Agency & Partnerships Flashcards
Principal and Agent Contractual Liability
General rule: If there is actual auth, apparent auth, or ratification, the principal is liable on the K and the agent is not.
BUT if the principal is undisclosed (at time of agent’s transaction, third party has no notice that the agent is acting for a principal) or undisclosed (at time of agent’s transaction the thrid party has notice that the agent is acting for a principal but has no notice of the principal’s identity), then the agent is also liable on the K along with the principal.
Partnership definition
A partnership is an association of two or more persons to carry on as co-owners a business for profit. It is formed regardless of whether the parties subjectively intend to form a partnership.
Actual authority for Partners
Actual authority is the authority a partner reasonably believes he has based upon the partnership agreement or communications between the partners. Actual authority can be express (e.g. written or oral communications) or implied (e.g. from conduct).
Apparent Authority for Partners
Apparent authority exists when a partner acts in the ordinary course of the partnership business or in the kind of business carried out by the partnership.
However, apparent authority does NOT exist if the partner had no actual authority to act for the partnership in the particular matter, and the person with whom the partner was dealing knew or had received notification (reason to know) that the partner lacked authority.
Contractual Agency Authority Hypo Intro
The issue with respect to each contract is whether X (the agent) acted with authority.
Generally, an agency relationship is created when one person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement.
A principal is contractually bound to the acts of the agent if the agent acted with actual or apparent authority.
Actual Authority for Agents
Actual authority is the authority that the agent reasonably believes he possesses based on the principal’s dealings with him. [If the principal’s words or conduct would lead a reasonable person in the agent’s position to believe that the agent has authority to act on the principal’s behalf, the agent has actual authority to bind the principal.]
Actual authority can be express (e.g. written or oral instructions from the agency agreement) or implied from the actions/conduct of the principal.
Apparent Authority for Agents
Apparent authority arises when the principal “holds out” the agent as having certain authority, causing third parties to reasonably believe the agent has such authority. [If
the principal’s words or conduct would lead a reasonable person in the third party’s position to believe that the agent has authority to act on the principal’s behalf, the agent has apparent authority to bind the principal.]
However, apparent authority does NOT exist if the agent had no actual authority to act for the principal in the particular matter, and the person with whom the agent was dealing knew or had received notification (reason to know) that the agent lacked authority.
