reiterating throughout the Comment that the concept of "authority" is a combination of the concepts of "power and right" and to making clear the distinction between the two. The Reporter will also consider whether an agent could have a reasonable belief that was not based on a manifestation, and whether the agent could have a reasonable belief that was based on the principal’s manifestation to persons other than the agent that reaches the agent indirectly. It was suggested that it be made clear that actual authority affects only the relationship between the principal and the agent and has nothing to do with a third party’s rights. The Reporter will also consider clarifying whether the agent’s reasonable belief, based on the principal’s manifestations to the agent, must be based solely on objective standards.

Comment b — It was suggested that it may be too early to say that "inherent agency" does not merit definition and should be excluded from the scope of the Restatement.

Comment c — Consideration will be given to adding the word "only" after "with" in the last line on page 91.

Comment e — Consideration will be given to discussing whether apparent authority is present in a situation in which the agent believes that he or she is violating the principal’s wishes, when in fact the agent is complying with those wishes.

§ 2.02

See § 2.01. It was suggested that the substance of § 73 of the Restatement Second of Agency, on what may be inferred from the authorization to manage a business, should be added here or in another section of the Restatement where contracts and transfers are considered.

(1) — Consideration will be given to adding the words "or implied" after "designated" in line 2. The Reporter will also consider clarifying whether this subsection hinges on the agent’s actual and reasonable belief that his or her acts were necessary or incidental or whether the subsection involves a subsequent determination by the court that the acts were necessary or incidental.

(2) — Consideration will be given to deleting the word "should" in line 1 of this subsection and in line 2 of Subsection (3) and to substituting the words "duty of loyalty" for "fiduciary duty" in the last line. It was suggested that the words "is entitled to" or "may" be substituted for "should" in line 1.

(3) — See § 2.01 and Subsection (2) above. Here and throughout the black letter and Comments of the Restatement, consideration will be given to specifying clearly whether a particular legal test is subjective or objective. It was suggested that the words, "To be reasonable," be added at the beginning of the subsection and that the words "must respect" be substituted for "should reflect" in line 2.

Comment — It was suggested that it be explained here what are "acts necessary or incidental," including the distinction between "necessary" and "incidental" and whether this is an objective standard or a subjective standard.

Comment b — The Reporter was asked to reconsider the decision to abandon use of the term "implied authority."

Comment d — Consideration will be given to adding the words "does not actually believe or" after "agent" in line 3 of the first paragraph and to revising the last sentence of the first paragraph to state, "This standard requires actual subjective belief as well as objectively reasonable belief."

Comment e — It was suggested that the respective significance of the two possibilities set forth in the first full paragraph on page 116 be clarified.

Reporter’s Note to Comment e — It was suggested that the third paragraph on page 126 needed revision to avoid the implication that it is desirable for an agent to deviate from the terms of instruction.

§ 2.03

See § 1.03 and § 2.01. The Reporter indicated that she will introduce additional descriptive subheadings here or subdivide some of the longer Comments to make the discussion easier to follow. It was suggested that the black letter be divided into two separate sections, with each sentence constituting a separate section, or, alternatively, that the sentences be made into two separate subsections with separate commentary for each. Another suggestion was that these sentences be redrafted in such a way that they would be understandable as jury instructions. It was suggested that the words "held by an agent or other actor" in line 3 be inserted in line 1 after "power." Consideration will be given to defining the phrase "traceable to the principal’s manifestations" in lines 6-7 and to stating that the agent’s position in an organization may also be taken into consideration in determining the traceability to the principal’s manifestations of the third party’s belief that the actor has authority to act. The Reporter will also consider either deleting "traceable to" or substituting tighter language such as "reasonably based upon."

