Agency

Question 1

Actual Authority (Express or Implied)

Answer 1

a. Express Actual Authority
Principal directly tells the agent that he has the authority to take certain actions
b. Implied Actual Authority
Based on the agent’s reasonable understanding of the principal’s instructions

Question 2

Apparent Authority

Answer 2

o Based on the principal’s manifestations to the third party
o If the third party reasonably believes the agent has authority to act (based on the principal’s
conduct), the agent will have the power to bind the principal.
Note 1: If the principal is undisclosed, there cannot be apparent authority.

Question 3

Estoppel

Answer 3

o Principal is prevented from denying liability if he failed to take reasonable steps and use
ordinary care to inform a third party of the lack of authority

Question 4

Termination of Authority

Answer 4

Principal has the power to terminate the agency relationship at any time
 Actual authority—simply tell the agent that authority is revoked
 Apparent authority—must tell the third party that authority is revoked

Question 5

Ratification

Answer 5

o A principal can ratify (affirm) an act performed by an agent, even if the agent did not have
authority to act
o Ratification requires that:
 The principal ratify the entire contract;
 The principal and third party have legal capacity to contract;
 The ratification occurs before the third party withdraws from the contract; and
 The principal know the material facts of the transaction.