Liability of Principal and Agent to Third Parties Flashcards
(40 cards)
When does an A have the power to bind the principal to a K?
When A has
-> actual authority (express or implied)
-> apparent authority
OR
-> the principal is estopped from denying the agent’s authority
How is A’s express actual authority established?
-> Through oral or written words;
-> clear, direct and definite language
OR
-> specific, detailed terms and instructions
What is the intent component of express actual authority?
P’s manifestation must cause A to believe that A is doing what P wants (subjective standard) and A’s belief must be reasonable (objective standard).
What must P do to show dissent to A’s express actual authority?
P must give clear notice if P disagrees with A’s actions.
What is A’s implied actual authority?
A’s implied actual authority allows A to take whatever actions are properly necessary to achieve P’s objectives, based on A’s reasonable understanding of the manifestations and objectives of P.
What is A’s customary implied authority?
Absent contrary instructions, A has implied authority to a ct within accepted business customs or general trade usage within an industry.
What is A’s implied authority by acquiescence?
Implied by P’s acceptance of A’s acts OR P’s failure to object to unauthorized actions of A
-> THAT affirm A’s belief regarding P’s objectives AND support A’s perceived authority to act in future.
Does A have an implied authority to delegate?
Generally A is prohibited from delegating either express or implied authority to a third party without P’s express authorization.
How is apparent authority established via P’s behavior?
Derives from the reasonable reliance of a third party on that party’s perception of the level of authority granted to A by P’s behavior (over a period of time).
What can the third party’s reasonable belief be based upon to see if A has apparent authority through P’s behavior?
Third party’s reasonable belief based upon
-> past dealings between P and A
-> trade customs
-> relevant industry standards
-> P’s written statements of authority
-> transactions that do not benefit P
-> extraordinary transactions for P
How is apparent authority established via A’s position?
By appointing A to a specific position (e.g., VP or GM), P makes a manifestation to the public that A has the customary level of authority of that position.
What are the different ways for there to be termination of A’s authority?
Different ways are
-> renovation or renunciation
-> agency agreement
-> change of circumstances
-> passage of time
-> P’s death or suspension of power
-> P’s loss of capacity
-> A’s death or suspension of powers
-> statutorily mandated termination or A’s breach of fiduciary duties
When is revocation/renunciation effective?
Is there a situation in which A’s power cannot be revoked or renounced?
Effective as soon as either party gives notice to the other party.
If A’s power is coupled with an interest in the subject matter of the power, then A’s power cannot be revoked or renounced
-> e.g. Borrower conveys an interest in real property to a lender under a deed of trust, and also confers on the lender the power to sell the property in the event of default, then the lender’s interest is coupled with an interest in the property. Therefore, the borrower cannot revoke the lender’s authority to sell.
How does an agency agreement terminate A’s authority?
P and A mutually agree to terminate A’s authority OR the occurrence of specified circumstances in agreement terminate A’s authority.
How does a change in circumstances terminate A’s authority?
What are examples of changes in circumstances?
A change in circumstances should cause A to reasonably believe that P no longer consents to A acting on P’s behalf.
Examples:
-> change in law
-> insolvency of P
-> dramatic change in business conditions
-> destruction of subject matter
-> disaster
How much time needs to pass for A’s authority to be terminated?
A reasonable period of time.
When does P’s death or suspension of powers terminate A’s authority?
Not automatic.
Modern trend is A’s actual authority terminates upon A’s receipt of notice of P’s actual death.
When does P’s loss of capacity terminate A’s authority?
Modern trees is A’s actual authority terminates upon A’s receipt of notice of P’s loss of capacity.
When does A’s death or suspension of powers terminate A’s authority?
Automatically terminates A’s actual authority.
How is P liable for A’s actions under estoppel?
Estoppel applies when a third party is justifiable induced to make a detrimental change in position BECAUSE that third party believed the transaction was entered into for P,
-> AND P failed to take reasonable steps and use ordinary care to show otherwise.
When can P ratify the acts of another party (such as the acts of an A or the acts of a non-A)?
P can ratify when
-> P ratifies the entire act/transaction
-> P has legal capacity to ratify the act or transaction
-> ratification is timely
AND
-> P has knowledge of the material facts involved in the original act
What is the doctrine of respondent superior state?
P is vicariously liable to a third party harmed by A who is an employee and who committed an act within the scope of employment.
When is an employee within their scope of employment?
An employee is within the S/E when either performing work assigned by the employer or engaging in a course of conduct subject to the employer’s control
When can intentional torts fall under the scope of employment?
Intentional torts may fall within S/E when
-> conduct is within the space and time limits of employment,
-> the employee was motivated to act for the employer’s benefit
AND
-> the act was of the kind that the employee was hired to perform