The Reporter will consider indicating in the second sentence that, in this situation, it is presumed that both standards set forth in the first sentence ("reasonably believes the actor has authority to act" and "is traceable") are met. It was suggested that the words "or other actor" be added after "agent" in line 1 of the second sentence. It was also suggested that words such as "or placement in charge" be added after "position" in line 5 of the second sentence. It was further suggested that it be indicated in whose mind the acts are "consistent with the position of the agent," in lines 5-6 of the second sentence, and whether this is an objective or a subjective test. Finally, it was suggested that "notice" be required in addition to "knowledge" in line 6 of the second sentence.

Comment — See § 2.03 above. It was suggested that the phrase, "holds a position within an organization," in the second sentence of the black letter, be clarified, and that the phrase, "has been placed in charge of a transaction or situation," in the second sentence of the black letter, be discussed. It will be clarified whether the phrase, "or has been placed in charge of a transaction or situation," in the second and third lines of the second sentence of the black letter, applies in the nonorganizational context, and the third party’s duty of inquiry in the nonorganizational setting will be reexamined. There was also a suggestion that a discussion of medical care organizations, deleted at the request of the Council, be restored.

Comment c — In light of the suggestion that the draft inconsistently refers to "reliance," "detri mental reliance," "change of position," and "detrimental change of position," the Reporter will make certain that the terminology is consistent. See also Comment f below.

Illustration 4 — The Reporter for Restitution and Unjust Enrichment expressed disagreement with the result in this Illustration, believing that the museum would be under a duty to make restitution of the painting. He and the Reporter for Agency will attempt to resolve their disagreement.

Comment d — It was suggested that, in determining whether a third party’s belief is unreasonable, the third party’s level of sophistication must be taken into account.

Illustration 9 — The meaning of the second sentence will be clarified.

Comment e — Consideration will be given to specifying whether this Comment involves a question of fact or one of law. It was suggested that, in the first sentence of the Comment on page 144, the Reporter refer not only to "manifestations of the principal" but also to other circumstances. The Reporter will consider restructuring the last full sentence on page 145 to clarify its meaning.

Comment f — As with Comment c above, the Reporter will make certain here that the draft uses consistent terminology in connection with "reliance." It was suggested that this Comment may confusingly combine two separate issues, the question of whether reliance is an essential part of the doctrine of apparent authority and the question of admissibility of evidence. It was also suggested that the bald statements in the first paragraph and elsewhere that reliance is not essential be supported. The last full sentence on page 147 will be revised to make it clear that, if an attempt is made to show that an agent has apparent authority, there is no hearsay problem in introducing evidence of what the principal said. Consideration will be given to moving the reference to ratification at the top of page 150 to the discussion in Comment c about ratification as the principal rationale for apparent authority in the second full paragraph on page 135. A cross reference may be inserted here to a subsequent section that will deal with the subject of ratification.

Illustration 14 — Consideration will be given to determining the result if, in Illustrations 14 and 15, T was on such notice that would lead a reasonable person to believe that A was really not acting on behalf of P in making these statements.

Illustration 15 — See Illustration 14 above.

Comment g — It was suggested that the Restatement specifically disavow the old case law that requires board of directors resolutions to establish apparent authority. It was also suggested that consideration be given to case law involving the complex internal rules of universities, foundations, unions, and the like and to whether third parties, particularly unsophisticated third parties, can be barred from making an apparent authority claim based upon the existence of such rules.

Illustration 21 — Consideration will be given to basing the result of this Illustration on the doctrine of estoppel rather than on apparent authority.

Comment j — It was suggested, because the entire discussion on the bottom of page 170 to the top of page 171 is, in effect, a harbinger of what is said in § 2.06, that all of it should be deleted except the first sentence, and that a cross-reference to § 2.06 be added. It was also suggested that the first full paragraph on page 171 was simply a repetition of what was said on the preceding page and therefore unnecessary.

The draft was discussed through § 2.03, but there was insufficient time to review it in its entirety, and no vote was taken. The draft, incorporating changes agreed to in the course of the discussion, will be resubmitted at a subsequent meeting.