Contract Liability

Question 1

Power to Bind

Answer 1

A has the power to bind P to a contract entered into on P’s behalf only if A acted with authority. Authority can be actual or apparent or ratified.

Question 2

Actual Authority

Answer 2

If P’s words or conduct would lead a reasonable person in A’s position to believe A had authority to act on P’s behalf, A had actual authority.

Express: in words

Implied: incidental to express authority, arising out of custom, based on prior acquiescences, based on title, etc.

Question 3

Apparent Authority

Answer 3

If P’s words or conduct would lead a reasonable person in T’s position to believe A had authority to act on P’s behalf, A had apparent authority.

Can be based on prior acts that P permitted A to engage in, based on title/position, where there was written authority and T hasn’t gotten notice of its termination…

Question 4

Ratification

Answer 4

If P ratifies the contract, he will be bound even if A had no authority to enter it. Ratification can be express or implied (by accepting the benefits) and requires that P know or have reason to know all material facts regarding the contract and accept the entire transaction. Ratification cannot be used to interfere with intervening third-party rights.

Question 5

T v. P

Answer 5

P will be liable to T if A had authority to act.

Question 6

T v. A

Answer 6

A will not be liable to T if he had authority to enter the contract, unless he did not disclose the existence/identity of P.

Question 7

Undisclosed P

Answer 7

If A had authority to enter the contract, but P’s existence/identity is not disclosed, T can sue P or A. and Either P or A can sue T to enforce the contract.

Question 8

Disclosed P

Answer 8

If P is disclosed, only P can sue T to enforce the contract.