Agency: Contract Liability

Question 1

Test for Contract Liability for Contracts Entered by Agents

Answer 1

Principal is liable for contracts entered into by its agent only if the principal authorized the agent to enter the contract

Question 2

Actual Express Authority

Answer 2

Principal used words to express authority to the agent; can be oral and private unless the K itself must be in writing like a conveyance of land

Question 3

Actual Express Authority: Revocation

Answer 3

Revoked by (1) unilateral act of either the principal or the agent or (2) death or incapacity of the principal, unless the principal gave the agent durable power of attorney (clear, written expression of authority to enter in to the contract)

Question 4

Actual Implied Authority

Answer 4

Authority which the principal gives the agent through conduct or circumstance, either by (1) necessity (tasks necessary to accomplish an expressly authorized task); (2) custom (tasks performed by people with the agent’s title or position), or; (3) prior acquiescence by the principal (tasks agent believes to be authorized to do from prior acq)

Question 5

Apparent Authority

Answer 5

Authority is apparent if (1) Principal cloaked agent with the appearance of authority and (2) 3P reasonably relies on appearance of authority

Question 6

Ratification Authority (+ Exception)

Answer 6

Authority can be granted after contract has been entered if (1) principal has knowledge of all material facts regarding the contract and (2) accepts its benefits.
Exception: Ratification cannot alter the terms of the K

Question 7

Contract Liability: General Rule + Exception

Answer 7

Principal is liable on its authorized contracts, so authorized agents generally are not liable on their authorized contracts
Exception: If the principal is undisclosed/unidentified or partially disclosed, the authorized agent may nonetheless be liable at the election of the 3P.