Agency Flashcards
A ability to bind P to a contract
An agent has the power to bind the principal to a contract when the agent acts with actual or **apparent **authority.
Actual Authority
Actual authority exists when the principal makes a manifestation that causes the agent to reasonably believe that the agent is authorized to act on the principal’s behalf.
Express actual authority can be created by oral or written words, clear direct and definite language, or specific detailed terms and instructions. For express actual authority to exist, the principal’s manifestation must cause the agent to believe that the agent is doing what the principal wants, and the agent’s belief must be reasonable.
Apparent Authority
Apparent authority exists when a third party reasonably relies on manifestations by the principal concerning the agent’s authority to act on the principal’s behalf.
Undisclosed Principal
A principal is an undisclosed principal if the third party has no notice of the principal’s existence.
==> An **agent **who enters into a contract on behalf of an undisclosed principal **becomes a party to the contract. **
Partially Disclosed Principal
A principal is a partially disclosed principal if the third party has notice of the principal’s existence but not the principal’s identity. ==> **Unless **the agent and the third party agree otherwise, an agent who enters into a contract on behalf of a partially disclosed principal becomes a party to the contract.
Vicarious Liability
Under the doctrine of respondeat superior, a principal may be vicariously liable for a tort committed by an agent acting within the scope of his employment.
The principal is liable despite the absence of tortious conduct by the principal. This is also known as “derivative liability.”
An employee acts within the scope of employment when either performing work assigned by the employer, or engaging in a course of conduct subject to the employer’s control. When an employee acts independently of any intent to serve any purpose of the employer, the employer may escape liability.
Ratification
P may be liable for A (even where no apparent or actual authority), where P ratified… 4 requirements
Ratification occurs when a principal affirms a prior act that was done on the principal’s behalf.
(i) the principal must ratify the **entire contract; **
(ii) the principal and the third party must have legal capacity to enter into the contract;
(iii) the ratification must occur before the third party withdraws from the contract/ in a timely manner; and
(iv) the principal **must know the material facts **of the transaction.
Significance of articulations to TPs
An agent is not a party to a contract**
However
==> an agent purporting to be acting for a principal gives an implied warranty of authority to the third party.
==> if the agent lacks the power to bind the principal, then a breach of the implied warranty has occurred, and the agent is liable to the third party
Implied Warranty of Authority
An agent or actor purporting to be an agent for a principal gives an implied warranty of authority to a third person with whom the agent enters into a contract on the principal’s behalf. If the agent or actor lacks the power to bind the principal, then a breach of the implied warranty has occurred, and the agent is liable to the third party for breach.
Ways for an A to escape liability for a K
i) Enter into the contract on behalf of the disclosed principal;
ii) Affirmatively disclose to the third party both the existence and identity of the principal; and
iii) Not agree to become a party to the contract.
When A is bound to K
Unless the agent and the third party agree otherwise, an agent who enters into a contract on behalf of a** partially disclosed principal ** becomes a party to the contract.
An agent who enters into a contract on behalf of an ** undisclosed principal** becomes a party to the contract and is liable to the third party on the contract.
If the agent binds the principal to the contract, or if the principal ratifies the contract,** then both the principal and agent are parties to the contract with the third party.**
Principal Liability
An agent has the power to bind the principal to a contract when:
i) The agent has actual authority (express or implied);
ii) The agent has apparent authority; or
iii) The principal is estopped from denying the agent’s authority ==> Estoppel applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for the principal and either the principal:
i) Intentionally or carelessly caused the belief; or
ii) Having notice of such belief and the possibility that the belief might induce others to change their positions in reliance on it, failed to take reasonable steps to notify them of the facts.
Undisc
==> The third party is induced to make a detrimental change in position by an agent without actual authority;
==> The principal knew of the agent’s conduct and that it might induce others to change positions; and
==> The principal did not take reasonable steps to notify the third party of the facts.
Election of Remedies
If the agent binds an undisclosed principal to a contract, then both the principal and the agent are parties to the contract with the third person.
In jurisdictions that have adopted the election of remedies doctrine, once the third party discovers the existence of the principal, the third party must choose to hold liable either the principal or the agent.
If the third party obtains a judgment against one of them, then the judgment operates as an election and the third party is precluded from seeking to hold the other party liable on the contract.
Other jurisdictions have adopted the satisfaction rule, which permits the third party to sue both the principal and the agent but limits the third party to a single satisfaction of the judgment. (Note that when the principal is partially disclosed, the election of remedies does not apply.)
