agency - liability of Principal to 3rd pty for Ks of Agent

Question 1

Whether P will be VL to 3rd parties for Ks entered into by A

Answer 1

1-part test:

P is liable for Ks entered into by its A ONLY if the P AUTHORIZED the A to enter into the K.

Question 2

Whether P will be VL to 3rd parties for Ks entered into by A

4 types of authorization

Answer 2

AEA, AIA, AA, ratification

Question 3

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
1. AEA

Answer 3

AEA: P used words to EXPRESS AUTHORITY to A
Rule: AEA can be oral and even private
Exception: If the K must be in writing, then EXPRESS AUTHORITY must be in writing as well (SoF-land).
AEA is narrowly limited to the actual words w/in it.

Question 4

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
1. AEA - revocation

Answer 4

AEA can be revoked by:
1.  Unilteral act of either P or A OR
2.  Death or incapacity of P
Exception:  If P gives A a durable POA
POA - written EXPRESSION of AUTHORITY to enter a transaction
durable - clear survival language

Question 5

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
2. AIA

Answer 5

AIA: P used CONDUCT or circumstance to give IMPLIED AUTHORITY to A in 1 of 3 ways
Necessity
Custom
Prior acquiescence

Question 6

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
2. AIA - necessity

Answer 6

Necessity: There is AIA to do all tasks which are necessary to accomplish an authorized task

Question 7

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
2. AIA - custom

Answer 7

Custom: There is AIA to do all tasks which by custom are performed by person’s w/agent’s title or position.

Question 8

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
2. AIA - prior acquiescence

Answer 8

Prior acquiescence: There is AIA to do all tasks which the A believes to be authorized to do from prior acquiescence by the P.

Question 9

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
3. AA

Answer 9

AA: Two-part test

1. P cloaked A w/APPEARANCE of AUTHORITY and
2. 3rd pty reasonably relies on APPEARANCE of AUTHORITY

Question 10

Whether P will be VL to 3rd parties for Ks entered into by A
4 types of authorization
4. ratification

Answer 10

Ratification: After the K has been entered into, AUTHORITY can be granted by RATIFICATION if:
1. P HAS KNOWLEDGE of all material facts regarding the K, AND
2. P ACCEPTS THE BENEFITS.
Exception: Ratification cannot alter the terms of the K.

Question 11

Whether P will be VL to 3rd parties for Ks entered into by A

Rules of liability on the K

Answer 11

GR: The P is liable on its authorized K’s; therefore as a rule, authorized A’s are not liable on its authorized K’s.
Exception: the undisclosed P
If P is partially disclosed (only the identity of the P concealed) or undisclosed (fact of P concealed), authorized agent may nonetheless be liable at the choice of the third party.