Agency

Question 1

What is an agent?

Answer 1

A person or entity that acts on behalf of a principal

Question 2

What are the two types of authority an agent may have?

Answer 2

Actual authority and apparent authority

Question 3

When is a principal bound to contracts?

Answer 3

A principal is bound to contracts entered into by its agent if the agent has actual authority

Actual authority can be either express or implied.

Question 4

What is express authority?

Answer 4

When the principal explicitly tells the agent that the agent is entitled to act

May be a written or oral expression.

Question 5

What is implied authority?

Answer 5

Implied authority arises when an agent believes they are entitled to act because the action is necessary or incidental to achieving the principal’s objectives

Implied authority can also stem from past dealings or industry custom.

Question 6

What are the conditions for an agent to have implied authority?

Answer 6

1. Agent believes they are entitled to act
2. Action is necessary or incidental to achieving the principal’s objectives
3. Agent has acted similarly in prior dealings
4. Customary for agents in that position to act that way

Question 7

What is apparent authority?

Answer 7

This occurs when a third party believes the agent has authority based on the principal’s representations. A principal is bound to contracts entered into by its agent if the agent has apparent authority

Question 8

What must a third party believe for apparent authority to exist?

Answer 8

The third party must reasonably believe that the agent has authority to act on behalf of the principal

This belief must be traceable to the principal’s manifestations.

Question 9

When is apparent authority NOT present?

Answer 9

When the third party has actual knowledge that the agent did not have authority

Actual knowledge negates the reasonable belief required for apparent authority.

Question 10

What duty does a third party have regarding apparent authority?

Answer 10

The third party has a duty to inquire further when the situation suggests it may be unreasonable to believe that the agent has authority

Question 11

When is a principal disclosed?

Answer 11

A principal is disclosed if a third party can reasonably infer the principal’s identity based on available information

Question 12

What is the liability of a disclosed principal?

Answer 12

A disclosed principal is liable for contracts the agent enters with actual or apparent authority

Question 13

Is an agent personally liable for contracts entered on behalf of a disclosed principal?

Answer 13

Not unless the agent agrees to be liable

Question 14

What is ratification in agency law?

Answer 14

Ratification confers authority after a purported agent has acted without authority

Question 15

How does a principal ratify an act?

Answer 15

A principal must manifest assent through words or conduct (like paying for the product) that he wishes to be bound by the act

Question 16

When is a principal partially disclosed?

Answer 16

A principal is partially disclosed if a third party knows the agent is acting on a principal’s behalf but does not know the principal’s identity.

Question 17

What is the liability of a partially disclosed principal?

Answer 17

A partially disclosed principal is liable on a contract entered into by an agent with actual or apparent authority

Question 18

What is the liability of an authorized agent for a partially disclosed principal?

Answer 18

An authorized agent is liable on a contract where the principal is partially disclosed unless the agent agrees otherwise

Question 19

What happens if an agent acts on behalf of an undisclosed principal without actual authority?

Answer 19

The agent is liable as a party to the contract

Question 20

What defines an undisclosed principal?

Answer 20

A principal is undisclosed if a third party has no notice that the agent is acting for a principal

Question 21

What is the liability of an undisclosed principal and an agent?

Answer 21

Both are liable on contracts entered into by an agent with actual authority