Restatement of the Law, Agency 3rd Sec. 3

Question 1

Creation of Actual Authority

Answer 1

§ 3.01 Creation of Actual Authority

Actual authority, as defined in § 2.01, is created by a principal’s manifestation to an agent that, as reasonably understood by the agent, expresses the principal’s assent that the agent take action on the principal’s behalf.

Question 2

Formal Requirements

Answer 2

§ 3.02 Formal Requirements

If the law requires a writing or record signed by the principal to evidence an agent’s authority to bind a principal to a contract or other transaction, the principal is not bound in the absence of such a writing or record. A principal may be estopped to assert the lack of such a writing or record when a third party has been induced to make a detrimental change in position by the reasonable belief that an agent has authority to bind the principal that is traceable to a manifestation made by the principal.

Question 3

Creation of Apparent Authority

Answer 3

§ 3.03 Creation of Apparent Authority

Apparent authority, as defined in § 2.03, is created by a person’s manifestation that another has authority to act with legal consequences for the person who makes the manifestation when a third party reasonably believes the actor to be authorized and the belief is traceable to the manifestation.

Question 4

Capacity to Act as Principal

Answer 4

§ 3.04 Capacity to Act as Principal

(1) An individual has capacity to act as principal in a relationship of agency as defined in § 1.01 if, at the time the agent takes action, the individual would have capacity if acting in person.
(2) The law applicable to a person that is not an individual governs whether the person has capacity to be a principal in a relationship of agency as defined in § 1.01, as well as the effect of the person’s lack or loss of capacity on those who interact with it.
(3) If performance of an act is not delegable, its performance by an agent does not constitute performance by the principal.

Question 5

Capacity to Act as Agent

Answer 5

§ 3.05 Capacity to Act as Agent

Any person may ordinarily be empowered to act so as to affect the legal relations of another. The actor’s capacity governs the extent to which, by so acting, the actor becomes subject to duties and liabilities to the person whose legal relations are affected or to third parties.

Question 6

Termination of Actual Authority—In General

Answer 6

§ 3.06 Termination of Actual Authority—In General

An agent’s actual authority may be terminated by:

(1) the agent’s death, cessation of existence, or suspension of powers as stated in § 3.07(1) and (3); or
(2) the principal’s death, cessation of existence, or suspension of powers as stated in § 3.07(2) and (4); or
(3) the principal’s loss of capacity, as stated in § 3.08(1) and (3); or
(4) an agreement between the agent and the principal or the occurrence of circumstances on the basis of which the agent should reasonably conclude that the principal no longer would assent to the agent’s taking action on the principal’s behalf, as stated in § 3.09; or
(5) a manifestation of revocation by the principal to the agent, or of renunciation by the agent to the principal, as stated in § 3.10(1); or
(6) the occurrence of circumstances specified by statute.

Question 7

Death, Cessation of Existence, and Suspension of Powers

Answer 7

§ 3.07 Death, Cessation of Existence, and Suspension of Powers

(1) The death of an individual agent terminates the agent’s actual authority.
(2) The death of an individual principal terminates the agent’s actual authority. The termination is effective only when the agent has notice of the principal’s death. The termination is also effective as against a third party with whom the agent deals when the third party has notice of the principal’s death.
(3) When an agent that is not an individual ceases to exist or commences a process that will lead to cessation of existence or when its powers are suspended, the agent’s actual authority terminates except as provided by law.
(4) When a principal that is not an individual ceases to exist or commences a process that will lead to cessation of its existence or when its powers are suspended, the agent’s actual authority terminates except as provided by law.

Question 8

Loss of Capacity

Answer 8

§ 3.08 Loss of Capacity

(1) An individual principal’s loss of capacity to do an act terminates the agent’s actual authority to do the act. The termination is effective only when the agent has notice that the principal’s loss of capacity is permanent or that the principal has been adjudicated to lack capacity. The termination is also effective as against a third party with whom the agent deals when the third party has notice that the principal’s loss of capacity is permanent or that the principal has been adjudicated to lack capacity.
(2) A written instrument may make an agent’s actual authority effective upon a principal’s loss of capacity, or confer it irrevocably regardless of such loss.
(3) If a principal that is not an individual loses capacity to do an act, its agent’s actual authority to do the act is terminated.

Question 9

Termination by Agreement or by Occurrence of Changed Circumstances

Answer 9

§ 3.09 Termination by Agreement or by Occurrence of Changed Circumstances

An agent’s actual authority terminates

(1) as agreed by the agent and the principal, subject to the provisions of § 3.10; or
(2) upon the occurrence of circumstances on the basis of which the agent should reasonably conclude that the principal no longer would assent to the agent’s taking action on the principal’s behalf.

Question 10

Manifestation Terminating Actual Authority

Answer 10

§ 3.10 Manifestation Terminating Actual Authority

(1) Notwithstanding any agreement between principal and agent, an agent’s actual authority terminates if the agent renounces it by a manifestation to the principal or if the principal revokes the agent’s actual authority by a manifestation to the agent. A revocation or a renunciation is effective when the other party has notice of it.
(2) A principal’s manifestation of revocation is, unless otherwise agreed, ineffective to terminate a power given as security or to terminate a proxy to vote securities or other membership or ownership interests that is made irrevocable in compliance with applicable legislation. See §§ 3.12- 3.13.

Question 11

Agents with Multiple Principals

Answer 11

§ 3.14 Agents with Multiple Principals

An agent acting in the same transaction or matter on behalf of more than one principal may be one or both of the following:

(a) a subagent, as stated in § 3.15; or
(b) an agent for coprincipals, as stated in § 3.16.

Question 12

Subagency

Answer 12

§ 3.15 Subagency

(1) A subagent is a person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal and for whose conduct the appointing agent is responsible to the principal. The relationships between a subagent and the appointing agent and between the subagent and the appointing agent’s principal are relationships of agency as stated in § 1.01.
(2) An agent may appoint a subagent only if the agent has actual or apparent authority to do so.

Question 13

Agent for Coprincipals

Answer 13

§ 3.16 Agent for Coprincipals

Two or more persons may as coprincipals appoint an agent to act for them in the same transaction or matter.