Agency - K liability of P to 3rd parties

Question 1

requirements for EXPRESS ACTUAL authority creating contractual liability of P

Answer 1

expressed orally or in writing w/ clear, direct and definite language and/or specific, detailed terms & instructions

intent - P’s manifestation must cause A to believe that A is doing what P desires (subjective) and A’s belief must be reasonable (objective)

Question 2

requirements for IMPLIED ACTUAL authority creating contractual liability of P

Answer 2

A permitted to take whatever actions are properly necessary to achieve P’s objectives based on A’s REASONABLE UNDERSTANDING of P’s manifestations and objectives

Question 3

custom as basis for IMPLIED ACTUAL authority

Answer 3

absent contract instructions, A has implied authority to act w/ in accepted business customs or general trade usage w/ an industry

Question 4

acquiescence by P as basis for IMPLIED ACTUAL authority

Answer 4

A has implied authority to act where a) P’s accepts A’s acts or b) P fails to object to unauthorized actions of A where such acceptance or failure to object affirm A’s belief regarding P’s objectives and support A’s perceived authority to act in the future

Question 5

prohibition against A’s delegation of A’s duties

Answer 5

A is generally prohibited from delegating either express or implied authority to a 3rd party w/ out P’s express authorization

Question 6

requirements for EXPRESS APPARENT authority creating contractual liability of P

Answer 6

P’s behavior: third party reasonably relies on its perception of the level of authority granted to A based on P’s behavior observed by the 3rd party over time

examples:
- past dealings between A and P
- trade customs
- relevant industry standards
- P’s written stmts of authority
- transactions that do not benefit P
- extraordinary transactions for P

A’s position: manifestation by appointment by P of A to a specific position (VP, GM) where A has the customary level authority from that position

Question 7

methods for terminating of agency relationship

Answer 7

• revocation/renunciation - effective immediately upon receipt by other party
• mutual agency agreement between A and P w/ termination provisions
• change of circumstances that cause A to reasonably believe P no longer consents to A acting on P’s behalf (change in law, insolvency, business conditions, destruction of subject matter)
• passage of reasonable period of time
• P’s death or suspension of powers - terminates relationship on notice to A
• A’s death or suspension - automatically terminates relationship
• statutorily mandated termination
• A’s breach of fiduciary duty

Question 8

requirements for estoppel to create P’s contractual liability

Answer 8

a) 3rd party is justifiably induced to make a detrimental change in position because that 3rd party believed the transaction was entered into for P AND
b) P failed to take reasonable steps and use ordinary care

Question 9

requirements for ratification to create P’s contractual liability

Answer 9

• P ratifies A’s entire act / transaction
• P has legal capacity
• ratification is timely
• P has knowledge of the material facts involved in the original act