3. Liability (Contracts)

Question 1

What is required for Agent’s actual authority?

Answer 1

Express

• Mistake
• Misrepresentation

Implied

• Agent’s reasonable belief based on Principal’s manifestations
• Principal’s dealings/custom/delegation/delivery/warranties/emergency

Question 2

How can Agent’s actual authority be terminated?

Answer 2

Lapse of time

Specified event

Change in circumstances

Agent’s breach of fiduciary duty

Unilateral termination

Death of Principal/Agent

Lack of capacity

Question 3

What is required for Agent’s apparent authority?

Answer 3

TP’s reasonable belief

No actual authority

• Principal’s negligent hiring of imposter
• Principal’s knowledge of TP dealing
• TP reliance on Agent’s written authority

Exceeding actual authority

• Principal’s consent + TP’s awareness
• Custom
• Respondeat superior

Question 4

What is required for ratification of Agent’s act?

Answer 4

1) Principal knew/should have known ALL material facts

2) Principal accepts ENTIRE transaction
- Express
- Implied (Accepting benefits/Silence/Enforcing lawsuit)

3) Principal has capacity
- Age
- Competency

Question 5

What type of Principal may ratify Agent’s acts?

Answer 5

Second Restatement (Majority view)

• Disclosed
• Unidentified

Third Restatement
- Any

Question 6

What are the exceptions to ratification of Agent’s acts?

Answer 6

Illegal performance

TP withdrawal

Material change towards TP’s position

Question 7

When may Agent be liable to TP?

Answer 7

Principal is undisclosed

Principal is disclosed

• Contract intent for Agent’s liability
• Implied warranty

Principal is unidentified
- TP can elect defendant (if P/A objects)

Principal is identified
- TP can sue Principal (unless judgment satisfied)

Question 8

When may TP be liable to Principal?

Answer 8

Principal is disclosed

- P can enforce contract vs TP

Question 9

When may TP be liable to Agent?

Answer 9

Principal is undisclosed/unidentified

• NO fraud misrepresentation
• NO unforeseen increased burden on TP