Agency - Liability of Principal for Contracts Entered By Agents -Duties owed Flashcards
What is the general test for whether a principal is liable for contracts entered into by its agent?
Principal is liable for contracts enter into by its agent only if the principal authorized the agent to enter the contract.
What are the four types of authority for enter into a contract?
(1) Actual Express Authority
(2) Actual Implied Authority
(3) Apparent Authority
(4) Ratification
When does an agent have actual express authority to enter into a contract?
Principal used words to express authority to agent. Can be oral words and even private UNLESS the contract itself must be in writing (SoF, i.e. a contact for real property).
Actual express authority is narrowly construed.
How can express authority be revoked?
(1) Unilateral act of either the principal or the agent; OR
(2) Death or Incapacity of the Principal.
Exception for Death/Incapacity: Principal gives the agent a durable power of attorney. Durable = clear survival language.
When does an agent have actual implied authority?
Authority which the principal gives through conduct or circumstances.
Three Ways:
By:
Necessity
Custom
Prior Dealings
What is actual implied authority by necessity?
Implied authority to do all task that are necessary to accomplish an expressly authorized task.
What is actual implied authority by custom?
Implied authority to do all task that by custom are performed by a person with the agent’s title or position.
What is actual implied authority by prior dealing between principal and agent?
Implied authority to do all tasks that the agent believes to be authorized to do from prior acquiescent by the principal.
What is the two part test for apparent authority?
(I) Principal “cloaked” agent with the apperance of authority;
(II) 3P reasonably relies on appearance of authority.
What is required for authority by ratification (two parts - one exception)?
Authority can be granted after the contact has been entered if:
(a) Principal has knowledge of all material facts regarding the contract; and
(b) Principal accepts its benefits
Exception: Ratification cannot alter the terms of the contract.
What is the general rule and the exception for principal - agent liability on contracts?
General Rule: The principal is liable on its authorized contracts, and there as a rule an authorized agent is not liable on its authorized contracts.
Exception: Undisclosed principal - If the principal is partially disclosed (only the identify of the principal concealed) or undisclosed (fact of principal concealed), authorized agent may nonetheless be liable at the election of the 3P.
What three duties does an agent owe a principal?
In return for reasonable compensation and reimbursement of expenses, agents owe principals:
(1) Duty of Care
(2) Duty of Obedience [obey instructions]
(3) Duty of Loyalty
What three ways can an agent violate their duty of loyalty?
(1) Self-dealing - agent cannot receive a benefit to the detriment of the principal; OR
(2) Unsurp the principal’s opportunity; OR
(3) Secret profits - making a profit at the principal’s expenses without disclosure.
