AGENCY & PARTNERSHIP Flashcards
Principal & Agent relationship
Authority
Principal is liable to a third party for contracts entered into by an authorized agent.
Agent is authorized to Principal is liable to a third party for contracts entered into by an authorized agent.
Agent is authorized to act on behalf of a principal if he has actual or apparent authority.
Actual authority is that authority which an agent reasonably believes he possesses based on the principal’s dealing. (clear instructions to buy certain thing)
Apparent authority is that authority which a third party reasonably believes an agent possesses based on the principal’s holding out the agent as having such authority.
Unilateral agent representations & Lingering apparent authority
Apparent authority cannot be created by mere representations. of an agent. Apparent authority must be based on principal’s manifestation to a third party.
If principal, third party and agent are all present, agent holds out to be authorized when he does not have actual authority, silence by principal is viewed as misleading the third party, and therefore creates apparent authority.
Apparent authority can exist even when actual authority does not. Apparent authority can linger after actual authority ends.
Ratification
Even if the agent had no authority to enter into contracts, principal will still be bound by the agent’s actions if the principal ratifies the contract.
Ratification can be expressed (written or oral affirmation) or implied (accepts benefits of the contract).
It is required that principal must have knowledge of all material facts of the contract, he must accept the ENTIRE transaction and it cannot be used to cut off rights of intervening parties (double transaction)
