Liability of Principal in Contract Flashcards
When determining whether a principal is bound by an agent’s contract, what must be determined?
whether the agent had actual authority, and if not, whether the agent had apparent authority.
Actual Authority
authority that the agent reasonably believes she possesses based on the principal’s dealings with her. This can be express or implied.
Express Actual Authority
authority contained within the agency agreement.
Implied Actual Authority
authority that the agent reasonably believes she has as a result of the principal’s actions.
How can actual authority be terminated?
lapse of a specified or reasonable time; the happening of a specified event; a change in circumstances; the agent’s breach of a fiduciary duty; a unilateral termination by either party; or by operation of law.
What kinds of agencies are irrevocable?
agencies coupled with an interest or powers given as security may not be unilaterally terminated by either party if the agency was given to protect the agent’s rights and it is supported by consideration.
Apparent Authority
authority of an agent which arises out of the reasonable beliefs of third parties.
If a principal directly or indirectly holds out another as possessing certain authority, thereby inducing reasonable reliance by others on that authority, the person so held out has __________________.
apparent authority.
Where a principal negligently permits an imposter to be in a position to appear to have agency authority, can the principal be held liable for the imposter’s actions undertaken with such authority?
yes, under apparent authority.
Where an agent’s actual authority has been terminated, his apparent authority to interact with all third parties the principal knew of will remain unless what?
unless the principal gives notice to those third parties that the agent no longer has authority.
Where an agent’s actual authority has been terminated, but third parties rely on a written authority of the agent, is the agent’s authority considered to be terminated?
no, there must be some kind of notice to the third parties explaining that the agent’s authority has been terminated.
Death or incompetency of the principal terminates ______________ authority.
actual
Death or incompetency of the principal does not terminate ______________ authority.
apparent.
Where the principal previously allowed an agency to exceed his authority, and knows that the third party is aware of this, is the principal bound by the agent’s unauthorized act?
yes
Where the agent is in a position that customarily carries with it certain responsibilities, the principal is liable . . .
for the agent’s acts that come within these customary responsibilities.
Inherent Authority
authority derived solely from the agency relationship and which results in the principal being bound even though the agent had no actual or apparent authority to perform the particular act.
Where an agent exceeds his actual authority, but the conduct is similar to acts authorized, is the principal held liable?
yes
The principal will be held liable for the disposition of her goods by an agent possessing them if . . .
the agent was given some indicia of ownership, or if the goods disposed of were sold by an agent who is a dealer in the particular goods.
Ratification
when an agent purports to act on behalf of a principal without any authority at all, but the principal subsequently validates the act and becomes bound.
When is the agent relieved of liability under a ratification fact pattern?
upon the ratification by the principal.
What must be present in order for a principal to ratify the acts of an agent?
the principal must 1) know or have reason to know of all the material facts; 2) accept the entire transaction; and 3) have capacity to assent.
Ratification of an act is _________________.
unilateral
Does ratification require consideration?
no
Must ratification be express?
no, it can be express or implied.
