Liability of Principal for Contracts Entered by Agents

Question 1

Principal is liable for Contracts entered into by agent if

Answer 1

Principal authorized the agent to enter the contract

Question 2

Five Types of Authority

Answer 2

1- Actual Express
2- Actual Implied
3- Apparent Authority
4- Ratification
5- Inherent Authority

Question 3

Actual Express Authority

Answer 3

Actual express authority can be oral and private, but it is narrowly construed

exception- If K must be in writing, so must express authority

Will be revoked by:
1- Unilateral act by P or A
2- Death of P

Question 4

Power of Attorney

Answer 4

Survives death if expressly says so

Survives incapacity until expressly says terminated upon such incapacity

Question 5

Actual Implied Authority

Answer 5

Authority through conduct or circumstances, 3 types:

1- necessity
2- custom
3- prior dealings between the principal and agent

Question 6

Apparent authority

Answer 6

Two part test:

1- Principal “cloaked” agent with the appearance of authority, &
2- third party reasonably relies on appearance of authority

Question 7

Ratification

Answer 7

authority can be granted after is:

1- principal has knowledge of all material facts regarding the contract, and
2- principal accepts its benefits

Exception: ratification cannot alter the terms of the contract

Question 8

Rules on liability of the Contract

Answer 8

The principal is liable on its authorized contracts, and therefore authorized agents are generally not liable on their authorized contracts

exception: the undisclosed principal

Question 9

Inherent Authority

Answer 9

The Court, in its discretion, can find inherent authority when the agent exceeds his express authority but conduct is so similar to acts authorized in order to protect innocent third parties