Agency

Question 1

Express Actual Authority

Answer 1

Principal directly tells the agent that he has the authority to take certain actions

Question 2

Implied Actual Authority

Answer 2

Based on the agent’s reasonable understanding of the principal’s instructions

Question 3

Apparent Authority

Answer 3

• Based on the principal’s manifestations to the third party
• If the third party reasonably believes the agent has authority to act, the agent will have the power to bind the principal

Note: If the principal is undisclosed, there cannot be apparent authority

Question 4

Estoppel

Answer 4

Principal is prevented from denying liability if he failed to take reasonable steps and use ordinary care to inform a third party of the lack of authority

Question 5

Termination of Authority

Answer 5

Principal has the power to terminate the agency relationship at any time
* Actual authority: simply tell the agent that authority is revoked
* Apparent authority: must tell the third party that authority is revoked

Question 6

Ratification

Answer 6

A principal can ratify an act performed by an agent, even if the agent did not have authority to act

Ratification requires that:
1. The principal ratify the entire contract,
2. The principal and third party have legal capacity to contract,
3. The ratification occurs before the third party withdraws from the contract, and
4. The principal knows the material facts of the transaction.